CTO, ANTI EVASION, CIRCLE III, RAJASTHAN, JAIPUR versus M/S PRASOON ENTERPRISES, JAIPUR on 26 March 2019

1. Leave granted.

2. This appeal is filed against the final judgment and order dated05.01.2017 passed by the High Court of judicature for Rajasthan at JaipurBench, Jaipur in S.B. Sales Tax Revision Petition No.114 of 2016 wherebythe High Court dismissed the revision petition filed by the appellant herein.

3. The appeal involves a short point as would be clear from theundisputed facts stated infra.

4. The appellant herein-State of Rajasthan (Commercial TaxDepartment) is the revision petitioner whereas the respondent herein isthe respondent of the revision petition before the High Court out of whichthis appeal arises.

5. The respondent is engaged in the business of trading of spareparts of mining machinery, steel wire ropes, standard wires, wire rodsetc. These goods are subjected to payment of Value Added Tax (VAT)under the Rajasthan Value Added Tax Act, 2003 (hereinafter referred toas “VAT Act”). The respondent is a registered dealer under the VATAct.

6. The Commercial Tax Officer (AE) [hereinafter referred to as“CTO”] conducted a survey in the respondent’s business premises on16.03.2009 and it was noticed therein that the respondent was chargingVAT at the rate of 4% on “Mobile Crane Wire Ropes”.

7. It is with this background fact, the question arose before thetaxing authorities under the VAT Act as to which is the proper Entryunder the VAT Act for charging tax on “Mobile Crane Wire Ropes”.

8. The aforementioned question arose before the CTO in theassessment proceedings, which were initiated against the respondent intheir business premises as a result of the survey conducted by the CTO

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Aand also arose before the Deputy Commissioner, Commercial TaxDepartment to seek his advance ruling on the aforementioned question.

9. The CTO and the Deputy Commissioner were of the view thatthe rate of tax chargeable to the goods in question is 12.5% as prescribedin the Residuary Entry in Schedule V under the Act and not 4% asBprescribed in Entry 155 of Schedule IV of the VAT Act.

10. In other words, both the taxing authorities were of the viewthat the proper Entry for payment of tax on these goods is the ResiduaryEntry of Schedule V, which prescribes the rate of tax as 12.5%.

11. The CTO accordingly initiated the assessment proceedingsCagainst the respondent for the Assessment Year 2007-2008. Byassessment order dated 16.03.2009, it was held that the respondent wasliable to pay VAT at the rate of 12.5% under the Residuary Entry ofSchedule V of the VAT Act. Since the respondent had deposited the taxat the rate of 4% treating the goods in question as falling in Entry 155 ofDSchedule IV, the notice was issued to the respondent to pay the differenceamount of VAT along with penalty and the interest payable under theVAT Act.

12. The respondent felt aggrieved and filed appeal before theDeputy Commissioner (Appeals). By order dated 02.12.2010, theEAppellate Authority allowed the appeal and set aside the order of theCTO (AE). The Appellate Authority held that the ropes in question wereessentially used in Mobile Cranes as part of the Mobile Cranes. It washeld that a Mobile Crane is not complete and nor it can effectively functionwithout the use of the rope. It was, therefore, held that the rope is a partof a Mobile Crane and chargeable to VAT in accordance with ratesFprescribed in the Entry 155 of Schedule IV of the Act.

13. The State (CTO) felt aggrieved and filed appeal before theRajasthan Tax Board under Section 83 of the VAT Act. By order dated06.01.2016, the Board dismissed the appeal and affirmed the order ofthe Deputy Commissioner. The State (CTO) felt aggrieved and filedGrevision petition in the High Court of Rajasthan Bench at Jaipur.

14. By impugned order, the High Court dismissed the revision andupheld the order of the Board, which has given rise to filing of this appealby way of special leave by the State (CTO) in this Court.

CTO, ANTI EVASION, CIRCLE III, RAJ., JAIPUR v. M/S PRASOONENTERPRISES, JAIPUR [ABHAY MANOHAR SAPRE, J.]

15. So, the short question, which arises for consideration in thisappeal, is whether the High Court was justified in dismissing theappellant’s (State/CTO) revision and thereby justified in upholding theview taken by the Board that the “Mobile Crane Wire Ropes” arechargeable to tax @ 4% under Entry 155 of Schedule IV of the VATAct.

16. Heard Dr. Manish Singhvi, learned AAG for the appellant andMs. Jyoti Mendiratta, learned counsel for the respondent.

17. Learned counsel for the appellant (CTO) while assailing thelegality and correctness of the impugned order reiterated the samesubmissions, which were urged before the High Court.

18. In substance, his submission was that the goods in questionare chargeable to tax at the rate of 12.5%, which is the rate prescribedin the Residuary Entry of Schedule V of VAT Act because, according tothe learned counsel, there is no specific Entry under which the goods inquestion fall for being taxed at a specified rate.

19. In other words, the submission was that since the goods inquestion are not specified in any of the Entries in Schedule IV andSchedule V of the VAT Act and nor they are the parts of the MobileCranes, the only Entry under which they can be taxed is the ResiduaryEntry of Schedule V of the VAT Act.

20. In reply, the learned counsel for the respondent (dealer)supported the impugned order and contended that it does not call for anyinterference.

21. Having heard the learned counsel for the parties and on perusalof the record of the case including the written submissions, we find nomerit in this appeal.

22. As taken note of supra, the question, which arises forconsideration in this case, is whether the “Mobile Cranes Wire Ropes”are chargeable to tax at the rate of 4% or 12.5% under the VAT Act.

23. In other words, the question arises is whether the goods “MobileCranes Wire Ropes” fall under Entry 155 of Schedule IV or under theResiduary Entry of Schedule V of the VAT Act.

24. At the relevant time, there were two relevant Entries whichread as under:

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ASCHEDULE IV[See section 4]Goods Taxable at 4%S.No.Description of GoodsRate of Conditions, if anyTax %1.2.3.4.B155.Hydraulic excavators (earth 4moving and mining machinery), mobile cranes and hydraulic dumpers (including parts thereof).Bracketed portion was inserted by Notification No.F.12(63)FD/Tax/2005-51 dated C08.05.2006 vide S.O. No.99 dated 09.05.2006SCHEDULE V

[See section 4]

Goods Taxable at 12.5%

DS.NoDescription of GoodsRate of Tax Conditions, if any%12341.Goods not covered in any other 12.5Schedule under the Act or under any notification issued under section 4 of the Act.

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25. Mere reading of Entry 155 quoted above would go to showthat the goods called Hydraulic excavators (earth moving and miningmachinery), Mobile Cranes and Hydraulic Dumpers (including partsthereof) are chargeable to tax at the rate of 4%.

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26. It may be mentioned here that the expression “including partsthereof” was inserted in the Entry 155 by an amendment w.e.f.09.05.2006. It, therefore, indicates that the parts of the goods specifiedin the Entry were not chargeable to tax at the rate of 4% prior to09.05.2006 but became chargeable at the rate of 4% only on and after09.05.2006.

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27. This Court has laid down the test as to how the Court shoulddecide the question as to whether a particular item is a part of other.The test is “a thing is a part of the other if the other is incompletewithout it”. In other words, “a thing is a part of the other, if theother cannot function without it”. [See M/s Annapurna Carbon H

CTO, ANTI EVASION, CIRCLE III, RAJ., JAIPUR v. M/S PRASOONENTERPRISES, JAIPUR [ABHAY MANOHAR SAPRE, J.]

Industries vs. State of Andhra Pradesh [(1976) 2 SCC 273 andCommissioner of Central Excise, Delhi vs. Insulation ElectricalPrivate Limited (2008) 12 SCC 45)]

28. When we apply this principle to the facts of the case at handthen we find no difficulty in holding that the wire ropes used in the MobileCranes are a part of the Mobile Cranes and thus fall in Entry 155 ofSchedule IV of the VAT Act.

29. A fortiori, it is taxable at the rate of 4%. The reasons are notfar to seek.

30. The respondent has filed (Annexure R-1), the completeliterature with a view to show as to how the Mobile cranes are designed,structured, built and operated in the field when it put to its ultimate useby the consumer. They have also filed the details of the specificationissued by the Bureau of Indian Standards specifying therein the strengthof each wire rod/rope, which is used in the manufacture of differentkind of Cranes.

31. Mere perusal of the literature would go to show that the MobileCranes are not complete without the wire ropes. In other words, in orderto use the Mobile Cranes and make them operational, the use of wireropes is essential. If wire ropes are not fitted in the Mobile Cranes, theywill not function much less effectively.

32. It is for this reason, we are of the considered opinion that theMobile Crane Wire Rope is an essential part of the Mobile Crane and,therefore, falls in Entry 155 of Schedule IV of the VAT Act. It is,therefore, taxable at the rates prescribed for the goods specified in Entry155.

33. We, however, make it clear that we have examined only thequestion of taxability of the “wire ropes” in the context of its use inMobile Cranes as would be clear from the question posed by the HighCourt in Para one of the impugned order.

34. In view of the foregoing discussion, the appeal is found to bedevoid of any merit and it thus fails and is accordingly dismissed.

In C.A.Nos. @ S.L.P.(c) Nos.4837-4838/2017, 4839-4840/

2017 and 5981/2017

1. Leave granted.

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1054 SUPREME COURT REPORTS [2019] 2 S.C.R.

A2. These appeals are directed against the common final judgmentand order dated 07.10.2016 passed by the High Court of Judicature forRajasthan, Jaipur Bench at Jaipur in S.B. Sales Tax Revision PetitionNos.106, 101, 99, 100/2013 and 449/2011 whereby the High Courtdismissed the revision petitions filed by the appellant herein.

B3. In view of the order passed above in C.A. @ S.L.P.(C)No.11937/2017, these appeals are dismissed.

Devika Gujral

Appeals dismissed.

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