Madras High Court
State Of Tamil Nadu vs Gith Corporation on 7 September, 1995
Author: T. Jayarama Chouta
Bench: T. Jayarama Chouta
JUDGMENT Thanikkachalam, J.
1. The assessee is Gith Corporation, a registered dealer in Luna mopeds and spares. The assessment years involved in these revisions are 1977-78, 1978-79 and 1979-80. In the certificate of registration, the assessee was permitted to purchase electric motors, starters, machinery and other accessories. On verification, the assessing authority found that the assessee had purchased during the assessment years in question Luna mopeds, spares, transformers, folding chairs and cables using the C forms. The assessing authority was of the view that the registration certificate issued to the assessee did not permit it to use the C forms for the purchase of Luna mopeds, spares, transformers and folding chairs. He took the view that the use of C form for the purchase of the aforesaid items amounted to false representation that the assessee was entitled to purchase those items using the C forms. Therefore, the assessing authority invoked the provisions of section 10-A of the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act") and levied penalty holding that the assessee had committed an offence under section 10(b) of the CST Act. Aggrieved by that order, the assessee preferred appeals before the Appellate Assistant Commissioner. He pointed out that Luna mopeds and spares would come under the broad classification of "machinery" and there was no false representation by the assessee in the purchase of those items by the issue of C forms and in that view, he allowed the appeals in respect of the purchase of mopeds and spares. In respect of transformers, he confirmed the levy of penalty, since the transformers, cannot be brought into the broad classification of "machinery". Likewise, he confirmed the levy of penalty in respect of the purchase of folding chairs and cables. Aggrieved by this, the assessee preferred appeals before the Tribunal. When those appeals were pending, the State filed enhancement petitions before the Tribunal to restore the levy of penalty in respect of the purchase of moped, moped spares also. The assessee filed a counter before the Tribunal reiterating the arguments, as advanced before the Appellate Assistant Commissioner. The Tribunal, considering the facts arising in this case, dismissed the enhancement petitions filed by the State, stating that moped and moped spares would come under the broad classification "machinery". In respect of transformers, the Tribunal following the decision in Bhandari v. State of Mysore [1967] 20 STC 25 (Mys.) pointed out that the transformers will come under the broad classification of "machinery". According to the Tribunal, from a reading of section 10(b) of the CST Act, it is evident that the goods purchased should be a class, which is covered by the certificate of registration of the dealer. The Tribunal found that there was no false representation by the assessee and it will not attract the provisions of section 10(b) of the CST Act and accordingly, the Tribunal set aside the levy of penalty for the purchase of transformers, sustained by the Appellate Assistant Commissioner. However, the Tribunal confirmed the levy of penalty in respect of folding chairs and cables. Finally, the Tribunal allowed the appeals filed by the assessee in part and dismissed the enhancement petitions filed by the department. Aggrieved by the above, the department has preferred these revisions. T.C. (R) Nos. 1460, 1465 and 1477 of 1984 relate to the appeals allowed by the Tribunal and T.C. (R) Nos. 1464, 1466 and 1468 of 1984 relate to the enhancement petitions dismissed by the Tribunal.
2. In the present revisions, the Additional Government Pleader (Taxes) would contend that the assessee's registration certificate contained only electric motors, starters, machinery and other accessories and as such, the transformers dealt with by the assessee cannot be included in this category, and the Tribunal should have confirmed the levy of penalty under section 10(b) of the Act with regard to transformers. According to the department, transformers fall under a separate entry under the TNGST Act as entry 41-D from September 13, 1977. It was further submitted that the Tribunal ought to have allowed the enhancement petitions filed by the Revenue with regard to the levy of penalty in respect of purchase of Luna mopeds and moped spares. On the other hand, learned counsel for the assessee submitted that the Tribunal was correct in deleting the penalty with regard to the purchase of Luna moped and moped spares. It was submitted by him that during the assessment years under consideration, "mopeds" were not taken note of under the provisions of the Act; but only from September 1, 1987 on wards, mopeds were included as "motor vehicles" under entry 3 to the First Schedule and that, therefore, "mopeds" should be taken within the broad classification of "machinery" for which, registration certificate was issued by the department. It was also submitted that on the basis of the various decisions cited by the assessee, before the Tribunal, the levy of penalty under section 10(b) of the CST Act is not exigible.
3. In reply, learned Additional Government Pleader would submit that the fact that the assessee later applied for amendment of the certificate of registration, to include Luna mopeds, moped spares and transformers therein, would go to show that the assessee could not have entertained any bona fide belief that the definition "machinery" would also take in "Luna mopeds" and "transformers". However, according to the learned counsel for the assessee, the transformers should be taken as a "machinery", because the assessee, after purchasing the transformers, fitted them in panels and sold them as control boards. It was pointed out that if the transformers were purchased as such and resold after fitting them in panels, the department cannot levy penalty under section 10(b) of the Act since there could not have been any violation of the provisions of section 10-A of the Act by the assessee.
4. We have heard the rival submissions of the learned counsel for the assessee and the learned Additional Government Pleader (Taxes). In so far as the transformers are concerned, it was submitted that the transformers should be taken as machinery, because the assessee, after purchasing them fitted them in panels and sold them and as such, the department cannot levy penalty under section 10(b) of the Act, since there could not have been any violation of the provisions contained in section 10-A of the Act by the assessee. In other words, according to the assessee, the word "machinery" would also include the transformers. Therefore when transformers were purchased using the C forms, it cannot be said that he goods not enumerated in the registration certificate were purchased. On the other hand, learned Additional Government pleader appearing for the department would submit that transformers cannot be regarded as a machinery and as such, the Tribunal was wrong in deleting the penalty imposed on the assessee. It is already noticed by us that the certificate of registration issued to the assessee referred to "electric motor, starter, machinery and other accessories". The Appellate Assistant Commissioner held that transformers would not come under the category of machinery. However, the Tribunal held that the assessee did not make any false representation and accordingly deleted the penalty levied therefor. As regards Luna mopeds and moped spares are concerned, the Appellate Assistant Commissioner has held that "Luna mopeds" and moped spares would come within the broad classification of "machinery" and as such, the purchase of those items using the C forms, will not amount to false representation, attracting the provisions of section 10-A of the CST Act and he deleted the penalty. The Tribunal concurred with the Appellate Assistant Commissioner and dismissed the enhancement petitions filed by the department.
5. The point for consideration is, whether (1) Luna mopeds and moped spares, and (2) transformers, would not fall under the category "machinery" and that therefore, penalty is leviable under section 10(b) of the CST Act ?
6. Taking up the "Luna mopeds" and "moped spares", in item 81 of the First Schedule to the TNGST Act, under the caption "machineries", mopeds and moped spares do not find a place and subsequently, "mopeds" were included under the caption "motor vehicles" under item 3(ii) in the First Schedule to the TNGST Act, and so, mopeds and moped spares could not be considered as "machinery" as contended by the department, cannot be accepted, because the classification of goods were made in the First Schedule to the TNGST Act for the purpose of levying tax at a particular rate. Hence, the classification of goods contained in the First Schedule to the TNGST Act would not determine the true nature of the goods dealt with by the assessee. The word "machinery" is not defined under the Act. Therefore, we have got to depend upon the various sources to understand the meaning of the word "machinery". In the case of D. B. Bhandari v. State of Mysore [1967] 20 STC 25, while considering the meaning of the word "machinery", the Mysore High Court at Bangalore held 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 or manufactured goods. The mode or the manner in which the power is fed into it or force is applied, need not and should not make any difference. The source of power can also be either human or animal". If this is the essential feature of machinery, which distinguishes it from other things, then, the mode or the manner in which power is fed into it or force is applied, need not and should not make any difference. It is conceded, for example, that the machinery would be a machinery whether it is fed by electrical power or other form of power applied by steam or generated by burning combustible oils. If the mode or the manner in which the power is applied, makes no difference in these specified cases, it should make no difference either if the source of power is either human or animal. Therein, it is also stated that according to the dictionary meaning, "machinery" is a mechanical contrivance containing several parts, each expected to make a certain operation, and the matter was put in more expressive language by Lord Atkinson in the judgment of the Privy Council in Corporation of Calcutta v. Cossipore Municipality AIR 1922 PC 27, as follows :
"The word 'machinery' when used in ordinary language, prima facie, means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter dependent operation of their respective parts, generate power, or evoke, modify, apply or direct natural forces with the object in each case of effecting a definite and specific result."
So also, while considering the meaning of the word "machinery", the Gujarat High Court, in the case of State of Gujarat v. Minu Chemical Pvt. Ltd. [1982] 50 STC 339 relying upon the decision of the Privy Council in Corporation of Calcutta v. Cossipore Municipality AIR 1922 PC 27; ILR 49 Cal 190, held that the meaning assigned to the word "machinery" in the dictionary as well as in the judicial decisions referred to by it, makes it clear that an article to be machinery must either be a completed machines, or a number of completed machines, or parts or members of a machine which, when they are assembled, form a complete machine. Likewise, in K. B. Dani v. State of Karnataka , while considering the meaning of the word "machinery", in relation to tractor-trailer, it was held that a tractor is a machinery and a trailer is not a machinery. In Commissioner of Income-tax v. Mir Mohammad Ali [1964] 53 ITR 165, the Supreme Court, while considering the meaning of the word "machinery installed" as occurring in section 10(2)(vi), (via), (5) of the Indian Income-tax Act, 1922, adopted the definition of the word "machinery" in the decision of the Privy Council in Corporation of Calcutta v. Chairman of the Cossipore and Chitpore Municipality AIR 1922 PC 27; ILR 49 Cal 190 (referred to supra) and held that although it was not given in a tax case, it should prevail under the Income-tax Act also, as the word "machinery" was an ordinary and not a technical word. In that case, a diesel engine was held to be a machinery. On the basis of the ratio laid down in the above decisions, if we apply the meaning of the word "machinery" to "Luna moped" which is a motorised bicycle, it would be seen that "Luna moped" would also come within the purview of the definition "machinery". The assessee is a registered dealer in Luna mopeds and its spares. In the certificate of registration, the assessee was permitted to purchase electric motors, starters, machinery and other accessories. The registration certificate was amended with effect from April 5, 1980 to include "Luna mopeds" and "transformers" also in order to avoid further controversy in the matter with the department. On the basis of the above, it cannot be said that the assessee has made any false representation in using C forms for the purchase of "Luna mopeds" and "moped spares" as the assessee's registration certificate contains the item "machinery" within its fold and we have already found that "Luna moped" would fall within the meaning of "machinery" as decided by the various decisions cited supra. When there is no false representation by the assessee in the purchase of "Luna mopeds" and "moped spares", penalty under section 10(b) of the CST Act is not exigible.
7. A further submission was made by the learned counsel for the assessee that at the time of purchase of Luna mopeds and moped spares by using the C forms, the assessee had entertained a bona fide belief that the goods purchased by it would come under the caption "machinery". Therefore, no penalty is exigible under section 10(b) of the CST Act. Learned Additional Government Pleader submitted that since the assessee subsequently filed an application for amendment of registration certificate, to include Luna mopeds and transformers, it would go to show that the assessee could not have entertained a bona fide belief in purchasing Luna mopeds and spares by using the C forms. In order to support this contention, reliance is placed upon a decision of this Court in [1991] 82 STC 268 in the case of Vijaya Electricals v. State of Tamil Nadu. We have already held that "machinery" would include "moped and spares". If that be so, the purchase by the assessee by using the C forms would be in accordance with the registration certificate. Therefore, whether the assessee would have entertained a bona fide belief in purchasing Luna moped and spares by using the C forms does not at all arise in the present case. Therefore, on the merits, we hold that Luna mopeds and spares are "machineries" and the assessee is entitled to purchase them by using C forms. Therefore, there is no false representation made by the assessee and so, the Tribunal is right in holding that the assessee is not liable for levy of penalty under section 10(b) of the CST Act.
8. Now coming to "transformers", the assessee has purchased transformers and fixed them in panels and resold the said articles. According to the assessee, the word "machinery" would also include "transformers". According to the assessee, since transformers are enumerated separately in the First Schedule of the TNGST Act for the purpose of ascertaining the rate of tax, it would not have any bearing in the matter of deciding whether transformers would fall under the category "machinery". By relying upon the decisions cited supra, counsel for the assessee submitted that transformers would also come under the category of machinery. Transformers are used for converting electric voltage from high voltage to low voltage and vice versa. In the present case, the assessee is purchasing transformers and by fitting them in panels and selling them as control boards. The Appellate Assistant Commissioner pointed out that even if the transformers are considered as a machinery, the authorisation was for the purchase of "machinery" only for resale and not for using them in the manufacture of some other item and then sell them off and that therefore, there is a violation of the provisions of the CST Act. Even though we consider that the transformers can be treated as machinery, according to the reasons given by us hereinabove, the fact remains that the assessee is not selling them as such transformers. They are fitted in panels and then sold them away as electrical control board. Therefore, what was sold by the assessee was electrical control board and not transformers, as such. In that view of the matter, the Tribunal is not justified in deleting the penalty in so far as transformers are concerned.
9. In the result, the penalty levied by the Appellate Assistant Commissioner in so far as transformers are concerned, shall stand restored and the appeals by the department are allowed in part to the above extent and in other respects, the appeals are dismissed and the order of the Appellate Tribunal shall stand. There will be no order as to costs.
10. Appeals partly allowed.