Gujarat High Court
State Of Gujarat vs Yantraman Automac Pvt ... on 7 July, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/517/2013 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 517 of 2013
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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STATE OF GUJARAT....Appellant(s)
Versus
YANTRAMAN AUTOMAC PVT LTD....Opponent(s)
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Appearance:
Mr.Pranav Trivedi, Assistant GOVERNMENT PLEADER
for the Appellant
MR. UCHIT N SHETH, ADVOCATE for the Opponent
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
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Date : 07/07/2016
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) This appeal is filed by the State Government challenging the judgment of Value Added Tax Tribunal( "the Tribunal" for short). While admitting the appeal, following substantial questions of law were framed:
"(1) Whether in the facts and circumstances of the case, the Tribunal has erred in believing that all the equipments, goods, products, vehicle machinery used in execution of works contract resold by the opponent herein, fall under entry 35 of the notification issued under section 5[2] of the VAT Act and therefore liable to tax at the rate prescribed in it?
(2) Whether in the facts and circumstances of the present case the Tribunal has erred in not giving an 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?
(3) Whether in the facts and circumstances of the case, the Tribunal has erred in not believing that, all the equipments, products resold by the opponent herein are "Motor Vehicle Machineries/ Equipments"
and in absence of any specific entry of "Motor Vehicle Machinery/ Equipments" entry 87 [Residuary Entry] of Page 2 of 10 HC-NIC Page 2 of 10 Created On Wed Jul 13 00:04:53 IST 2016 O/TAXAP/517/2013 JUDGMENT Schedule II of the said Act would be applicable?"
2. The controversy arises in the following background. The respondent assessee, is a company registered under the Companies Act and is a distributor of JCB India Ltd. which is the manufacturer of construction equipments. The assessee also re-sells machines used in execution of works contract after purchasing the same in case of inter-state sale. For such purpose, the assessee is a registered dealer under Central Sales Tax Act, 1956 as well as Gujarat Value Added Tax Act, 2003 ("the Act" for short). It is not in dispute that several items with which we are concerned were used in execution of works contract as defined in second explanation to section 2(23) of the Act. Central question is whether such goods would fall under entry 35 pertaining to "machinery including parts and accessories thereof used in the execution of works contract" and invited tax at the rate of 4% and additional rate of 1% or the goods would fall under residuary entry inviting tax at higher rate.
3. The assessee, in view of such possible dispute applied to the competent authority under section 80 of the Act for determination of disputed questions. The assessee's specific query was with respect to the following equipments:
Sr Invoice No. Date Item Name
No
1 RI/YAPL/-07-08/368 15.3.08 BACKHO LOADER
2 RI/YAPL/07-08/386 31.3.08 TRACK EXCAVATOR
3 RI/YAPL/07-08/379 31.3.08 LOADERS
4 Sales is not effected SKID STEER LOADER
during the year
5 Sales is not effected TELESONIC HANDLER
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during the year
6 Sales is not effected VIBRATORY TANNDEM
during the year ASPHALT COMPACTOR
7 Sales is not effected VIBRATORY SOIL
during the year COMPACTOR
8 Sales is not effected CRANE
during the year
4. The Joint Commissioner of Commercial Tax by his order dated 16.11.2009 ruled against the assessee. He neither stated that the equipments in question were not machinery nor held that the same was not used in execution of a works contract. He merely relied on the provisions of Motor Vehicles Act and the decision of the Supreme Court in the case of Bose Abraham vs. State of Kerala and another reported in 121 STC 614 to come to the conclusion that these equipments are in the nature of motor vehicles. He observed that such vehicles are required to be registered compulsorily under Motor Vehicles Act. In his opinion therefore, they would not fall within entry 35 under residuary clause.
5. This decision of the competent authority gave rise to the assessee's appeal before the Tribunal. Before the Tribunal, the assessee produced voluminous literature to point out that these equipments are machines used exclusively for the purpose of construction related projects and were therefore, in the nature of machines used in execution of a works contract. The Tribunal accepted the assessee's contention and came to the conclusion that the equipments were in the nature of machines used for works Page 4 of 10 HC-NIC Page 4 of 10 Created On Wed Jul 13 00:04:53 IST 2016 O/TAXAP/517/2013 JUDGMENT contract and therefore, covered under entry 35 of the schedule and not residuary clause. The Tribunal referred to various judgments cited by the Government to find that the same were primarily concerned with Motor Vehicles Act. In the opinion of the Tribunal, even if the machinery was otherwise categorised as motor vehicle under Motor Vehicles Act, it could not be excluded from entry 35 if it was otherwise used for execution of the works contract. The Tribunal thus allowed appeal upon which the Government has filed the present appeal.
6. Learned Assistant Government Pleader contended that the vehicles in question were in the nature of motor vehicles. They were registered as motor vehicles under Motor Vehicles Act. They therefore, could not have been treated as machines. The Tribunal therefore, committed a serious error in allowing the appeal.
7. On the other hand, learned counsel Shri Uchit Sheth for the assessee opposed the appeal contending that (i) entry 35 of the schedule is specific and includes machinery used in execution of works contract. The goods in question satisfied said description. Merely because they also happened to be motor vehicles, cannot be excluded from the purview of the said entry 35 (ii) the Government amended the said entry under notification dated 15.2.2010 by adding following words:
" but excluding the machinery in the form of a motor vehicle or attached or mounted to a motor vehicle." This would clearly indicate that prior to such amendment, the motor vehicle which otherwise fulfilled the description contained under entry 35 could not be classified under residuary entry.
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8. In support of his contention, counsel relied on the following judgments:
(1) Division Bench judgment of this Court in the case of Ambica Woods Works vs. The State of Gujarat, reported in 43 S.T.C. 338 (2) Vicas Tractors vs. Commissioner of Sales Tax, reported in 27 S.T.C. 203 (3) Gem Granites vs. Commissioner of Income-Tax, reported in 271 ITR
322.
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 of the matter would disappear when one peruses the judgment of the Tribunal challenged in the Page 6 of 10 HC-NIC Page 6 of 10 Created On Wed Jul 13 00:04:53 IST 2016 O/TAXAP/517/2013 JUDGMENT 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.
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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.
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 Page 8 of 10 HC-NIC Page 8 of 10 Created On Wed Jul 13 00:04:53 IST 2016 O/TAXAP/517/2013 JUDGMENT 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 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 sub-section 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 Page 9 of 10 HC-NIC Page 9 of 10 Created On Wed Jul 13 00:04:53 IST 2016 O/TAXAP/517/2013 JUDGMENT 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 Sub-section 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 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.
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