1984 (4) TMI 259 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of pumps and pumping sets under the Gujarat Sales Tax Act, 1969.
2. Interpretation of the term "exclusively" in entry 5 of Schedule II-Part A of the Gujarat Sales Tax Act, 1969.

Detailed Analysis:

Issue 1: Classification of Pumps and Pumping Sets
The primary question was whether the pumps and pumping sets manufactured by the assessee, which are claimed to be agricultural machinery, should be classified under entry 5 or entry 36 of Schedule II-Part A of the Gujarat Sales Tax Act, 1969. Entry 5 pertains to "agricultural machinery and implements exclusively used in agricultural operations," whereas entry 36(2) relates to "water pumps and water pumping sets."

The assessee argued that the pumps were designed specifically for agricultural use, characterized by a lower horsepower range (2 to 10) and longer suction with immediate delivery, making them unsuitable for domestic or industrial use. The Deputy Commissioner of Sales Tax and the Gujarat Sales Tax Tribunal classified the pumps under entry 36(2), resulting in a higher tax rate of six paise in the rupee, as opposed to three paise if classified under entry 5.

The Court referred to the legislative history and previous judicial interpretations, particularly the decision in Patel Tractor Company v. State of Gujarat, which had classified similar items under entry 36. However, the Court noted that the legislative intent, as reflected in the Sales Tax Inquiry Committee's recommendations and the Select Committee's report, was to maintain the status quo from the Bombay Sales Tax Act, 1959, where agricultural machinery was taxed at a lower rate.

The Court emphasized that the specific design and primary use of the pumps for agricultural purposes should be the determining factor. The Tribunal had found that the pumps were designed for drawing water for irrigation, had a longer suction, and were sold to agriculturists, thus qualifying as agricultural machinery.

Issue 2: Interpretation of "Exclusively"
The second question concerned the interpretation of the term "exclusively" in entry 5. The Tribunal had held that to determine if the pumps were "exclusively" used in agricultural operations, one must consider their ordinary or common use, not just possible use.

The Court agreed that the term "exclusively" should be interpreted based on the primary and predominant use of the machinery. The pumps in question were found to be designed specifically for agricultural use, with features that made them unsuitable for domestic or industrial purposes. Thus, they met the criterion of being "exclusively used in agricultural operations."

Conclusion:
The Court concluded that the pumps and pumping sets in question should be classified under entry 5 of Schedule II-Part A as "agricultural machinery and implements exclusively used in agricultural operations." This classification results in a lower tax rate of three paise in the rupee. Consequently, the Court answered the first question in favor of the assessee and deemed it unnecessary to address the second question separately.