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CTO, Anti Evasion, Circle III, Rajasthan, Jaipur Vs. Prasoon Enterprises, Jaipur - (Supreme Court) (26 Mar 2019)

A thing is a part of the other, if other cannot function without it


Sales Tax/VAT

In facts of present case, the Respondent is engaged in the business of trading of spare parts of mining machinery, steel wire ropes, standard wires, wire rods etc. These goods are subjected to payment of Value Added Tax (VAT) under the Rajasthan Value Added Tax Act, 2003 (VAT Act). The Respondent is a registered dealer under the VAT Act.

The Commercial Tax Officer (CTO) conducted a survey in the Respondent's business premises and it was noticed therein that, the Respondent was charging VAT at the rate of 4% on "Mobile Crane Wire Ropes". The CTO and the Deputy Commissioner were of the view that, the rate of tax chargeable to the goods in question is 12.5% as prescribed in the Residuary Entry in Schedule V under the Act and not 4% as prescribed in Entry 155 of Schedule IV of the VAT Act.

The CTO accordingly initiated the assessment proceedings against the Respondent. The Respondent felt aggrieved and filed appeal before the Deputy Commissioner (Appeals). The Appellate Authority held that, the ropes in question were essentially used in Mobile Cranes as part of the Mobile Cranes. It was held that, a Mobile Crane is not complete and nor it can effectively function without the use of the rope. It was, therefore, held that the rope is a part of a Mobile Crane and chargeable to VAT in accordance with rates prescribed in the Entry 155 of Schedule IV of the Act.

The State (CTO) felt aggrieved and filed appeal before the Rajasthan Tax Board under Section 83 of the VAT Act. By order, the Board dismissed the appeal and affirmed the order of the Deputy Commissioner. The High Court also dismissed the revision and upheld the order of the Board.

Mere reading of Entry 155 would go to show that, the goods called Hydraulic excavators (earth moving and mining machinery), Mobile Cranes and Hydraulic Dumpers (including parts thereof) are chargeable to tax at the rate of 4%.

The expression "including parts thereof" was inserted in the Entry 155 by an amendment w.e.f. 9th May, 2006. It, therefore, indicates that, the parts of the goods specified in the Entry were not chargeable to tax at the rate of 4% prior to 9th May, 2006 but became chargeable at the rate of 4% only on and after 9th May, 2006.

This Court has laid down the test as to how the Court should decide 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 incomplete without it". In other words, "a thing is a part of the other, if the other cannot function without it".

The Respondent has filed complete literature 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 use by the consumer. Mere perusal of the literature would go to show that, the Mobile Cranes are not complete without the wire ropes. In order to use the Mobile Cranes and make them operational, the use of wire ropes is essential. If wire ropes are not fitted in the Mobile Cranes, they will not function much less effectively. The Mobile 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 Entry 155. Appeal dismissed.


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