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2016 DIGILAW 1349 (GUJ)

Mira Industries v. Sales Tax Officer (1) Div. 15

2016-07-18

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. By way of these appeals, the assessee has challenged the order of Gujarat Value Added Tax Tribunal at Ahmedabad (For short, "the Tribunal") in Second Appeal Nos. 277 to 281, 643 and 644 of 2000 dated 28.9.2007, whereby the appeal filed by the appellant was dismissed. 2. At the time of admitting these Appeals, following question of law was framed:- "1. Whether, in law and in the facts and circumstances of the case, the Gujarat Value Added Tax Tribunal was right in interpreting the provisions of Rule 42 and the proviso thereto and thereby not allowing the claim of set off on the purchase of spare parts of electric motors which have been used for the manufacture of electric motor?" 3. Mr. Soparkar, learned advocate for the appellant submitted that spare parts purchased by the appellant have actually been used by the appellant in the manufacture of electric motors and that the electric motors, so manufactured, have been fitted in the Water pumping sets and ultimately, sold as Water pumping sets. He further submitted that the entry of water pumping sets and the pumping sets is separate under the Act and hence the tax payable has been paid at the rate applicable to pumping sets. He further submitted that since the appellant has manufactured electric motor from the said spare parts purchased by it, the appellant is entitled to set off Condition (2) of Rule 42 of the Gujarat Sales Tax Rules. Rule 42 reads as under:- "42. Drawback, set off, or refund of tax for the goods purchased by a manufacturer. In assessing the tax payable by a manufacturer (hereinafter referred to as the 'assessee'), the Commissioner shall, subject to the general conditions of rule 47, and further condition specified below, grant him draw back, set off or as the case may be refund, of the whole or any part of the tax in respect of the purchases of goods used by him in manufacture:- Conditions: (1) The assessee is a Registered dealer as defined in clause (25) of section 2 of the Act. (2) The goods purchased are taxable goods other than those falling within the category of prohibited goods as defined in clause (21) of section 2 of the Act: Provided further that the condition shall not applying respect of purchases of spare parts and accessories [hereinafter referred to as "such goods"] described in entry 55 of Schedule II, part A. Where any such goods are used by assessee in the manufacture of machinery falling under entry 39 in Schedule II Part A, or, as the case may be, in the manufacture of any such goods. [Provided also that, the condition shall not apply in respect of purchases of Iron and Steel (hereinafter referred to as "specified goods") described in entry-5 of Schedule-II, Part-A, where specified goods are used by the assessee in the manufacture of Iron and Steel falling under the said entry 5] (3).......... (4)........... " 3.1 He submitted that in view of above Rule, the Tribunal has committed an error while passing the impugned order by not allowing the claim of set off on the purchase of spare parts of electric motors which have been used for the manufacture of electric motor. He, therefore, prayed to allow present appeals. 4. Mr. Hardik Vora, learned AGP appearing for the respondent submitted that the Tribunal has not committed any error while passing the impugned order. He submitted that while passing the impugned order, it is observed that, "The Tribunal is required to consider as to what is required to be produced and what is required to be sold. The Tribunal will also be required to consider as what has been ultimately sold. In the matters on hand, admittedly, what the appellant has sold are water pumping sets. It is an admitted position that when electric motors are separately sold then in that event set off under rule 42 is being given invariably by assessment orders." It is further observed that, "Therefore it cannot be said that this Tribunal has not properly construed the provision made in Rule 42 and misinterpreting condition No. 2 in said Rules." Relying upon these observations, he prayed that present appeals are required to be dismissed. 5. We have heard learned counsel appearing on both sides. We have also gone through the material on record and the impugned judgment. 5. We have heard learned counsel appearing on both sides. We have also gone through the material on record and the impugned judgment. Considering the provisions of Rule 42, it is clear that the 'Motor' is a part of 'Pump' and a pump cannot operate without the 'Motor'. The spare parts purchased by the appellant have actually been used by the appellant in the manufacture of electric motors and that the electric motors, so manufactured, have been fitted in the water pumping sets and ultimately, sold as water pumping sets. Therefore, the question posed for our consideration is answered in favour of the assessee and against the department and it is held that the Tribunal has committed an error in interpreting the provisions of Rule 42 and the proviso thereto and the claim of set off on the purchase of spare parts of electric motors which have been used for the manufacture of electric motor is allowed. It is held that spare parts or the motor is a part of the process. Accordingly, all these appeals are allowed and the question posed for our consideration is answered in favour of the assessee.