Gujarat High Court
State Of Gujarat Through Commissioner ... vs Gmm Co. Ltd C/O Manibhai & Brothers ... on 7 July, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/496/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 496 of 2013
==========================================================
STATE OF GUJARAT THROUGH COMMISSIONER OF....Appellant(s)
Versus
GMM CO. LTD C/O MANIBHAI & BROTHERS ESTATE....Opponent(s)
==========================================================
Appearance:
MR PRANAV TRIVEDI, AGP for the Appellant(s) No. 1
MR RV DESAI, ADVOCATE for the Opponent(s) No. 1
RULE SERVED for the Opponent(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 07/07/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Government has filed this appeal against the judgement of Value Added Tax Tribunal. Following substantial questions have been framed at the time of admission of appeal :
"(A) Whether in the facts and in the circumstances of the case, the Tribunal has rightly held that, loader will fall under expression machinery, thereby falling within Entry No.35 of notification, dealing with machinery used in excavation in works contract and not under Entry No.87 of ScheduleII of the Gujarat Value Added Tax Act, 2003?
(B) Whether the Tribunal has erred in not giving an Page 1 of 6 HC-NIC Page 1 of 6 Created On Wed Jul 13 23:59:41 IST 2016 O/TAXAP/496/2013 ORDER independent finding that, all the items under consideration were actually used for the purpose of execution of works contract as required by Entry 35 of notification issued under section 5(2) of the Gujarat Value Added Tax Act, 2003?"
2. We notice that the equipments involved are in the nature of loader used in execution of works contract and, therefore, would not be part of entry 35. Case of the Government is that being a motor vehicle, they cannot be treated as machinery used for execution of works contract. In somewhat similar background, in a separate judgement passed today, we had rejected such a contention making the following observations :
"9. Having thus heard learned counsel for the parties and having perused documents on record, we may notice that term sale has been defined under section 2(23) of the VAT Act which provides that sale means the sale of goods made within the State for cash or deferred payment or other valuable consideration and includes inter alia in clause (b) transfer of property in goods whether as goods or in some other form involved in execution of a works contract. Term works contract is explained in explanation clause (ii) which provides that for the purpose of clause (b) expression works contract means a contract for execution of works and includes such works contract as the State Government may by notification in official gazette specify. The fact that the equipments in question were being used for execution of a works contract is not even disputed by the Government. The sole dispute is whether they would be machines used in execution of a works contract. Here also, it does not appear to be the case of the Government that the equipments are not in the nature of machines. Whatever doubt one may have with respect to this aspect Page 2 of 6 HC-NIC Page 2 of 6 Created On Wed Jul 13 23:59:41 IST 2016 O/TAXAP/496/2013 ORDER of the matter would disappear when one peruses the judgment of the Tribunal challenged in the appeal. In such judgment, the Tribunal bestowed detailed consideration to the nature of equipments and its different uses. The appellant had produced extensive materials to establish before the Tribunal that equipments were in the nature of machines. Quite apart from the equipments being used for the purpose of construction related activities, we may usefully refer to two judgments cited by the counsel for the assessee. In case of Ambica Woods Works (supra), a Division Bench of this Court was considering screen printing block tables of wood sold to textile mills. The question was whether the same can be treated as accessories to machineries. In this context it was observed that in order to be a machinery, four factors must exist, namely; a complete and integrated collection of several objects or articles; these objects or articles should interact in unison upon or with each other; this interaction is promoted by application of force which may be manual or motive power; and the movement should be with a view to do some specific activity or to obtain specific or definite result. These observations were based on the Privy Council judgment of Cossipore and Chitpore Municipality reported in AIR 1922 P.C. 27. Likewise, in the case of Vicas Tractors (supra), Division Bench of this Court considered the question whether a tractor can be considered an agricultural machinery. It was observed that whenever a question arises whether a tractor is an agricultural machinery or an industrial machinery or machinery of any other type, the question must be answered by reference to its design, mechanism, distinct features and special adaptability, if any, to any particular use out of the diversity of uses to which a tractor is capable of being put.
10. Bearing in mind said principles and considering the nature of construction equipments, we have no hesitation in upholding the Tribunal's view that these were machineries used for the purpose of works contract.
Page 3 of 6
HC-NIC Page 3 of 6 Created On Wed Jul 13 23:59:41 IST 2016
O/TAXAP/496/2013 ORDER
11. The main question therefore, arises is whether these machines being motor vehicles, would be covered by residuary entry. The fact that these vehicles are motor vehicles and were registered or compulsorily registerable under the Motor Vehicles Act is not dispute. However, in our opinion, this would be of no consequence. Entry 35, we may recall, pertains to machinery including parts and accessories thereof used in the execution of the works contract. Admittedly, there is no separate entry for motor vehicles. Therefore, when a question arises where certain equipment is a machinery which is used in the execution of the works contract, the fact that it also happens to be a motor vehicle, would be wholly insignificant. In other words, if an equipment satisfies description of being a machinery used in execution of works contract, the fact that it also happens to be a motor vehicle, would not change this fundamental feature which would be sufficient to bring the equipment within the purview of entry 35. In absence of any specific entry pertaining to motor vehicle, merely because a certain equipment satisfies description of being a motor vehicle, in addition to being a machinery used in execution of works contract, cannot carry it to the residuary clause.
12. Quite apart from these features of the case, we may recall, with effect from 15.2.2010, entry 35 now includes the exclusion clause providing for excluding machinery in form of a motor vehicle or attached or mounted to a motor vehicle. By implication therefore, till this amendment even the legislature considered a motor vehicle as part of entry 35 if otherwise satisfied the description of being machinery used for works contract. Unless and until this amendment is treated either as declaratory or clarificatory, its significance would be that till these words were added in the statute, any motor vehicle which otherwise fulfilled description of being machinery used in execution of works contract, would be covered under entry 35. This amendment in plain terms is neither declaratory nor clarificatory; nor is given retrospective effect either Page 4 of 6 HC-NIC Page 4 of 6 Created On Wed Jul 13 23:59:41 IST 2016 O/TAXAP/496/2013 ORDER specifically or by necessary implication. This would be one more ground to reinforce our belief that prior to 15.2.2010, any construction equipment which was a machinery used for execution of works contract even if it happened to be a vehicle would fall within entry 35. In this context, we may refer to the decision of the Supreme Court in the case of Gem Granites (supra) in which it was held and observed as under:
"13. The introduction of the phrase other than in Clause(b) of subsection 2 of Section 80HHC in 1991 in our opinion, indicates the carving out of a specific class from the generic class of minerals and ores. This means that were it not for the exception, the specific processed minerals and ores would have been covered by the words minerals and ores, it also indicates that only the minerals and ores subjected to the process of cutting and polishing would be entitled to the benefit of Section 80HHC meaning thereby that all other species of processed minerals and ores would continue to be covered by the general exclusion applicable to the generic class. The 1991 Amendment to Section 80 HHC thus conclusively demonstrates that the words minerals and ores msut be construed widely and in an unrestricted manner. As has been held in Municipal Committee vs. Manilal MANU/SC/0197/1966:(1967)2 SCR100 and Pappu Sweets and Biscuits vs. Commissioner of Trade Tax, U.P. MANU/SC/0638/1998:1998(62)ECC 593 subsequent legislation may be looked into to fix the proper interpretation to be put on the statutory provisions as it stood earlier. The benefit of Section 80 HHC has been extended by the amendment to a specific kind of mineral and was introduced for the first time in 199. If we were to hold that the word minerals in Subsection 2(b) never included processed minerals then the 1991 Amendment excepting processed minerals from the exclusionary effect of the sub section would be rendered meaningless and an exercise in futility.
14. Every statute if prima facie prospective unless it is Page 5 of 6 HC-NIC Page 5 of 6 Created On Wed Jul 13 23:59:41 IST 2016 O/TAXAP/496/2013 ORDER expressly or by necessary implication made to have retrospective operation [See: Keshavan v. State of Bombay MANU/SC/0020/1951: 1951 Cri.LJ 680]. There is nothing in the wording of the 1991 amendment to suggest that it was to operate retrospectively. Apart from the lack of any express words indicating such intention, there is nothing in the statute from which we can infer on any principle of interpretation that the intention of Parliament was to give th amendment retrospective effect."
13. In the result, the questions are answered against State and in favour of the assessee. Tax Appeal is dismissed.
3. Under the circumstances, tax appeal is dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) raghu Page 6 of 6 HC-NIC Page 6 of 6 Created On Wed Jul 13 23:59:41 IST 2016