Tax rate for locally manufactured car audio systems turns on the finished product, not imported component parts.

Imported components used in a locally manufactured composite product do not determine the sales tax rate by themselves; the character of the finished goods sold governs. The court compared the relevant tariff entries with the licence agreement, bill of materials and manufacturing process, and found that the imported items were only some parts of the car audio system, while substantial other parts were sourced locally and assembled in India. As the finished car audio system was manufactured domestically and cleared on payment of central excise duty, it was not to be treated as an imported good. The turnover from sale was therefore taxable at the rate applicable to domestic products, in favour of the assessee.

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Issues: Whether the car audio systems sold by the assessee were liable to tax at the rate applicable to imported goods or at the rate applicable to domestic products under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The relevant entries were compared with the license agreement, the bill of materials, and the nature of the manufacturing activity. The imported items were only some components and signature parts, while substantial other parts were procured locally and the items were integrated into a finished car audio system. The final product was manufactured in India and cleared on payment of central excise duty. The imported components, by themselves, were only parts and did not amount to a complete car audio system as contemplated by the entry applicable to imported goods.

Conclusion: The turnover from sale of car audio systems was exigible at the rate applicable to domestic products and not as imported goods, in favour of the assessee.

Ratio Decidendi: Where imported parts are only inputs into a locally manufactured composite product, the tax rate must be determined with reference to the character of the finished goods sold, not by treating the final product as imported merely because some components were sourced from abroad.

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