2010 (5) TMI 766 - HC - VAT and Sales Tax

Whether the said E-bike is covered by the word bicycle as such the same is exigible to tax at four per cent as it falls under Schedule C entry 14 ? Held that - Cycle rickshaw is cycle rickshaw as understood in common parlance. The word bicycle will take colour from the word cycle-rickshaw and the things group are belonging to same genus. Considered from this angle one has to reach to the conclusion that the view taken by the Tribunal that e-bike or e-bicycle is not within the sweep of the word bicycles appears to be in consonance with the legislative intent. No fault can be found with the view taken by the Tribunal. In view of the findings in the aforesaid paragraphs we are of the opinion that the appellant s product cannot fall under Schedule C entry 14 and therefore there is no substance in the present appeal. Thus the appeal is dismissed

Summary

Issues Involved:
1. Classification of the appellant's product ("E-bike Matrix") under the Maharashtra Value Added Tax Act, 2002.
2. Determination of the appropriate tax rate for the appellant's product.

Issue-Wise Detailed Analysis:

Classification of the Appellant's Product:

Appellant's Arguments:
- The appellant, a private limited company, manufactures the "E-bike Matrix," which they argue should be classified as a "bicycle" under Schedule C, entry 14 of the VAT Act, 2002, and thus be taxed at 4%.
- The product is described as a bicycle with an auxiliary electric motor, a 30-minute backup power of less than 0.5 kilowatts, and pedal assistance.
- The appellant presented various documentary evidence, including a certificate from the Automotive Research Association of India, stating that the product is not a "motor vehicle."
- The appellant argued that the term "bicycle" in Schedule C, entry 14 should include all types of bicycles, including those with auxiliary motors, similar to how "sewing machines" in entry 87 include both pedal and electric motor-operated machines.
- The appellant cited several judgments, including Commissioner of Sales Tax, Maharashtra State, Bombay v. La Bela Products and State of Gujarat v. Bhagwati General Agency (Import), to support their claim that the product should fall under a specific entry rather than a residuary entry.

Respondent's Arguments:
- The respondents argued that the "E-bike Matrix" does not fall under the definition of "bicycle" as commonly understood, which is a pedal-driven, human-powered vehicle.
- They cited dictionary definitions and common parlance to argue that a bicycle is a pedal-driven, human-powered vehicle with two wheels.
- The respondents emphasized that the appellant's product is battery-operated, which distinguishes it from a traditional bicycle.
- They also cited several judgments, including Commissioner of Sales Tax v. Suraj Rubber Industries and Plasmac Machine Manufacturing Co. Pvt. Ltd. v. Collector of Central Excise, Bombay, to support their argument that the product should be classified according to its popular meaning and commercial sense.

Court's Analysis:
- The court noted that in common parlance, a "bicycle" is a pedal-driven, human-powered vehicle with two wheels.
- The court observed that the appellant's product, being battery-operated, does not fit this common understanding of a bicycle.
- The court also considered the price list of the appellant's product, noting that a significant portion of the cost is attributed to the battery, which is taxed at 12.5% when sold separately.
- The court found that classifying the appellant's product under Schedule C, entry 14 would create an anomalous situation where the battery would be indirectly taxed at a lower rate.
- The court referred to the principle of "noscitur a sociis," which means that the meaning of a word can be understood by the company it keeps. The court noted that the term "bicycle" in Schedule C, entry 14 is associated with "tricycles" and "cycle rickshaws," which are also pedal-driven.
- The court concluded that the appellant's product does not fall within the scope of Schedule C, entry 14 and should be classified under the residuary entry.

Determination of the Appropriate Tax Rate:

Appellant's Arguments:
- The appellant argued that their product should be taxed at 4% under Schedule C, entry 14, as it is essentially a bicycle with additional features for customer convenience.
- They cited judgments to support the argument that a specific entry should override a general entry, and that their product should not fall under the residuary entry.

Respondent's Arguments:
- The respondents argued that the product should be taxed at 12.5% as it does not fit the definition of a bicycle under Schedule C, entry 14.
- They emphasized that the product is battery-operated and does not meet the common understanding of a bicycle.

Court's Analysis:
- The court agreed with the respondents, noting that the product is battery-operated and does not fit the common understanding of a bicycle.
- The court found that the product should be classified under the residuary entry and taxed at 12.5%.

Conclusion:
The court dismissed the appeal, holding that the appellant's product does not fall under Schedule C, entry 14 of the VAT Act, 2002, and should be classified under the residuary entry, thus being taxed at 12.5%. The court emphasized the importance of common parlance and commercial sense in interpreting tax statutes and found no substance in the appellant's arguments.