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M/s. Machine Tools Traders (Madras), Rep. by its Partner Nehal S. Shah v/s The Commercial Tax Officer, Harbour Assessment Circle, Chennai

    W.P. Nos. 21939 & 21941 of 2019 & WMP. Nos. 21156 & 21160 of 2019
    Decided On, 29 June 2022
    At, High Court of Judicature at Madras
    By, THE HONOURABLE DR.(MRS.) JUSTICE ANITA SUMANTH
    For the Petitioner: V. Sundareswaran, Advocate. For the Respondents: R. Siddharth, Government Advocate.


Judgment Text
(Common Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of certiorari calling for the records of the respondent in CST.No.1239/2012-13 and 1239/2014-15 dated 30.05.2019 quash the same ultravires of the provisions of the Central Sales Tax Act, 1956 and decisions of this Hon'ble Court in [2010] 28 VST 306 followed in W.P.No.6777 of 2011 dated 15.12.2017 in the case of the petitioner themselves for the year 2004-05.)

Common Order

1. The petitioner challenges orders of assessment dated 30.05.2019 passed in terms of the provisions of the Tamil Nadu Value Added Tax Act, 2006 (in short 'Act') for levy of Central Sales Tax (in short ‘CST’). The petitioner had claimed the benefit of Notification No. II (1)/CT&RE/38/76 dated 11.02.1976 (in short ‘Notification’), that provides for a concessional rate of tax to be levied upon the turnover from sale of scientific equipments and instruments to educational institutions, hospitals, laboratories and institutions, premised upon the satisfaction of certain conditions.

2. The returns filed by the petitioner were taken up for assessment and assessment orders have been passed on 30.05.2019 accepting the claim of the petitioner. This order does not contain any specific discussion in regard to the appropriateness or otherwise of the claim but merely accepts returns of the petitioner and the computation of tax contained therein.

3. Notices were thereafter issued under Section 27 of the Act proposing to revise the assessment on the ground that the inter-state sale of capital goods had not been covered by C Forms and the turnover from such sales ought to have been assessed at 14.5%. The petitioner objected to the proposal pointing out that it was entitled to the benefit of the Notification as detailed in para 1 of this order.

4. The Notification has been issued in public interest and to provide for a concession on the inter-state sale of scientific equipment and instruments for educational institutions, including for educational purposes, hospitals, laboratories or other institutions.

5. The conditions that have been imposed under the Notification are that the goods themselves should constitute scientific equipment and instruments and that the recipient of the goods, either educational institutions, hospitals, laboratories or any other institution carrying on research for the promotion of literature, scientific, artistic or educational objects, should not be run with the motive of making profit.

6. As far as an educational institution is concerned, the purpose of such sale must be for use of teaching/dissminating science. A Form was prescribed in terms of which the recipient is to confirm that it is indeed engaged in the laudable object as set out under the Notification, the goods are not for its own use and that it is not for profit making.

7. The Notification is extracted below for completion of narration:

In exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the governor of Tamil Nadu having been satisfied that it is necessary so to do in the public interest hereby directs that in respect of scientific equipments and instruments (hereinafter referred to as “the said goods”) the tax payable under the said Act by any dealer having his place of business in the State of Tamil Nadu, in respect of the sale by him from such place of business of the said goods in the course of inter-State trade or commerce to an educational institution for use in the teaching of science, or to a hospital for its use, or to a laboratory or institution which carries on any research work for the promotion of a literary, scientific, artistic or educational object and which is not run with the motive of making profit, shall be calculated at five per cent of the sale price of the goods so sold, if-

(a) such sale does not fall within sub-section (1) of the said section 8; and

(b) the educational institution, hospital, laboratory or institution, as the case may be, furnishes to the dealer a certificate in the form appended hereto and the dealer produces on demand such certificate before the assessing authority.

Appendix

(To be issued by an educational institution, hospital, laboratory or institution situated outside the State of Tamil Nadu in respect of its purchase of scientific equipments and instruments made in the course of inter-State trade or commerce from a dealer in the State of Tamil Nadu.)

I, the officer-incharge-of the management of * situated at (Place) hereby certify that No. of Messers. (Place) have been purchased by the said-

(i) institution for use in the teaching of science,

(ii) hospital for its use,

(iii) laboratory or institution for use in research work and that the said laboratory or institution carries on research work in and is not run with the motive of making profit.

Dated Signature Designation

8. There is no dispute on the position that the certificates as required under the appendix to the Notification have been furnished by all the recipient colleges. Thus, one condition of the Notification has, admittedly, been complied with. The dispute arises with regard to the second condition, that is, as to whether the goods supplied,being a lathe, drillingand hopping machines,satisfy the definition of 'scientific equipment and instruments' that form the thrust of the Notification.

9. The petitioner in this regard would rely on a decision of the Zenith Computers Vs. State of Maharasthra[(1996) 101 STR 242], wherein the question that fell for consideration was as to whether the computers sold by that assessee would be entitled to the benefit of the Notification. In conclusion, the Division Bench held that the expression ‘scientific equipment and instruments’ is one of wide import, and that computers would meet the description.

10. That apart, the petitioner relies on three clarifications issued on 01.01.2014 in terms of 48A of the Act, by the Authority for Advance Ruling (in short ‘AAR’). The equipment dealt with under orders in ACAAR No.04.2015/16 dated 05.09.2011 is as follows:

(i) All kinds of Measuring instruments such as Gauges Meters, Vernie Caliper, Protractor and Measurement trainers kits,

(ii) All kinds of Apparatuses, Testing Machines and Testing Kits

(iii) Subsonic and Supersonic wind tunnels for Aeronautical lab.

(iv) Hydraulic and Pneumatic trainer kits.

(v) Controller kits of Data logger system.

11. In ACCAR No.4/2015-16, the equipment in question related to scientific equipments sold to ISRO being:

Collapsible mandrels, propellant casting mandrels INSAT-II integration fixtures and transportation containers, which are invariable certified as scientific equipments for the purpose of Space launch Vehicle research by ISRO.

12. In ACAAR No.123/2015-16 the equipments are as follows:

Electronic Integrated Circuits/Micro Assemblies, Cathode Ray Oscilloscope, Spectrum Analyzer & signal Analyzers & Signal Analyzers, Signal Generator and Analyzer.

13. In the present case, the petitioner would also point out that for the earlier period, an assessment, similar to the present one,was set aside by this Court with a direction to the assessing authority to pass orders afresh. Consequential proceedings have been framed on 22.05.2018 accepting the entitlement of the petitioner to the claim for exemption.

14. Per contra, learned Government Advocate would point to the clear description of the goods in question stating that a lathe, drilling machine and hopping machine would not, under any stretch of imagination, come under the cover of the description, ‘scientific equipment and instruments’.

15. In this context they rely upon a decision of this Court in the case of Jaya and Company Vs. State of Tamil Nadu, [MANU/TN/0336/1991]. In that matter the assessees were dealers in steam boilers and the question that arose for decision was as to whether steam boiler would satisfy the definition of ‘scientific equipment and instruments’.

16. The Bench reiterated the settled proposition that, while interpreting an exemption notification, the authority has to constitute the same strictly and cannot extend and grant any benefit beyond what the notification envisaged. The Bench states as follows:

4. .... In common parlance a scientific instrument or equipment is an instrument or equipment which converts a principle of science to some common use. Viewed in this manner the steam boiler cannot be said to employ any scientific principles for its use. Further we are of the opinion that merely because an article has been manufactures scientifically, that would not be decisive in coming to a conclusion that the article is a scientific instrument or equipment. Steam boilers are used as household articles also. When so used nobody calls it a scientific instrument. The mere fact fact that the steam boiler in this case is used in a hospital, its character cannot change and it cannot be termed a scientific equipment. Reliance is also place on Commissioner of Income Tax v. Mohan Meaking Breweries ltd. [1980] 22 ITR 203. The facts of that case are far from the question involved in this case. The court was concerned, in that case, with the installation of an internal telephone system and they construed the same as a plant and not an officer appliance. As already stated that decision has no application to the facts of the present case. Even in the dictionary meaning the words of or pertaining to science or the sciences” indicate that the equipment should be relatable to the application of natural science. Thus, looked from any angle, we are not satisfied that steam boilers can be brought within the meaning of “scientific equipment or instrument” and given the concessional rate of 5 per cent.

17. I am of the considered view that this decision is of no assistance to the respondents. In that case, of Jaya and Company

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(supra), the steam boilers do not appear to have been used for any educational purpose. It was in that context that the Bench had observed that a boiler served a dual purpose, not just a scientific instrument, but a common household item as well. It was never the case of the assessee therein that it was used for the purposes of education and in such circumstances, the grant of exemption did not arise. 18. As regards the lathe, drilling machine and hopping machine at issue, there is no dispute posed that the recipient colleges are technical/engineering colleges that have utilized/deployed these machines in the teaching/instruction of the respective courses. The impugned order of assessment also does not make any adverse observation in regard to this aspect of the matter, that is to say, there is no allegation that the machines in question have been used for any purpose other than education. 19. In light of above discussion, the conclusion arrived at by the authority fails, the impugned assessment orders are set aside and these writ petitions are allowed. Connected miscellaneous petitions are closed. No costs.
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