Madras High Court
Keyes And Sons vs State Of Tamil Nadu on 26 July, 1990
JUDGMENT Venkataswami, J.
1. Aggrieved by the order of the erstwhile Board of Revenue by invoking the suo motu power, the present appeals are filed by the assessee. As a common question of law is involved in these two appeals filed by the same assessee, but, for different years, namely, 1973-74 and 1974-75, it is different to note the facts of one assessment year.
2. For the assessment year 1974-75, the appellant/assessee reported a total and taxable turnover of Rs. 8,78,238.21 and Rs. 6,46,246.48, respectively. After giving an opportunity and after perusing the accounts of the appellants, the Joint Commercial Tax Officer, Ram Nagar, Coimbatore, determined the total and taxable turnover at Rs. 6,46,446. Out of the said taxable turnover, the appellants claimed that turnover amounting to Rs. 6,40,872.81 represents sales of automobile parts and, therefore, exigible to tax at 13 per cent, in the light of a notification issued under section 17 of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Act") on March 18, 1970. The assessing officer held that "the dealers are dealing in smoke screen glasses, door locks, tail lamps, door channels, side mirrors, fibre glass, dash boards, grills, etc., which are not parts of automobiles essential to make the vehicle run" and, therefore, they will not fall under the Notification No. 86 of 1970 dated March 18, 1970 to claim concessional rate of tax at 13 per cent. Consequently that turnover was subjected to tax at 15 per cent, treating it as falling under item 3 of the First Schedule to the Act. Aggrieved by the order of the assessing officer, the appellants preferred an appeal to the Appellate Assistant Commissioner. The first appellate authority was of the view that items like door laces, counter tapes, flexible channels, shield glasses, side glasses, door locks, horns, hub caps, mirrors, speedometer cables, etc., are essential to make the car to run as a car in complete shape. Therefore, they are parts of automobiles. According to the first appellate authority, those items are essential inasmuch as without those items, the car will not be in full shape. On this view, the first Appellate Assistant Commissioner granted the relief.
3. The Board of Revenue, on a scrutiny of the order of the Appellate Assistant Commissioner, found that the view taken by the Appellate Assistant Commissioner was not correct. Therefore, after complying with the formalities and after hearing the counsel for the assessee, the Board of Revenue held that the goods involved like door laces, counter tapes, flexible channels, shield glasses, side glasses, door locks, horns, hub caps, mirrors and speedometers are only accessories and not spare parts to automobiles and, therefore, the order of the Appellate Assistant Commissioner was set aside and the order of the assessing officer was restored. Aggrieved by the order of the Board of Revenue, the present appeal is filed.
4. It is contended by the learned counsel for the appellant/assessee that the view taken by the Board of Revenue is not correct. On the other hand, the reasonings given by the Appellate Assistant Commissioner in support of his view that the goods involved are only parts of automobiles are well-founded.
5. Learned Additional Government Pleader (Taxes), contending contra, submitted that the reasonings given by the Board of Revenue are quite in accordance with several decisions of the High Courts in regard to the definition of "accessory". He also pointed out that the Webster's International Dictionary has specifically given the example a speedometer as an accessory. In this connection, the following decisions were cited at the bar : Khetty Traders v. State of Madras reported in [1973] 32 STC 346 (Mad.), Union Traders v. Deputy Commercial Tax Officer reported in [1975] 36 STC 180 (Mad.), State of Tamil Nadu v. Best and Co. (P). Ltd. reported in [1984] 57 STC 174 (Mad.) and State of A.P. v. Power and Industrial Equipment and Accessories .
6. We have considered the rival submissions. In [1973] 32 STC 346 (Khetty Traders v. State of Madras), a Division Bench of this Court, while considering the question whether "seat covers" are automobile accessories, has held as follows :
"We agree with the Tribunal that upholstery items like seat covers are automobile accessories. It may be that such items are strictly not necessary for running the vehicle. But, in our opinion, that is not the only test. It is certainly an accompaniment to the seat of the car but unessential for the running of the car. Once the canvass cloth has been converted into seat covers, it becomes an auto-part or accessory. On that view, the tax case is dismissed."
The above ratio of the Division Bench has been followed in State of Madras v. E.A.N. Meerakasim Carnatic Seat Company reported in [1973] 32 STC 463 (Mad.) and also in [1975] 36 STC 180 (Mad.) (Union Traders v. Deputy Commercial Tax Officer).
7. In [1984] 57 STC 174 (Mad.) [State of Tamil Nadu v. Best and Co. (P) Ltd.], the question raised was, whether a monobloc pumpset is an electrical goods, falling under item 41 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, or machinery not falling under the said item. The learned Judges held that the monobloc pumpset will fall under "electrical goods". We do not think, the said case is of any assistance to decide the issue raised in this case.
8. In [1989] 74 STC 87 (State of A.P. v. Power and Industrial Equipment and Accessories), a Division Bench of the Andhra Pradesh High Court, has held that though radiators used in transformers are integral parts of transformers, they cannot be considered as electrical goods or accessories thereon. This judgment again is not helpful to decide the issue raised in this case as it was rendered with reference to entry 38 of the First Schedule to the Andhra Pradesh General Sales Tax Act.
9. The Board of Revenue, mainly on the ground that the articles in question are not essential but only add to the convenience and effectiveness of the automobile, held that they are "accessories" and not "parts". The Board of Revenue also held that the motor vehicles can be run without these articles.
10. During the relevant periods, namely, 1973-74 and 1974-75, entry 3 of the First Schedule reads as follows :
------------------------------------------------------------------------
S. No. Description of the goods Point of Rate of (Effective
levy tax from)
per cent
(1) (2) (3) (4) (5)
------------------------------------------------------------------------
3. Entry from December 23, 1964 : At the 15 26-2-1970 Motor vehicles including motor point cars, motor taxi-cabs, motor of first cycles and cycle combinations, sale in motor scooters, motorettes, the State motor omni buses, motor vans and motor lorries, chassis of motor vehicles, bodies built on chassis of motor vehicles belonging to others (on the turnover relating to bodies) component parts of motor vehicles, all varieties of trailers, by whatever name known, tyres (including pneumatic tyres) and tubes ordinarily used for motor vehicles and trailers (whether or not such tyres and tubes are also used for other vehicles), and articles (excluding batteries) adapted for use generally as parts and accessories of motor vehicles and trailers.
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By Notification No. 86 of 1970 dated March 18, 1970, issued under section 17 of the Act, the rate of tax on sales of automobile tyres, batteries (excluding dry cells) and automobile spare parts was reduced from 15 per cent to 13 per cent. The relevant portion of the Notification reads as follows :
"In exercise of the powers conferred by section 17 of the Tamil Nadu General Sales Tax Act, 1959 (T.N. Act 1 of 1959) the Governor of Tamil Nadu hereby makes with effect on and from the first April, 1970.
(i) .............
(ii) the reduction in rate from 15 per cent to 13 per cent in respect of the tax payable by any dealer under the said Act on the sales of automobile tyres, batteries (excluding dry cells) and automobile spare parts."
Taking advantage of that notification alone, the assessee/appellant claimed that the articles in question will fall under the abovesaid notification and, therefore, exigible to tax only at 13 per cent.
11. It is in this context, we have to find out whether the view taken by the Board of Revenue is correct or unrealistic.
12. The Appellate Assistant Commissioner, while granting the relief to the appellant, has observed as follows :
"........ Items like door locks, flexible channels, shield glasses, side glasses, door laces, etc., are only sold as replacement by the appellant. They are essential to make the car to run as a car in a complete shape. So they are, in my opinion, parts of automobile. They are essential inasmuch as without this the car will not be in full shape. The door lock is essential part inasmuch as without the door lock it is safe to drive the vehicle. So also petrol cap accessories are meant to give convenience to the passengers and to add to the beauty of the vehicle or car. As such, items like side mirror, speedometer and hub caps can be classified as accessories. It is a moot point whether horns will fall under auto parts or accessories. In my opinion, horns are essential for a car without which the driving of the car will be hazardous. Hence they are essential for running of the car. It may be argued that without the horn car can run but it should be considered that it is not safe to drive without a horn. I, therefore, consider that the turnover relating to items like door lock, laces, flexible channels, horns, shield glasses should be treated as auto parts."
As against this, the Board of Revenue, as found earlier, held that the article in question are only accessories as these articles only add to the convenience and effectiveness of the motor vehicle, but are not essential. In Bajoria Halwasiya Service Station v. State of Uttar Pradesh reported in [1970] 26 STC 108, the Allahabad High Court, while interpreting the words "spare parts" with reference to motor vehicles, held them as duplicate parts of a motor vehicle kept in readiness to replace loss, breakage, etc. May be, in our view the articles in question are not indispensable one for running of the automobile, but it cannot be gainsaid that they are essential, with the exception of hub caps, for effective and convenient running of the motor vehicle. If so viewed, and coupled with the decision of the Allahabad High Court, we are inclined to agree with the realistic view taken by the Appellate Assistant Commissioner rather than the unrealistic view taken by the Board of Revenue. In fact, in [1973] 32 STC 346 (Mad.) (Khetty Traders v. State of Madras) there is this observation, namely, that "once the canvass cloth has been converted into seat covers, it becomes on auto-part or accessory". If that be so, it will not be a far-fetched view to treat the articles in question as automobile spare parts.
13. In the result, we set aside the order of the Board of Revenue, and allow the appeals. No costs.
14. Appeals allowed.