TaxTMI 
TaxTMI 
2008 (9) TMI 910
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.... 2005, the applicant-company intimated the Public Relations Officer, Directorate of Commercial Taxes that it would charge VAT at four per cent on sales of diesel engines and spare parts being item No. (xxviii) and (xxix) covered by entry No. 54B of Schedule C of the VAT Act, 2003. (A2) However, under orders dated February 28, 2006 and March 21, 2006 in respect of Case Nos. 24X/PRO/VAT/2005/10 and 24X/PRO/VAT/ 2006/32 initiated on the basis of applications moved by M/s. NP Syndicate of 22, Strand Road and M/s. Jaju Brothers of 11, Pollock Street, Kolkata, respectively, the Commissioner determined that diesel engine and diesel engine generator set are not covered by item No. (xxviii) of entry No. 54B of Part I of Schedule C as diesel engine and diesel engine generator set are not treated as machinery in common parlance. It was determined that parts of diesel engine and diesel engine generator set also are not covered by item No. (xxix) of the goods specified in column (2) against serial No. 54B of column (1) of Part I of Schedule C of VAT Act, 2003. Rate of tax on these items was determined at 12.5 per cent. (A3) The position was further clarified under trade circular No. 02/ 2006 ....
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.... that the Commissioner has failed to appreciate the prevailing situation in the trade. It was also contended that determination regarding taxability of the items at 12.5 per cent was not also justified in view of the fact that these items do not fall under serial No. 1 of Schedule CA of the VAT Act, 2003 which is a residuary entry. He also drew our attention to the fact that the provisional certificates issued to various manufacturing units under rule 27 of the West Bengal Sales Tax Rules, 1995 contained diesel engines and diesel engine generator sets as plant and machinery. There was, therefore, no reason as to why the Commissioner took a different stand under the VAT Act while interpreting items at (xxviii) and (xxix) of entry 54B of Part I of Schedule C of the VAT Act, 2003. In support of his submission, learned Advocate relied on the decisions in the case of Ghaziabad Engineering Co. (P) Ltd. v. Commissioner of Sales Tax [1991] 80 STC 243 (Delhi), Sterling Machine Tools v. Commissioner of Sales Tax, U.P. [1979] 43 STC 72 (All), A.C.T.O., Ward II v. Kishore Trading Co. [1999] 116 STC 3 (Raj) and State of Maharashtra v. Bradma of India Ltd. [2005] 140 STC 17 (SC). In the case ....
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....ll sales of machinery for setting up of textile, ceramic, glass, cement, engineering, sugar, metal industries and industry based on minerals. Since there was no finding that the cables sold by the said Kishore Trading Corporation were part of the machinery or would form a "machinery" when assembled, the honourable judges remanded the matter back to the Rajasthan Sales Tax Tribunal for giving a finding as to the use of the cables and then took a view in the matter. Incidentally, the honourable judges also relied on the decision of the Supreme Court in the case of Commissioner of Income-tax v. Mir Mohammed Ali [1964] 53 ITR 165 as referred to hereinbefore. It has been observed by the honourable judges that machinery is a contrivance whereby several things are put together to work in such a way that force may be applied at a most convenient point in a most convenient way to get a particular work or an item of work done or to produce a specific article. In the case of State of Maharashtra v. Bradma of India Ltd. [2005] 140 STC 17, the honourable judges of the apex court observed that a specific entry in the Schedule to a taxing statute would override a general entry. Only w....
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....nd parts thereof could be treated as items falling under item No. (xxviii) and (xxix), respectively, under entry No. 54B of Part I of Schedule C of the VAT Act, 2003. Decisions relied upon by the learned Advocate appearing on behalf of the petitioners were in respect of entries in respective Schedules and considering these entries the honourable judges held diesel engines as machinery for the purpose of levying tax at the rate as per those Schedules. The question before us is not only to decide whether diesel engines and generator sets are machineries but also whether these items can be treated as plant and machinery. It is the accepted principle that when two or more words which are susceptible to analogous meaning are coupled together, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, that is, the more general is restricted to a sense analogous to the less general. Here, each of the words is wide and each is qualified and restricted by other. So only those "plants" which are covered by the word "machinery" are included. Similarly, only those "machineries" which are covered by the expression ....
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....ust be a "tool in the trade" of the businessman. (f) Gross materiality or tangibility is not necessary and, in fact, intangible things like ideas and designs contained in a book could be "plant". They fall under the category of "intellectual store house". (g) In considering whether a structure is plant or premises, one must look at the finished product and not at the bits and pieces as they arrive from the factory. The fact that a building or part of a building holds the plant in position does not convert the building into plant. The piecemeal approach is not permissible and the entire matter must be considered as a single unit unless, of course, the component parts can be treated as separate units having different purposes. (h) The functional test is a decisive test. In brief, an item to be considered as plant must be durable, must have a functional role in carrying on the business and it must satisfy the condition that it is inextricably linked with activities for which it has been put to use. Relying on this decision and the principle as detailed hereinbefore, one has to take a view as to whether diesel engines and generator sets should fall ....