The Orissa High Court has held that HP’s fully automatic Auto-Transformer Starter (ATS) control panel, and motor starter panel board fall under ‘accessories’ as per Odisha Value Added Tax Act, 2004 (OVAT Act).
M/s. Corporate Engineers and Associates, a partnership firm, has approached the Court challenging the Order passed by the Odisha Sales Tax Tribunal in Second were partly allowing the appeal filed by the State of Odisha-opposite party against the Order dated 17.04.2015 passed by the Deputy Commissioner of Sales Tax (Appeal), arose out of Order under Section 42 of said Act, 2004 read with Rule 49 of the Odisha Value Added Tax Rules, 2005 by the Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar about the tax periods from 01.04.2011 to 31.03.2013.
The assessee-petitioner being a registered dealer under the OVAT Act carries on its business in manufacturing and trading of electrical goods and equipment for industrial use, electric generator, pump sets and their spares and accessories etc. Apart from this, it was engaged in supply, erection, installation and commissioning of contract work.
On tax audit was conducted and Audit Visit Report was submitted to the Assessing Authority-Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar, Assessment under Section 42 was framed stating that the petitioner-dealer had misclassified the item, namely 150 HP Fully Automatic ATS (Auto-Transformer Starter) Control Panel, Motor Starter Panel Board and other Control Panel (“ATS”), as a result of which there was a short levy of value added tax.
The Assessing Authority has raised a demand of tax to the tune of Rs.52,517/- and imposed a penalty twice the amount of tax so assessed invoking provisions of sub-section (5) of Section 42.
the authorities below never examined the pertinent issue as to the identity of the commodity— ATS concerning Entry 29 of Part-II of Schedule B. The Assessing Authority mechanically discarded the explanation rendered by the petitioner and shifted the onus onto the dealer
For ascertaining the true nature of ATS, the petitioner has brought on record the expert opinion and this Court on visiting the web portal of manufacturers of such commodities found that in trade parlance ATS is treated as accessories to ‘Centrifugal, Monoblock and Submersible pumps and pump sets’.
The explanation of the petitioner aligning with the well-settled tests and guidelines propounded by the Courts, the suggestion of Sri Sunil Mishra, learned Standing Counsel for the Commercial Tax & Goods and Service Tax Organisation for sending the matter back to the Assessing Authority for fresh adjudication by giving scope for enquiry/investigation is rejected.
It was viewed that unless the Department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, the resort cannot be had to the residuary item. The entry which provides the most specific description shall be preferred to the entry providing a more general description.
It was observed that priority has to be given to the main entry and not the residual entry. The residuary entry is meant only for those categories of goods which fall outside the ambit of specified entries.
In the case of the State of Odisha Vrs. Rajkumar Agarwalla, the court held that “the commodities, i.e., 150 HP Fully Automatic ATS (Auto-Transformer Starter) Control Panel, Motor Starter Panel Board and other Control Panel is comprehended in the term “accessories” as per entry in Serial No.29 of Part-II of Schedule-B appended to the OVAT Act, which attracts a rate of tax @ 4% for the tax periods before 01.04.2012 and @5% for the tax periods commencing from 01.04.2012 about the periods of assessment”.
A two-member bench comprising Dr Justice B R Sarangi and Justice Murahari Sri Raman held that “the Order dated 20.06.2017 passed by the Odisha Sales Tax Tribunal, Cuttack in S.A. No. 188 (VAT) of 2015-16 so far as it relates to the issue of classification of ATS is set aside and the determination of tax liability by applying the rate of tax @13.5% as specified in Part-III of Schedule-B is held to be erroneous. “
Further directed the Assessing Authority to recompute the tax liability by applying the rate of tax @4% for the tax periods from 01.04.2011 to 31.03.2012 and @5% for the tax periods from 01.04.2012 to 31.03.2013.
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