M/S. Tara Equipments (P) Ltd vs State Of Orissa Represented By
2022 Latest Caselaw 2897 Ori

     IN THE HIGH COURT OF ORISSA AT CUTTACK

                 STREV Nos.72 and 73 of 2009

M/s. Tara Equipments (P) Ltd.                ....              Petitioner


                                -versus-
State of Orissa represented by               ....         Opposite Party
Commissioner of Sales Tax, Cuttack

Advocates appeared in these cases:

For Petitioner              :                     Mr. Jagabandhu Sahoo,
                                                        Senior Advocate

For Opposite Party          :                         Mr. Sunil Mishra,
                                           Additional Standing Counsel

 CORAM:
 THE CHIEF JUSTICE
 JUSTICE R.K. PATTANAIK

                           JUDGMENT

28.06.2022 Dr. S. Muralidhar, CJ.

1. Both these revision petitions are directed against the orders dated 10th March 2008 passed by the Orissa Sales Tax Tribunal, Cuttack (Tribunal) in S.A. No.394 of 2005-06 and S.A. No.393 of 2005-06 respectively. By the said orders, while dismissing the Petitioner's appeals, the Tribunal affirmed the orders dated 1st February 2005 passed by the Assistant Commissioner of Sales Tax (ACST), Sundargarh Range, Rourkela in Sales Tax Appeal Nos.AA.271 (RL-II)/2004-05 and AA.255 (RL-II)/2004-05 respectively.

2. While admitting the present revision petitions, this Court by its order dated 27th October 2009 framed the following questions separately for considerations:

"I. Whether equipment is same as machinery and would be covered under the Finance Department Notification No.44987-CTA-105/89-F dated 22nd December 1989 w.e.f. 1st January 1990 and Notification No.1691/CTA-37/01 (PT)-F dated 9th January 2002 w.e.f. 1st March, 2002?

II. Whether in the facts and circumstances of the case, disallowance of claim of deduction under section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act for sale of mechanical equipments i.e. idler to HEC against Form No.XXXIV is lawful and proper?"

3. An interim order was passed in both the revision petitions to the effect that the sales tax demand for the year 2001-02 shall be stayed subject to the Petitioner depositing Rs.50,000/- and Rs.30,000/- respectively before 15th November, 2009.

4. The background facts are that the Petitioner is a registered dealer under the Orissa Sales Tax, 1947 (OST Act) and the Central Sales Tax Act, 1956 (CST Act) and is engaged in the manufacture and sale of mechanical equipments having its place of business at Rourkela. During the assessment years (AYs) 2000- 01 and 2001-02, the Petitioner sold 'idler' manufactured by M/s. Heavy Engineering Corporation Ltd. (HEC), a Government of India entity, against a declaration Form-XXXIV and claimed deduction under Section 5(2)(A)(a)(ii) of the OST Act. While passing the assessment orders dated 31st May 2004 and 31st March

2004 respectively, the Sales Tax Officer (STO) accepted that the above sale had taken place against Form-XXXIV and that in support of such sales to HEC, the Assessee had furnished a declaration. However, according to the STO, the machinery and its spares were subject to tax of the first point of sale w.e.f. 1st January 1990 and therefore, Form-XXXIV was not maintainable. The claim for deduction was therefore disallowed by the STO and the said amount of Rs.19,61,116.15/- and Rs.10,65,244/- respectively was added to the taxable turnover for levy of sales tax at 16%.

5. Further, in the course of separate assessment in both the matters, while examining the work order issued to the Petitioner by M/s. Otto India (P) Ltd., M/s. Small Tools & Allied Manufacturing Co., SAIL RSP and HEC respectively, the STO noted that the Petitioner had undertaken a job of repairing and machining, which involved consumables like welding rod, gas and paints. The STO concluded that there was a transfer of property in the goods in the form of electrodes and paints from the dealers account. 70% of the gross receipt was allowed towards labour and services and the balance was treated as material component. This led to an extra tax demand of Rs.2,95,720/- and Rs.1,96,552/- respectively.

6. The ACST has in the orders dated 1st February 2005 concurred with the STO as regards the disallowance of the claim for deduction on the strength of Form-XXXIV vis-à-vis the equipments sold by the Petitioner to HEC. As regards the labour

contract, the ACST allowed 85% towards labour and service charges and the balance 15% as materials involved in the job works. The tax demand on this account was reduced to Rs.2,75,935/- and Rs.1,91,290/- respectively.

7. In the further appeal by the Assessee, the Tribunal has by the impugned orders dated 10th March 2008 concurred with the STO and ACST that the idler sold to HEC was subject to tax at first point of sale and the Assessee being the first seller was bound to collect tax on the sale of such goods. The order of the ACST as regards the works contract was also affirmed by the Tribunal.

8. This Court has heard the submissions of Mr. Jagabandhu Sahoo, learned Senior Advocate appearing for the Petitioner and Mr. Sunil Mishra, learned Additional Standing Counsel for the Department.

9. As regards the conclusion of the Tribunal that the idler is a component part of the machinery, reference is made by Mr. Sahoo to serial No.6 of the Finance Department Notification dated 22nd December 1989 which mentions "machineries including sewing machines and component parts and accessories thereof". Referring to Collin's Dictionary, Mr. Sahoo submitted that an 'idler' is nothing but "a pulley riding loosely on a shaft pressing against a belt to guide it or take up the slack: also idler pulley". He also referred to entry in serial No.114 of the notification dated 31st March 2001 (SRO No.149/2001) to urge that 'equipment' does not specifically find mention in the notifications under Section 8

of the OST Act for exigibility of tax at the first point of sale. Relying on the decision of the Allahabad High Court in Commissioner of Sales Tax, U.P. v. Om Iron Foundry [1974] 33 STC 82 (All), it is contended that pulleys are not parts of machinery and they fall under unclassified goods and that ordinary pulleys connecting shafts with electrical motors or oil engines for transmission of power are not liable to be taxed as machinery parts at the rate of 6%.

10. It is further submitted by Mr. Sahoo that the goods sold by the Petitioner to HEC against Form-XXXIV satisfies the conditions stipulated in Section 5(2)(A)(a)(ii) of the OST Act since the goods purchased by HEC has been subjected to levy of tax on the sales effected by HEC to NALCO against Form-IV as noted in the assessment order of HEC Ltd. dated 9th February 2004 for the same period 2001-02, a copy of which has been enclosed with the petition as Annexure-5 to STREV No.72 of 2009. Reference is made to the judgment dated 20th May 2022 of this Court in STREV Nos.41 and 42 of 2002 (M/s. High-way Trading (Pvt.) Ltd. v. State of Orissa) where it was observed that it would not be proper to tax a person twice in respect of the same transaction. Mr. Sahoo also placed on record samples of invoices raised by the Petitioner on HEC for sale of the 'idlers' which indicates that they are separate standard items and not part of any machinery.

11. Mr. Mishra, learned Additional Standing Counsel appearing for the Department on the other hand supported the orders passed by the STO, ACST and the Tribunal. He referred to serial No.16,

sub-serial 6 of List-D of the Rate Chart which indicated that "machinery including sewing machines and component parts and accessories thereof" were, till 28th February 2002, subject to tax at the first point of sale. It is submitted that the idler is nothing but a component part of the machinery and was subject to tax in the first point of sale and therefore, Form-XXXIV could not be used.

12. The above submissions have been considered. As per the notification dated 9th January 2002 issued by the Finance Department, the entry at serial No.175 states "machinery, machinery parts and spare parts and component parts and accessories thereof and tools" would be exigible to tax at the first point of sale. Admittedly, the Petitioner is the first seller of the 'idlers' to HEC. The entry in question refers not only to machineries but also component parts thereof and accessories. It also includes 'tools'. The decision of the Allahabad High Court in Commissioner of Sales Tax, U.P. v. Om Iron Foundry (supra) was dealing with the question whether pulleys were not parts of the machinery. The High Court observed that the goods in question were "ordinary pulleys connecting shafts with electrical motors or oil engines for transmission of power".

13. In the present case, the Petitioner does not appear to have placed on record materials to show what the function of the 'idler' is. The STO treated it as "machinery spare" whereas the ACST took the view that components parts and accessories thereof constituted a separate part of the entry and therefore 12% rate in respect of unspecified taxability came into play when it concerned

component parts and accessories. While it is true that idler by itself may not be a complete machine, what is exigible to tax is not only the complete machinery but also spare parts and accessories of machines.

14. The decision of the Allahabad High Court in Commissioner of Sales Tax, U.P. v. Om Iron Foundry (supra) appeared to turn on the fact that pulleys there were not an integral part or an accessory of any particular machine. The mere fact that the tax may have been paid on the further sales by HEC to NALCO on the machinery sold by HEC would not ipso facto result in taxing the same 'transaction' twice. It is not clear whether what was sold by the HEC to NALCO was the same 'idler' or the machinery of which the idler was a part. In the absence of clear evidence in this regard, it is not possible to accept the contention of the Petitioner that the same transaction is being taxed twice. Consequently, the Court does not find the decision in M/s. High-way Trading (Pvt.) Ltd. (supra) as having relevance here.

15. The Court is not persuaded that the idler sold by the Petitioner does not form part of machinery or is not an accessory. The distinction sought to be drawn by Mr. Sahoo between 'equipment' and 'machinery' is not convincing in the context in which the question arises here. If the idler was a component part of machinery or even an accessory or a tool, it would still be exigible to tax at the first point of sale.

16. For the aforementioned reasons, the Court answers the Questions I and II in the affirmative i.e., in favour of the Department and against the Assessee thereby upholding the view expressed by the STO, ACST and the Tribunal.

17. The revision petitions are accordingly dismissed with no order as to costs.

(S. Muralidhar) Chief Justice

(R.K. Pattanaik) Judge

S.K.Guin/ Sr. Stenographer