1984 (12) TMI 292 - HC - VAT and Sales Tax

Issues Involved:
1. Classification of the Kirloskar refrigeration compressor under the Bombay Sales Tax Act, 1959.
2. Determination of primary use for classification purposes.
3. Relevance of trade or common parlance in classification.
4. Comparison with similar legal precedents.
5. Impact of occasional use in different systems on classification.
6. Interpretation of legislative entries concerning immovable property.

Detailed Analysis:

1. Classification of the Kirloskar Refrigeration Compressor:
The primary issue was whether the Kirloskar refrigeration compressor model K 60 x 110 sold under an invoice dated 15th October 1974, fell under entry 47(b) of Schedule C or the residuary entry 22 of Schedule E of the Bombay Sales Tax Act, 1959. The Tribunal had classified the compressor under entry 47(b) of Schedule C, which pertains to air-conditioning plants and their components. The High Court, however, was tasked with reviewing this classification.

2. Determination of Primary Use for Classification Purposes:
The court emphasized that the classification of goods under sales tax legislation should be based on their primary or predominant use. The court noted that the compressor in question was primarily used in refrigeration plants, as evidenced by sales figures and technical literature. The court cited the Supreme Court's decision in Annapurna Carbon Industries Co. v. State of Andhra Pradesh, which held that the predominant or ordinary use of an item determines its classification, not occasional uses for other purposes.

3. Relevance of Trade or Common Parlance in Classification:
The court observed that in the absence of evidence or findings relating to how the compressor was regarded in trade or common parlance, the primary use should guide its classification. The court found that the compressor's primary use was in refrigeration plants, and its occasional use in air-conditioning plants was insufficient to classify it under entry 47(b) of Schedule C.

4. Comparison with Similar Legal Precedents:
The court referenced the Bombay High Court's decision in Commissioner of Sales Tax v. Jayanand Khira & Co. Pvt. Ltd., which held that the primary or ordinary use of an article determines whether it is a component part of another article. The court also discussed the Gujarat High Court's decision in Bharat Sales Limited v. State of Gujarat, disagreeing with its logic that classification could vary based on the purchaser's use of the article.

5. Impact of Occasional Use in Different Systems on Classification:
The court rejected the department's argument that occasional use of the compressor in air-conditioning plants justified its classification under entry 47(b). The court clarified that occasional use does not override the primary use for classification purposes. The court noted that the Tribunal had accepted the factual position that the compressor was primarily used in refrigeration plants but had erred in its legal conclusion.

6. Interpretation of Legislative Entries Concerning Immovable Property:
The court addressed an alternative argument that an air-conditioning plant, which includes the compressor, could be considered immovable property and thus not "goods" under the sales tax legislation. The court found no relevant finding in the present case to support this argument and emphasized that components or parts of air-conditioning plants are considered goods and taxable under entry 47 of Schedule C.

Conclusion:
The High Court concluded that the Kirloskar refrigeration compressor model K 60 x 110 should be classified under the residuary entry 22 of Schedule E to the Bombay Sales Tax Act, 1959, as its primary use was in refrigeration plants. The Tribunal's decision was overturned, and the question referred to the court was answered in the negative, in favor of the assessees. The respondent was ordered to pay the costs of the reference, and the applicants were entitled to a refund of Rs. 100 deposited with the Sales Tax Tribunal.

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