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Goa Auto Accessories Ltd., Panaji v/s Commissioner of Sales Tax, Goa and another

    WRIT PETITION NO.594 OF 1993

    Decided On, 27 October 1999

    At, In the High Court of Bombay at Goa

    By, THE HON'BLE MR. JUSTICE R.K. BATTA & THE HON'BLE MR. JUSTICE J.A. PATIL

    Mr.M.S. Usgaonkar, Senior Advocate with Mr.S.S. Usgaonkar for petitioner. Mr.J.E. Coelho Pereira, Advocate General with Mr. J. Godinho, Additional Government Advocate, for respondents.



Judgment Text

R.K. BATTA, J.


The petitioner had sought classification of brake shoes and other processed components manufactured by them under Schedule Twenty-Eight of the Goa Sales Tax Act, 1964 (hereinafter called "the said Act"). According to the petitioners the said products were not covered under Schedules One to Twenty-Seven of the said Act. The office of the Commissioner of Sales Tax informed the petitioner that the item "brake shoe" falls within the ambit of Entry I of the Twelfth Schedule and the rate of tax applicable is 5% at the first point of sale. The petitioner then filed an application for review before the Commissioner of Sales Tax, Panaji, under section 27A of the said Act. In the said representation it was urged by the petitioner that it was not given any opportunity to be heard in the matter as required under section 27A of the said Act; that the brake shoe and other components are taxable at 7% under section 7(1)(xxviii) of the said Act. In this application for review, it was further urged that all items manufactured by the company are supplied to Automobile Corporation of Goa Ltd. at Ponda, Sattari, given as raw material and the said Corporation does further processing after which the same are sent to Telco Pune and Jamshedpur. Thus, according to the petitioner, the items are meant only for Telco Pune and Telco Jamshedpur. It was further contended by the petitioner in the said review application that the brake shoe is an integral part of the front wheels and rear wheels of the vehicle, without which the vehicle cannot be manufactured and cannot be put on the road for use; that there is no possibility of second sale of the product; that the brake shoe cannot be used in any other vehicles except those manufactured by Telco and the brake shoe does not require replacement in the ordinary course on account of wear and tear, nor is it an extra item for use in any emergency.


2.After hearing the advocate for the petitioner, the Commissioner of Sales Tax vide Order dated 2nd September, 1993, came to the conclusion that brake shoe and twenty other items manufactured by the petitioner company fall within the ambit of Entry I of Twelfth Schedule appended to the said Act and, as such, they are taxable at the rate of 0.5 p. in a rupee. It is further pointed out in the said Order that vide Notification No. 5/3/85-Fin(R & C) dated 31st March, 1992, these items have been declared to be taxable at the first point. The petitioner aggrieved by the said Order of the Commissioner of Sales Tax, has filed the Writ Petition in question for the purpose of quashing the impugned Order and for directions that the brake shoes are classifiable under Clause (xviii) of sub-section (1) of section 7 of the Sales Tax Act, 1964. The petitioner had also sought restraint on respondent No.1 from demanding and recovering sales tax on the sale of brake shoes pending hearing of the petition. However, vide Order dated 24th November, 1993, no interim relief was granted. Nevertheless, it was left open to the petitioner to raise the question about the correct Entry to be applied in the assessment proceedings, but the assessment proceedings shall not be stayed on that count and shall be completed in accordance with the provisions of law. It was further stated in the said order dated 24th November, 1993, that the final assessment will be subject to the result of the petition.


3.In this petition the challenge is restricted to the classification of brake shoes. The petitioner's claim is that the brake shoes fall under Residuary Clause (xxviii) of sub-section (1) of section 7 of the said Act, whereas according to the respondents brake shoe is a "spare part" falling under Entry I of the Twelfth Schedule to the said Act. Therefore, the short question which has been raised in this petition is whether motor vehicle brake shoe manufactured by the petitioner is "spare part" falling under Entry I of the Twelfth Schedule to the Act, or it falls under Residuary Clause (xxviii) of sub-section (1) of section 7 of the said Act.


4.Learned Senior Counsel, Shri M.S. Usgaokar, argued on behalf of the petitioner, that brake shoe is an integral part of the front wheels and rear wheels of the vehicle and without brake shoe the vehicle cannot be manufactured and cannot be put on the road for use; the petitioner is manufacturing the brake shoe only for use for Telco Pune and Telco Jamshedpur and the same is not available in the market, nor can it be used in any other vehicle other than produced by Telco; that the brake shoe does not require replacement in the ordinary course on account of wear and tear, nor it is an extra item for use in emergency and that there is no possibility of second sale of the product in question. According to the learned Senior Counsel, the main test to be applied in order to find out as to whether a product is "spare part", is whether the product in question is subject to normal wear and tear in the ordinary course, requires frequent replacement and, as such, is required to be normally kept by an owner of the vehicle in readiness for replacement in emergency. After placing reliance on Commissioner of Sales Tax vs. Amar Radio Cabinet Works (1968) 22 STC 63, Bajaj Tempo Ltd. and others vs. The Pimpri Chinchwad Municipal Corporation and others, (1997) Vol. 99(3) BLR 491, Commissioner of Sales Tax, Maharashtra State, Bombay vs. Acme Mfg. Co. Ltd. (1990) 78 STC 79, Jaiswal and Sons vs. Commissioner of Commercial Taxes (1992) 86 STC 416 and Parekh Electric Wire Industries Pvt. Ltd. vs. State of Gujarat (1992) 85 STC 464, learned counsel has urged that the impugned order in relation to brake shoes is, therefore, required to be quashed.


5.On the other hand, learned Advocate General, Shri Coelho Pereira, has argued that the burden of proof in terms of section 9 of the said Act in respect of any sale effected by a dealer lies on him when the dealer takes a plea that he is not liable to pay tax and that the petitioner has not discharged the burden of proof cast on it. It was pointed out by him that the "spare parts" were included in the Twelfth Schedule to the said Act with effect from 1st April, 1992 to 29th March, 1995, after which they were classified under Residuary Clause (xxviii) of section 7(1) of the said Act and thereafter they were included in the Thirteenth Schedule. According to him, the dominant test is the replaceability of the spare part in question and not how frequently it is required to be replaced. Relying upon the following judgment in Commissioner Sales Tax vs. Kohinoor India Pvt. Ltd. (1980) 45 STC 332, Sujan Singh and another vs. Appellate Assistant Commissioner, Sales Tax, Delhi and others, (1969) 24 STC 504, Bajaj Tempo Ltd. and others vs. The Pimpri Chinchwad Municipal Corporation and others (supra), Parekh Electric Wire Pvt. Ltd. vs. State of Gujarat (supra), Bajoria Halwasiya Service Station vs. State of U. P. and another, (1970) 26 STC 108 and Vithal Chhagan and Sons vs. State of Gujarat, (1966) 17 STC 96, it was urged that the impugned Order does not suffer from any infirmity and the Writ Petition is liable to rejected.


6.In reply learned Senior counsel, Shri M.S. Usgaokar, urged that the burden is always on the Taxing Authority and in this connection reliance has been placed on Hindustan Ferodo Ltd. vs. Collector of Central Excise, Bombay, (1997) 106 STC 214, Union of India vs. Garware Nylons Ltd., 1996 (87) E.L.T. 12 (S.C.), Garware Nylons Ltd. vs. Union of India and others, 1980(6) E.L.T. 249 (Bom.) and Colgate Palmolive (India) Ltd. vs. Union of India and others, 1980(6) E.L.T. 268 (Bom.).


7.Section 4 of the said Act provides for levy of tax and section 7 provides for rate of tax. The relevant portion of section 7, around which the controversy centres in this petition is as under: _


"Rate of Tax.-


(1) ......................................................


(i) to (x) .................................................


(xi) in respect of goods specified in the Twelfth Schedule, at the rate of five paise in the rupee; (xii) to (xxvii) ........................................


(xxviii) in respect of any other goods, at the rate of eight paise in the rupees;"


The petitioner had filed an application under section 27A for classification of the brake shoe for the purpose of payment of tax in accordance with section 7 of the said Act. The Commissioner of Sales Tax classified brake shoe under Entry I of the Twelfth Schedule of the said Act, which has been challenged in this petition.


8.The question for determination, therefore, is whether brake shoe is "spare part" of motor vehicle. The relevant Entry I of Twelfth Schedule which was deleted with effect from 30th March, 1995, reads:


"Spare parts of Motor Vehicles including batteries."


9.The plain dictionary meaning of the word "spare" as per Shorter Oxford English Dictionary is:


"Not in actual or regular use at the time spoken of, but carried, held or kept in reserve for future use, or to supply an emergency; additional, extra, that can be spared, dispensed with or given away, as being in excess of the actual requirements, superfluous."


The expression "spare part", has been defined in Webster's International Dictionary as:


"An extra part of a vehicle or machine kept for use in emergency or replacement."


In the absence of any definition of "spare part" in the said Act, the popular meaning of the expression "spare part", can be taken into consideration for determining whether a product can be said to be "spare part". At this stage we shall briefly refer to the rulings upon which reliance has been placed on either side.


10.In Vithal Chhagan & Sons vs. The State of Gujarat (supra) the question which arose before the Division Bench of the Gujarat High Court was whether wrist-watch cases with chromium steel back are spare parts of watches within the meaning of Entry 10 of Schedule E to the Bombay Sales Tax Act, 1959. Entry 10 of Schedule E described the goods comprised in it as "clock, time-pieces and watches and spare parts thereof", while Entry 22 of Schedule E was a residuary entry. It was ruled therein by the Division Bench that:


"Now it is a well-settled rule of construction in sales tax statutes that words used by the Legislature in entries in various schedules to describe different kinds of goods for prescribing different rates of tax must be construed not in any technical or scientific sense but as understood in common parlance."


It was held that the wrist-case is as much an integral part of the wristwatch as the mechanism and both make up the wrist-watch as understood in ordinary parlance. The watch-cases therefore, are clearly an integral constituent part of the wrist-watches. Elaborating further, it was pointed out that a component part is a part which goes in the composition of an article and after it becomes part of such article it may retain its identity or it may even lose its identity and not be capable of separate identification. Accordingly, it was held that the watch case is, therefore certainly a component part of the wrist-watch as the wrist-watch would not be complete as a commercial article without the watch-case and watch-case undoubtedly goes into the making of a wrist-watch. But the question is: "Is it also a spare part of the wrist-watch?" It was pointed out that every part which goes in the making of an article and is, therefore, a component part of the article would not necessarily be spare part of the article. After considering the definition of the word "part", according to Black's Law Dictionary, which is "an integral portion, something essentially belonging to a larger whole; that which together with another or others makes up a whole" and the definition of the word "spare", given in the Shorter Oxford Dictionary at page 1957, it was ruled that "spare part" would, therefore, mean any integral part of an article which is carried, held, or kept in reserve for future use or to supply an emergency or which is additional or extra. Therefore, it was implicit in this meaning that the part in question must be a part which is severable and capable of being substituted or replaced by another, for otherwise there would be no point in having an additional or extra part or carrying, holding or keeping such part in reserve for future use or to supply an emergency. According to Their Lordships, the watch case clearly satisfies this requirement since it is indubitably a severable part which can be substituted or replaced by another. The crux of this ruling is that the spare part in question must be an integral part and essential part of the whole unit and that it should be severable part which could be substituted or replaced by another.


11.In Commissioner of Sales Tax vs. Amar Radio Cabinet Works (supra), a Division Bench of the Bombay High Court was required to decide whether radio cabinets and loudspeaker cabinets fall within Entry 65 Schedule C or Entry 22 of Schedule E of the Bombay Sales Tax Act, 1959. Entry 65 Schedule C to the Bombay Sales Tax Act, 1956, as it stood prior to 1st April, 1963, when it was amended was in the following terms:


"65. Wireless reception instruments and apparatus and radio gramophones and electrical valves, batteries, transmitters, accumulators amplifiers and loudspeakers required for use therewith and spare parts of such wireless instruments, apparatuses and radio gramophones."


General residuary entry was Entry 22 of Schedule E of the said Act. The Division Bench took into account that as a matter of plain language the expression "spare parts" connotes a part which requires replacement in the ordinary course on account of wear and tear and as an extra item for use in an emergency. It was pointed out that the expression "spare parts" cannot be equated with "parts" without regard to the colour that is lent by the word "spare" with which it is associated in that entry and that it is inconceivable that anybody would keep a radio cabinet as an extra for use in an emergency or that it could be said to be a part which would require replacement in ordinary course on account of wear and tear. There may be exceptional cases in which a person replaces his radio cabinet, but, in interpreting an entry of this nature the meaning which is required to be given to words occurring therein has to be in consonance with common parlance and common usage. It was, therefore, held that radio cabinets and loudspeaker cabinets cannot be said to be "spare parts", falling within Entry 65 of Schedule C of the Bombay Sales Tax Act, 1959.


12.A similar view was taken by the Division Bench of the Bombay High Court in Bajaj Tempo Ltd. and others vs. The Pimpri Chinchwad Municipal Corporation and others (supra), in respect of the expression "spare part", while dealing with the said expression under the Maharashtra Municipalities Octroi Rules, 1968. Reliance was placed on Sujan Singh and another vs. Appellate Assistant Commissioner, Sales Tax, Delhi and others (supra).


13.In the case of Sujan Singh vs. Appellate Assistant Commissioner, Sales Tax, Delhi and others (supra) a learned Single judge of the Delhi High Court was faced with the question as to whether body of motor vehicle would fall within the expression "spare parts" occurring in Item 1 of the First Schedule of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, as it stood prior to the amendment of the same by Notification dated 31st August, 1966. The said Entry read as follows:


"Motor vehicles, including chassis of motor vehicles, motor tyres and tubes and spare parts of motor vehicles."


After considering the definition of the words "spare part" as given in Webster's Third New International Dictionary, Vol. II (1967 Edn.), to the effect that "an extra part of a vehicle or machine kept for use in emergency or replacement", it was held that obviously the body of motor vehicle cannot fall within the expression "spare part". Further, relying on observations made by a Division Bench of the Bombay High Court in Commissioner of Sales Tax vs. Amar Radio Cabinet Works (supra), it was held that a similar principle would have to be adopted in the case of motor bodies also. Accordingly, it was held that the body of motor vehicle is not a "spare part" in order to attract higher rate of sales tax of 0.10 p. in a rupee under section 5(1)(a) of the Bengal Finance (Sales Tax) Act, 1941.


14.Likewise, in Bajoria Halwasiya Service Station vs. State of U. P. and another (supra) it was held that bus bodies cannot be taxed as spare parts of motor vehicles under Notification dated 18th June, 1965 issued under section 3-A of the U. P. Sales Tax Act, 1948. It was pointed out that in popular sense the term "spare part" when used with reference to motor vehicles is a duplicate part of a motor vehicle kept in readiness to replace loss or breakage, etc. and by no stretch of imagination can a bus body be called a ' spare part" in that sense. It was further held that though the body of a motor vehicle was a component part thereof, yet a component part of a vehicle obviously is not the same thing as a spare part of a vehicle.


15.In Commissioner, Sales Tax vs. Kohinoor India Pvt. Ltd. (supra) the learned Single Judge of the Allahabad High Court (as his Lordship then was), had to decide whether wind screen wipers and oil gauge manufactured and sold by the assessee and utilized in diesel locomotive were spare parts of machinery and liable to be taxed as such. After taking into consideration the meaning of the words "spare parts", as given in Webster's International Dictionary as well as in Little Oxford Dictionary and the judgments of the Bombay High Court in Commissioner of Sales Tax vs. Amar Radio Cabinet Works (supra) and also that of Delhi High Court in Sujan Singh vs. Appellate Assistant Commissioner, Sales Tax, Delhi (supra), it was held that windscreen wipers are not machinery nor part of machinery and, as such, they could not be considered to be spare part of machinery but the oil gauge is part of machinery and is capable of being substituted or replaced and, as such, it was "spare part" of machinery. While coming to said conclusion, it was laid down by the learned Single Judge:


"A part in the absence of which the vehicle cannot run smoothly or otherwise is as much a part as the steering, brake, etc. In the Hindi notification, the words "atirikt saman" has been used for "spare parts". This further makes it clear that an article to be covered under that entry must be extra part of machinery which may be capable of being substituted. Before an article can be considered to be extra or spare part, it must be held to be part of the machinery. As unless something is part, it cannot be a spare part. A machinery may consist of numerous parts, some may be essential and integral parts of it and others may be for smooth and efficient running of the machine. All the same both are parts of the machinery. Those parts that can be replaced or substituted are described as spare parts. But merely because they can be replaced they do not cease to be parts. A part which cannot be replaced becomes part of the machinery itself and those that are capable of being substituted become spare parts. A spare part is nothing but a part of the machinery."


It is pertinent to note that those parts of the machinery which can be replaced or substituted are described as "spare parts".


16.In Commissioner of Sales Tax, Maharashtra State, Bombay vs. Acme Manufacturing Co. Ltd. (supra) a distinction was drawn between components and spare parts and it was laid down that in common parlance components are items or parts which are used in the manufacture of the final product and without which the final product could not be conceived of, whereas "spare parts" are those component parts which, in the course of use, are subject to frequent wear and tear and are therefore, required to be kept in readiness for use as and when necessary. The diesel engine was thus held to be a component of a truck, i.e. motor vehicle.


17.In Parekh Electric Wire Industries Pvt. Ltd. vs. State of Gujarat (supra) the question which arose before the Division Bench of the Gujarat High Court was whether super enamelled copper winding wire (SECW wire) was "spare part" of electric motor, within the meaning of Entry 16(2) or Entry 41 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969. After taking into consideration that the function of SECW wire in an electric motor is quite different inasmuch as it is used for the purpose of creating a magnetic field as an integral but-distinct part of the electric motor; that SECW wire has a definite commercial identity as it is manufactured and sold as such and its use also is definite. It is also regarded as a distinguishable part of the stator which is an integral part of electric motor. It being neither a raw material used in the manufacture or reparation of electric motor, nor an article of general use, it will have to be held that it is an article having a distinct commercial identity and it is a distinguishable part of electric motor, as result of which it was held that SECW wires sold by the assessee were "spare parts" of an electric motor and hence thereof fell under Entry 16(2) of Schedule II Part A of the Gujarat Sales Tax Act, 1969.


18.In Jaiswal & Sons vs. Commissioner of Commercial Taxes (supra), the Division Bench of the Andhra Pradesh High Court had to decide the question whether "battery plates" and "battery covers" are taxable under Entry 3 or Entry 38 of the First Schedule or as unclassified goods under the Andhra Pradesh General Sales Tax Act, 1957. The Division Bench applied the ratio of the cases in Vithal Chhagan & Sons vs. State of Gujarat (supra), Commissioner of Sales Tax vs. Amar Radio Cabinet Works (supra) and Sujan Singh vs. Appellate Assistant Commissioner, Sales Tax, Delhi (supra) and held that "battery plates" and "battery covers" are not such goods which are kept in reserve for future use or to supply in emergency or which is additional or extra like a spare wheel of a car, and the like. It was further laid down that there may be some spare parts which are also integral parts, but in the view of the learned Judges the test to determine whether a part is a "spare part" is that its replacement should not affect the identity of the article; if on its replacement the identity of the article itself changes, it cannot be treated as "spare part" within the meaning of Entry 3. It was held that the goods in question are integral parts of the battery without which no battery can function and their replacement changes the identity of the battery as a result of which they do not fall within the meaning of "spare parts".


19.Coming to the matter under consideration, in the absence of any definition of expression "spare part" or guidelines in that beha

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lf in the said Act, we must give to the words, "spare parts" occurring in Entry I of Twelfth Schedule, the meaning that can be attributed in common parlance and usage in interpreting an Entry of such nature. There is no dispute that "brake shoe" is an integral part of axle which is fitted to a motor vehicle. The question to be decided is whether "brake shoe" would fall within the ambit of "spare part" occurring in the Twelfth Schedule of the Act. In common parlance the expression "spare part" connotes a part which requires replacement in ordinary course on account of wear and tear and is kept in reserve for use in future in emergency. 20.The case put forth by the petitioner before the Commissioner of Sales Tax, Panaji was: (a) "brake shoe" is an integral part of axle fitted in a motor vehicle; (b) "brake shoe" does not require replacement in ordinary course due to wear and tear; (c) "brake shoe" is not kept as spare in a motor vehicle for use in future in emergency; (d) "brake shoe" is not available in shops; and (e) "brake shoe" manufactured by the petitioner cannot be used in any other vehicle, except vehicles produced by Telco. It appears that the Department of Sales Tax did not refute the above contentions before the Commissioner of Sales Tax. The Commissioner of Sales Tax in the impugned order held that "brake shoe" is not normally kept in the motor vehicle that it is not often required and the same is not stocked by traders in automobile spares as rolling on this part is less. These conclusions do not justify classification of "brake shoe" as "spare part". "Brake shoes" in question manufactured by the petitioner neither require replacement in ordinary course on account of wear and tear, nor they are kept in reserve for use in emergency, nor are available in shops, as the case of the petitioner is that they are supplied only to Telco and the same cannot be used in other vehicles. 21.In these facts and circumstances, "brake shoe" manufactured by the petitioner cannot be classified as "spare part" within the meaning of Entry I of Twelfth Schedule of the said Act and would fall under Residuary Entry under section 7(1)(xxviii) of the said Act and as taxable thereunder. The impugned order is, therefore, liable to be quashed. The Writ Petition accordingly succeeds and is allowed, in terms of prayer clause (B). Rule made absolute in terms of prayer clause (B). In the facts and circumstances, parties are left to bear their own costs.
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