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M/S.Tecmo Industries Vs the Tamilnadu Sales Tax — GST and Indirect Tax | Madras HC (2024)

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M/S.Tecmo Industries Vs the Tamilnadu Sales TaxM/S.Tecmo Industries v. the Tamilnadu Sales Tax

Allowed

M/S.Tecmo Industries v. the Tamilnadu Sales Tax

Madras HC1 Oct 2024WP/8110/2008

Case brief

AI extract

What is this about?

null

What did the court decide?

Impugned Tribunal order dated 03.12.2007 set aside; writ petition allowed; no costs.

What the court decided

AI extract

A

2024:MHC:3614

W.P. No. 8110 of 2008

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 01.10.2024

CORAM

THE HON'BLE MRS. JUSTICE DR. ANITA SUMANTH AND THE HON'BLE MR. JUSTICE G. ARUL MURUGAN

W.P. No. 8110 of 2008

M/s. TECMO Industries, 44-A, South Street, Avarampalayam, Coimbatore – 641 006.

..Petitioner

Vs.

The Tamil Nadu Sales Tax Appellate Tribunal, (Additional Bench), Coimbatore, represented by its Secretary, Commercial Taxes Building, Balasundaram Road, Coimbatore – 641 018.

The Appellate Assistant Commissioner (CT), (Main), (FAC), Commercial Taxes Building, Balasundaram Road, Coimbatore – 641 018.

Cases cited

Colour shows how this judgement treated each authority

AI extract

Northwest Switchgear Ltd. V. Commissioner of Central Excise, New DelhiDistinguished¶12
(2006) 3 SCC 86 · Who else cites this
Commissioner of Income Tax, Central V. L.G. Ramamurthi and OthersRelied on

Parties & counsel

AI extract

petitioner
M/s. TECMO Industries
respondent
The Tamil Nadu Sales Tax Appellate Tribunal, (Additional Bench), Coimbatore
respondent
The Appellate Assistant Commissioner (CT), (Main), (FAC), Coimbatore
respondent
The Deputy Commercial Tax Officer, Avarapalayam Circle, Coimbatore

Coram

AI extract

Case details

As recorded by the court registry

Court: Madras HC
Decided on: 1 Oct 2024 · October
Registered: 1 Apr 2008
Case no.: WP/8110/2008

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Cite this judgement

M/S.Tecmo Industries v. the Tamilnadu Sales Tax, WP/8110/2008 (MAD), decided on 1 October 2024.

The Madras High Court publishes no neutral citation for this judgement — cite it by case number and date of decision.

Cases cited2

Northwest Switchgear Ltd. V. Commissioner of Central Excise, New DelhiDistinguished¶12
Commissioner of Income Tax, Central V. L.G. Ramamurthi and OthersRelied on¶21

Open Authorities

Outcome

Impugned Tribunal order dated 03.12.2007 set aside; writ petition allowed; no costs.

Detailed headnote1 paragraphs

null

A compact analysis

This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.

The Deputy Commercial Tax Officer, Avarapalayam Circle, Coimbatore. ..Respondents

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W.P. No. 8110 of 2008

Prayer:

Prayer: Petition under Article 226 of the Constitution of India praying for issue of a Writ of Certiorari to call for the records of the 1^st respondent herein i.e., the Tamil Nadu Sales Tax Appelate Tribunal (Additional Bench), Coimbatore in C.T.A. No. 58 of 2006 and quash the impugned order dated 03.12.2007 passed therein.

For Petitioner :: Mr.C. Subramanian for Mr.R.L. Ramani For Respondents :: Mrs.K. Vasanthamala Govt. Advocate

O R D E R

(Order of the Court was made by Dr. ANITA SUMANTH., J)

The petitioner is a manufacturer of submersible pumps, motors and a dealer under the provisions of Tamil Nadu General Sales Tax Act, 1959 ( in short 'TNGST Act/Act'). In respect of the period 2003-2004, the petitioner had purchased components for the manufacture of submersible pumps and in addition, had also purchased panel boards for sale along with pumps manufactured by it.

An assessment had been made on 09.04.2005 bringing to tax,

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W.P. No. 8110 of 2008

turnover from sale of pumps, motors, scrap and pumpsets at the rates indicated in the schedules. As regards panel boards, the petitioner had purchased the same against Form XVII declarations that had been issued to its vendor, such declarations being specific that the panel boards were to be supplied along with submersible pumps.

There is thus no dispute on the position that the panel boards

purchased by the petitioner against Form XVII declarations had accompanied submersible pump sets, both being sold as an integrated unit to its customers. This fact emanates from the order of assessment where, the

proposal for determination of total and taxable turnover is set out as follows:

It was therefore proposed to determine the total and taxable turnover for

the year 2003-04, as detailed below: 1. Sales of 3 HP, 5HP pumps at 4% : Rs. 22,69,943.00 2. Sales of pump sets at 10% : Rs.1,29,14,667.00 3. Sales of Motor at 12% : Rs. 11,66,252.00 4. Sales of iron scrap at 4% : Rs. 16,248.00 5. Turnover liable to tax at 1% u/s 3(4) : Rs.2,04,91,185.00 6. Panel Board purchases against form XVII not admissible difference tax at 12% - 3% = 9% : Rs. 29,51,301.00 Taxable turnover proposed under TNGST Act : Rs.3,98,09,596.00

The proposal at Serial No.2 above, 'Sales of Pumpsets at 10%'

indicates acquiescence of the Assessing Authority that the submersible

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W.P. No. 8110 of 2008

pumps have been sold as a set, with all components, both internal and external. Having held so, the Assessing Authority takes a contradictory stand that the Form XVII declarations had been misused since, according to him, the Panel Boards had been supplied as a separate item to the purchaser and were ineligible for the benefit of concessional rate of tax under Section 3(3) of the Act. He hence eschews the declarations, bringing to tax the turnover from purchase of panel boards at differential rate of 9% (i.e., 12% - 3%).

In both first and second appeals, the petitioner was unsuccessful as both authorities confirm the findings in the order of the assessment that the panel boards were independent items liable to tax at the rate of 12%. Reliance was placed on the judgment of the Supreme Court in the case of Northwest Switchgear Ltd. V. Commissioner of Central Excise, New Delhi¹ , reiterated by Mrs. K. Vasanthamala, learned Government Advocate before us.

Mr. C. Subramanian, learned counsel for the petitioner would reiterate the fact that submersible pumpsets were sold as integrated units for immediate use by the agriculturists. He would point out that the pumps were

1 (2006) 3 SCC 86

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W.P. No. 8110 of 2008

unusable without the panel boards and hence, as a business measure and on the ground of commercial expediency, the pumpsets manufactured by the petitioner must be accompanied by all components to make them ready for use including the panel boards.

He relies on Rule 3(h) of the Tamil Nadu General Sales Tax Rules, 1959 ( in short, TNGST Rules/Rules) which defines the word 'Manufacturer' to mean any person who produces, prepares or makes goods for the purpose of trade. This definition, according to him, supports the position that even a person who integrates various components to make finished products ready to use, would satisfy the definition of 'manufacturer'.

We have heard learned counsel on either side and perused the records. We have also perused carefully the judgment of Supreme Court in the case of Northwest Switchgear Ltd.¹

The admitted factual matrix before us, as could be seen from a perusal of the assessment order, is that the petitioner has sold 'pumpsets' which includes two items, namely, submersible pumps and panel boards. Nowhere has the Department questioned the nature of commodity supplied to the agriculturists as comprising both the aforesaid items.

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The argument advanced on behalf of the petitioner, that the submersible pumps would be rendered unusable without the panel boards has been refuted by the learned Government Advocate to state that the panel boards could be purchased by the agriculturists even separately and it was not mandatory for the petitioner to have supplied them together in order to render the pumpsets complete. This may well be so.

However, in the present case, there is a finding of fact by the assessing authority that reveals to us that the goods supplied are integrated sets, comprising both submersible pump and panel board. In such circumstances, where the department has accepted the nature of final product supplied, we find it difficult to accept the stand that the two items must be treated as separate products liable to tax under different rates as stipulated in the schedules.

In the case of Northwest Switchgear Ltd¹ , the assessee was engaged in the manufacture of switches, fan regulators and distribution boards that fell under Chapter Sub-Headings No. 8536.90, 8414.20 and 8537.00 of the Central Excise Tariff Act, 1985 (in short, Tariff Act'). The appellants had classified fan regulators under Sub-Heading 8414.20 of the

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Tariff Act which covers electric fans, on the strength that there is no other use of these items and these are used principally and solely with the electric fans.

In that case as well, the Central Excise Department took a stand

very similar to that taken by the Sales Tax Department before us. They were of the view that the sale of regulators would attract duty @ 15% ad valorem in terms of the specific entry under which they were classified and not 10% ad valorem as contended by the appellants. The issue framed to be determined was whether fan regulators would be classified along with electric fans at the same rate of duty or as parts and accessories attracting higher rate of duty.

On facts, the position in that case was that regulators had been sold

without the electric fan and as independent, stand-alone products. On that admitted factual basis, the Supreme Court accepted the contention of the Department that fan regulators manufactured by that assessee without any electric fans were only classifiable as a part or accessory of a fan and not as a fan itself.

In the present case, undoubtedly, submersible pumps and panel

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boards are governed by separate entries. Under the Schedules, submersible pumps are taxable @ 10% under entry 26 of part 'C' of the First Schedule and panel boards are taxable under entry 14 (iii) of part 'D' of the First Schedule taxable @ 12%.

However, the admitted position in this case is that the panel boards have not been sold as an independent or stand-alone item, but along with submersible pumps, as pumpsets. In such circumstances, we agree with the assessee that the benefit of reduced rate of tax as stipulated under Section 3(3) of the Act would be available. Section 3(3) of the Act is extracted below:

"Sec.3(3) Notwithstanding anything contained in [sub-section (2), (2-A) or (2-C),] but subject to the provisions of sub-section (1), the tax payabale by a dealer in respect of sale of any goods including consumables, packing material and labels, but excluding plant and machinery, to another dealer for use by the latter in the manufacture, and assembling, packing or labelling in connection with such manufacture inside the State, for sale by him of any goods *[[other than ethyl alcohol, absolute alcohol, methyl alcohol, rectified spirit, neutral spirit and denatured spirit] goods falling under Part A of the Third Schedule, goods falling under item 1 of the Sixth Schedule] and arrack, shall be at the rate of only three per cent on the turnover relating to such sale:

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W.P. No. 8110 of 2008

Provided further that any dealer who, after purchasing the goods in respect of which he had furnished any declaration, fails to make use of the goods so purchased for the purpose specified in the declaration but dispose of such goods in any other manner, shall pay the difference of tax payable on the turnover relating to sale of such goods at the rate prescribed and three per cent:"

The Assessing Authority appears to have invoked the proviso to Section 3(3) of the Act although there is no reference to the proviso in the order of assessment. The officer proceeds on the basis that the petitioner, after purchasing the panel boards on the strength of Form XVII declarations, has failed to make use of the panel boards for the purpose stated in the declarations, but has sold them as independent commodities. We are unable to accept his conclusion in the light of categoric admission in the assessment order to the effect that the submersible pumps have been sold with the panel boards as integrated kits.

We extract below the operative portion of the assessment order where the Assessing Authority states thus:

'In respect of purchases of panel board against form XVII in large quantity for sale along with submersible pumps to the agriculturists is not admissible to effect purchases u/s.3(3) or 3(5) of TNGST. Panel board can be purchased as capital

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assets by the manufacturing unit. In this case the dealers have effected pale board not for the use of the dealer in their manufacturing activity. It is for the sale to the agriculturists along with their sale of submersible pumps as an accessory like starter, switch and other pipe fittings. Hence, there is no justiification in the argument of the dealer that the panel board is an component part for submersible pump. Hence, the objection of the dealer is over ruled and the levy and penalty are confirmed."

We may also, in this regard, refer to three assessment orders all dated 27.01.2005 for the periods 2002-2003, 2004-2005 & 2005-2006 where the claim of concessional rate of tax under Section 3(3) has been accepted by the Assessing Officer. Needless to say, it is necessary that the Department adopts a sustained and uniform view in assessment and cannot waver, taking conflicting stands, especially in the absence of any variation in facts or legal position.

Thus, the decision that Form XVII declarations are legitimate and liable to be accepted for the earlier and later years, we do not find any justification in the officer having deviated from that view for the intervening year alone.

We are supported in this conclusion by the decision of this Court

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W.P. No. 8110 of 2008

in

in Commissioner of Income Tax, Central V. L.G. Ramamurthi and Others²

where the following conclusions are relevant and extracted below:

It is worthwhile emphasising that if a Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly, if a Division Bench differs from the view taken by another Division Bench, it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal in the present case wanted to take an opinion different from the one taken by the earlier Bench, it should have placed the matter before the President of the Tribunal so that he could have referred the case to a Full Bench of the Tribunal, consisting of three or more members for which there is provision in the Act itself.

Under these circumstances, we are clearly of the opinion that the Tribunal completely erred in coming to the conclusion it did, at variance with and opposed to the conclusion of the Tribunal on the earlier occasion, namely, that the gifts in the present cases constituted real gifts and not sham ones.

In the result, the impugned order of the Tribunal dated

2 110 ITR 453

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W.P. No. 8110 of 2008

03.12.2007 is set aside and this writ petition stands allowed. No costs.

[A.S.M., J] [G.A.M., J]

01.10.2024

Index:Yes/No Speaking order/non-speaking order Neutral Citation:Yes/No

nv

To

The Appellate Assistant Commissioner (CT), (Main), (FAC), Commercial Taxes Building, Balasundaram Road, Coimbatore – 641 018.

The Deputy Commercial Tax Officer, Avarapalayam Circle, Coimbatore.

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W.P. No. 8110 of 2008

Dr.ANITA SUMANTH,J. AND G.ARUL MURUGAN,J.

nv

W.P. No. 8110 of 2008

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01.10.2024

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110 ITR 453

Statutes considered

4 provisions across 3 enactments

AI extract

Tamil Nadu General Sales Tax Act, 1959Tamil Nadu General Sales Tax Act, 19593(3)
Tamil Nadu General Sales Tax Rules, 19593(h)
Constitution of India226

Dr. Anita Sumanth
G. Arul Murugan

CNR

HCMA010184062008

Topic

GST and Indirect Tax

Bench

Anita Sumanth G.arul Murugan

Disposal

ALLOWED

M/S.Hotel Gowrishankar (P) Ltd. Vs the Secretary, Sales Tax

1 Oct 2024

The Pondicherry University, Vs Dr.Sheela Das

1 Oct 2024

Statutes4

Tamil Nadu General Sales Tax Act, 1959Tamil Nadu General Sales Tax Act, 1959 · 3(3)
Tamil Nadu General Sales Tax Rules, 19593(h)
Constitution of India226

View all statutes

Bench / Coram

Dr. Anita Sumanth and G. Arul Murugan

Parties & counsel