A division bench of the Orissa High Court headed by the Chief Justice has held that the tyre, tube and flaps when sold along with tractor-trolley as a single unit to be taxed separately @ 12.5% and 13.5% [after 01.04.2011] and tractor-trolley without tyre, tube and flaps will be sold @ 4% under the provisions of the Orissa VAT Act.
Earlier, the Appellate Authority observed that the petitioner, being a manufacturer of tractor-trolley, does not sell tyres and tubes independently, but the same are sold as integral part of tractor-trolley “as single unit”. Therefore, the Appellate Authority observed that notwithstanding that Entry 119 of Part-II of Schedule B appended to the OVAT Act specifically excluded tyres and tubes from its purview, the rate of tax on sale of tractor-trolley would attract tax @ 4% including tyres and tubes, but these items cannot be taxed at separate rate of tax @ 12.5%.
However, on further appeal, the VAT Tribunal reversed the order and ruled in favour of the Revenue.
The petitioner approached the High Court contending that without tyres and tubes, the product “tractor-trolley (trailer)” cannot be sold and the manufactured item can only be sold tyres and tubes accompanied therewith.
“Applying the above principles to the present context, it may safely be stated that since “tyres, tubes and flaps” are specifically excluded from the items enumerated in said entry, the said commodities are liable to be taxed as per rate of tax specified under Part-III of Schedule B appended to the OVAT Act,” the bench said.
The bench comprising Chief Justice S Muralidhar and Justice Murahari Sri Raman upheld the impugned order of Tribunal and held that the Tribunal was legally justified to tax tyre, tube and flaps when sold along with tractor-trolley as a single unit to be taxed separately @ 12.5% [up to 31.03.2011] and 13.5% [after 01.04.2011] and tractor-trolley without tyre, tube and flaps will be sold @ 4% is answered in the positive, i.e., in favour of the opposite party-Revenue and against the petitioner-dealer.
“The question whether the dispute being the rate of tax the confirmation of penalty by the Tribunal is correct in law is answered in the positive inasmuch as the penalty is imposed on the tax assessed invoking Section 42(5) of the OVAT Act, i.e., in favour of the opposite party-Revenue and against the petitioner-dealer,” the High Court said.
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