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2019 (11) TMI 4 - HC - VAT and Sales TaxClassification of goods - crankshaft' and 'camshaft' used in the compressors in refrigerators - machinery or not - whether goods in question 'crankshaft' and 'camshaft' are covered within the ambit of Entry No. 26 of Schedule-II Part-A of the U.P. VAT Act, 2008? - rejection of Books of Accounts - Best Judgement assessment - HELD THAT:- Section 4(1)(a) read with Schedule-II of the Act provides for rate of tax on goods that have been described in column-2 Schedule-II. Thus, everything else apart, the rate of tax on goods falling under Schedule-II would remain 4%. There exist other Schedules to the Act and parts thereof providing different categorization of goods both on the basis of rates and also use. However, no classification or categorization of any goods by virtue of those being 'capital goods' - On the other hand, Section 2(f) of the Act is not a provision affecting the rate of tax. There is no taxing entry of 'capital goods' existing or relied upon by the revenue. What was required to be seen first was - whether 'crankshaft' and 'camshaft' of compressors used in refrigerators and air-conditioners manufactured and sold by the assessee were items as would fall within any of the description of the taxing entry 26 of Schedule II, Part A of the Act. While examining that claim the Tribunal could not have looked into the residuary entry that in effect is Schedule V of the Act. Thus, if the answer to the above were in the negative and it were to be found that the 'crankshaft' and 'camshaft' manufactured by the assessee were not machinery, then, in absence of any other or alternative claim, the Tribunal could treat the goods to be unclassified under Schedule V to the Act. If however, that answer were in the affirmative, they could not be treated as unclassified by relying on Section 2(f) of the Act, which has no bearing to classification of any goods for taxation purpose. For the purposes of interpreting a taxing entry and to determine the classification of goods, section 2(f) of the Act and its effect would remain wholly irrelevant. It may be clarified, as there is complete absence of any taxing entry of 'capital goods' under any of the Schedules, hence there exists no occasion to examine that issue any further or to determine whether there exists a special entry (of capital goods) and a general entry (of machinery) under entry no. 26, Schedule II, Part A. Commonly, even in homes and non-commercial or non-industrial establishment machines come to be used on a daily basis. A common example of such machine is a ceiling fan. In absence of a special taxing entry to categorize it otherwise, merely because a ceiling fan may be used both in an industrial establishment and also at a residential establishment would not change its identity and therefore its taxability as a machine. It cannot be treated both as an classified and unclassified goods solely on the basis of its installation, whether at an industrial establishment or a home. The order passed by the Tribunal is wholly unsustainable - The same is set aside and the matter is remitted to the Tribunal to pass a fresh order in accordance with law - the question of law is left unanswered.
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