The single bench of Rajasthan High Court has confirmed 4% VAT on batteries supplied to Indian Army for the purposes of Radio Communication Receivers (RCRs).
The Assessee M/s Marathon India Ltd is the supplier of batteries and during the course of its business, sold batteries for the purposes of Radio Communication Receivers (RCRs), which is mainly and primarily supplied to the Army for its use in the RCRs.
While the claim of assessee was that as per Schedule IV (Part-A) of the Rajasthan Value Added Tax Act, 2003, there is an Entry bearing no.13, stating “Radio Communication Receivers, Radio Pagers – Rate of Tax being 4%”, and there is another Entry bearing no.28 in the same Schedule which states “Parts of 1 to 27 above – Rate of Tax being 4%”, and the claim of assessee was that since battery is a part of Entry no.13 i.e. RCRs, therefore, the same rate of 4% was required to be applied insofar as the batteries are concerned, however, the claim of assessee was negatived by the Assessing Officer, who held that batteries are being separately sold and it will fall in the Residuary Entry V at the rate of 12.5%.
The assessee contended that they are the only dealer of batteries which is mainly and primarily supplied to Government of India for the purpose of Army, who use the same in RCRs and there is no other purpose of the batteries because batteries cannot be put to any other use except placing in the RCRs.
They also contended that before the AO two certificates from Office of the Directorate General Assam Rifles : Shillong, were submitted, which had certified that the batteries being supplied by the assessee is an integral part of RCRs and when there is a specific certificate of the purchaser, then the Tax Board ought not to have applied its own reasoning.
Also contended that there is no other use of the batteries except to put as an integral part of RCRs and when Schedule IV clearly expresses in Entry no.28 that parts and accessories of 1 to 27 above will also be taxed at the rate of 4%, the AO and the Tax Board ought not to have applied their analogy in taking the specific claim of the Residuary clause.
While reversing Tax Board’s decision, Justice Jainendra Kumar Ranka observed that, “the batteries which were supplied by the assessee to the Army, were accessories of Radio Set STARS V 5W, and Radio Communication Receiver is incomplete/non-functional without the said part being placed. Once there is a specific certificate by the Army itself, who purchased the said batteries, in my view the finding reached by the Tax Board appears to be unjustified, and when Entry No.28 mentions about tax on 1 to 27, which includes RCRs and Radio Pagers, to be applicable at the rate of 4%”.
Citing catena of decisions, the Justice Jainendra Kumar Ranka also noted that, “Once there is a specific rate of 4% for the parts sold, in my view the finding reached by the AO as well as the Tax Board is contrary to the specific Entry bearing no.13”.
Read the full text of the order below.