1963 (11) TMI 81 - HC - VAT and Sales Tax

Summary

Issues:
Determining if 'L' type Industrial Centrifugal Humidifiers with electric motors fall within Entry 15 of Schedule C of the Bombay Sales Tax Act, 1959.

Analysis:
The case involved a dispute regarding the classification of 'L' type Industrial Centrifugal Humidifiers with electric motors under the Bombay Sales Tax Act, 1959. The applicants contended that the humidifiers should be classified under Entry 15 of Schedule C as machinery used in the manufacture of cloth. The Deputy Commissioner of Sales Tax initially ruled against this classification, stating that while humidifiers were essential for maintaining humidity in textile mills and improving yarn quality, they did not directly connect with the manufacturing process of cloth. The Deputy Commissioner classified the humidifiers under Entry 20 of Schedule C as electrical goods. The Tribunal upheld this decision, emphasizing that to be classified under Entry 15, machinery must be used in the actual process of manufacturing goods. The Tribunal considered humidifiers as not directly involved in the manufacturing process of cloth but as essential for the textile industry.

The High Court analyzed the definition of 'machinery' and its application to humidifiers. Referring to a Privy Council decision, the Court concluded that humidifiers, being operated by electric motors and contributing to the manufacturing process by maintaining required humidity levels, could be classified as machinery. The Court emphasized that machinery used in the manufacture of goods includes items essential for converting raw materials into finished products. Applying this test, the Court found that humidifiers played a crucial role in the textile manufacturing process by improving yarn quality and preventing breakages, thus qualifying as machinery used in the manufacture of cloth.

The Court distinguished a previous decision regarding water pumps as agricultural implements, emphasizing that the current case focused on the specific classification of machinery used in the manufacture of goods. Ultimately, the Court ruled in favor of the applicants, stating that the humidifiers fell under Entry 15 of Schedule C and not Entry 20. The respondents were directed to bear the costs of the reference, and the Court answered the reference accordingly.