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Judgment
Yashwant Varma, J.—Heard Sri S.D. Singh, learned Senior Counsel assisted by Sri Garav Mahajan who has appeared for the revisionist and Sri B.K. Pandey who has appeared on behalf of the State-respondents.
These two revisions with the consent of parties have been taken up for disposal together. The issue which arises for consideration in these revisions is whether a Car Stereo System was liable to be taxed under Entry 75 of a Notification dated 13 December 2002 or whether it was liable to be classified and taxed on the basis of it falling under Entry 18 of the Notification dated 29 January 2001 as amended and reiterated vide Notification dated 9 May 2003. The two competing entries read as follows:
NOTIFICATION DATED 13.12.2002
In the list to the aforesaid notification, after entries at serial Number 74, the following entries shall column wise be inserted, namely :
Serial number
Description of goods
Point of tax
Rate of tax percentage
1
2
3
4
75(i) (a)
Television, video cassette recorders, video cassettee player, Satellite receiver, wireless set, video cassette, video games and electronic toys;
M or I
12 per cent
(b)
Telephones including cordless phones, phones with cords, celluar phones and parts, accessories and components thereof;
M or I
4 per cent
(ii)
Computer hardware, software and parts thereof and electronic components that is to say all types of passive compoments, resisters, capacitors, diodes and other active compoments, transistors, integrated circuits, large scale integration, very large scale integration chips, black white picture tubes, colour picture tubes, power semiconductors, audio tapes and video tapes, printed circuit boards, connectors, relay, auto electronic components, magnetic media, micro wave tubes television components, television glass shells, electronic transducers, actuators, display devices that is light emitting diodes, liquid crystal diodeds, micro motors, crystals, tape deck mechanism, etched and framed foils, electronic tuners, deflection yokes, line output transformers, electro-deposited copper foils, printed circuit board laminate, populated printed circuit boards, power supply devices, cabinet and plastic components,
M or I
4 per cent
(iii)
Microwave oven and all other electronic goods not specified anywhere else in the schedule or in any other notification.
M or I
8 per cent
Notification dated 29 January 2001
In the aforesaid notification, at Serial Number 1, 18, 29, 59, and 69, the following entries shall column wise be substituted, namely
Serial number
Description of goods
Point of tax
Rate of tax percentage
1
2
3
4
18 (i) (a)
Motor vehicles including chasis of motor vehicles, but excluding light commercial vehicles mentioned in sub clause (b) below, two wheelers motor vehicles and tractors and harvester combines.
Sales by dealer to consumer or, in this case of through a hire purchase company, to the hire purchase company financing this purchase by the consumer.
12 per cent
(b)
Fule efficient light commercial vehicles having engine capacity between 3000 cubic centimeter to 4000 cubic centimeter and certified as fuel efficient by an officer not below the rank of Deputy Secretary to the Government of India in the Ministry of Industry, Department of Industrial Development on the basis of fuel efficiency test carried out by the Vehicle Research Development Establishment of the Ministry of Defence, Ahmednagar (Maharastra) or the Automotive Research Association of India, Pune (Maharashtra) in accordance with the procedure prescribed in Government of India Notification No. 241/86CE dated 25th September, 1986 and No. 89/90EC, dated 20th March, 1990 and such other notification as may be issued from time to time
Sale by dealer to consumer or, in this case of sale through a hire purchase company, to the hire purchase company financing this purchase by the consumer.
12 per cent
(ii) (a)
Components, parts and accessories of vehicles specified in Clauses (i) and (iii) including batteries and trailers adapted for use along with said vehicles other than such trailers as are predominantly used along with any other vehicles.
M or I
12 per cent
(b)
Tyre and tubes of vehicles specified in Clauses (i) and (iii)
M or I
12 per cent
(iii)
Motor cycles, motor cycles combination, motor scooters, moped.
Sale by dealer to consumer or, in this case of sale through a hire purchase company, to the hire purchase company, finacing this purchase by the consumer.
12 per cent
The dispute itself has travelled to this Court in the following background.
The revisionist is stated to be engaged in the business of trading in TV, Music Systems, Mobile/Cellular Phone, Stereo, Laptop, Audio/Video Systems, Projector etc. During the assessment proceedings which were undertaken for A.Y. 200506, the assessing authority accepted the account books maintained the revisionist but taxed the sale of Car Stereos @ 12%. The revisionist had accepted its liability of tax upon the said article treating it to be "electronic goods" thus falling within Entry 75. Aggrieved by the view that was taken by the assessing authority the revisionist preferred a First Appeal. The first appellate authority was informed during the course of proceedings before it that the controversy raised, had been settled by the Tribunal itself while dealing with a similar issue pertaining to A.Y. 200405. The judgment of the Tribunal rendered for A.Y. 200505 dated 20 June 2009 was placed for consideration before the first appellate authority. The first appellate however proceeded to hold against the revisionist and it is submitted in this regard that it chose to ignore a binding verdict handed down by the Tribunal. Aggrieved by the decision so taken, a Second Appeal was carried to the Tribunal. In the course of consideration of the matter the Tribunal felt that the decision rendered in proceedings pertaining to A.Y. 200405 required reconsideration. Accordingly, the President of the Commercial Tax Tribunal on 1 September 2010 proceeded to constitute a Larger Bench. It is the judgment rendered by the Larger Bench of the Tribunal on 27 September 2010 which forms subject matter of challenge in the instant revision.
It also becomes relevant to note here that the decision of the Tribunal rendered for A.Y. 200405 came to be assailed by the Department by way of TTR No. 488 of 2010. This revision of the Department came to be dismissed on 6 September 2014 in the following terms:
"1. Heard learned Standing Counsel for Revisionist and perused the record.
Having heard learned Standing Counsel, I find that Tribunal has recorded findings of fact and learned Standing Counsel could not place anything before this Court to show that view taken by Tribunal suffers from any error either of facts or of law in any manner. Learned Standing Counsel could not dispute that no question of law in fact has arisen in the matter and Tribunal has recorded findings of facts and therefore, this revision has to be dismissed.
Even otherwise, this revision is preferred under Section 11(1) of U.P. Trade Tax Act, 1948. The procedure for filing revision is prescribed in Chapter 27 of the High Court Rules. Rules 1 to 13, thereof, basically talks of procedure of filing an application under Section 256(2) of Income Tax Act, 1961, but, vide Rule 20, it is provided that Rules contained in the aforesaid Chapter shall, so far as, may be, with necessary modifications and adoptions, would also apply on proceedings of similar nature or revision under any other Tax Act, including certain provisions of different Acts which are detailed therein. The revision under Section 11 of U.P. Sales Tax Act, 1948, now retitled as U.P. Trade Tax Act, 1948 is also one of the provisions mentioned therein. Therefore, procedure in Rules 1 to 19(B) subject to modification and adoption etc. would apply for filing revision also.
Rule 5 of Chapter 27 of the High Court Rules contemplates filing of an affidavit of service of the copy of application, which is being filed in this Court. If the revision is preferred by assessee, he shall serve copy of revision upon learned Standing Counsel and file an affidavit of service giving facts as stated in Rule 5(1) and if revision is preferred by the Revenue i.e. Commissioner of Trade Tax, he shall ensure service of revision upon assessee and file an affidavit of service in the same manner. Chapter 27 Rule 5 of The High Court Rules, 1952, reads as under :
"5. Certain conditions for an affidavit.(1) An application made by an assessee shall be accompanied by an affidavit of service stating that two copies of the application together with other papers or affidavit accompanying it have been served on the Standing Counsel authorised to receive notice on behalf of the department concerned, and further stating that the Standing Counsel has been intimated the date of filing in Court of the application.
(2) An application made by the Commissioner of Income Tax shall normally be accompanied by an affidavit of service stating that a copy of the application together with other papers and affidavit accompanying it have been served on the assessee in accordance with the procedure prescribed therefor by the Income Tax Act, 1961 and also stating that the assessee has been intimated in writing the date of filing in Court and the date of hearing of the application:
Provided that if due to lack of time or other sufficient reason the affidavit of service does not accompany the application filed by the Commissioner of Income Tax, the aforesaid affidavit must be filed within three weeks of the date of institution of the application.
(3) A counter affidavit if any, may be filed within two weeks of the service of the application after serving a copy thereof on the Counsel for the applicant, a rejoinder affidavit may similarly be filed in another one week."
Thus, affidavit of service has to accompany revision application, but proviso to sub Rule 2 provides, that, if due to lack of time or for any other sufficient reason, affidavit of service is not accompanying the application filed by Commissioner of Trade Tax, such affidavit must be filed within three weeks'' of the date of institution of application. Therefore, a revision would be treated to be validly filed by an assessee if it is accompanied by affidavit of service, but in case of revision filed by Commissioner of Trade Tax, affidavit of service must accompany revision, but for valid reasons, this condition would stand dispensed with, but, the affidavit of service then, must be filed within three weeks'' of the date of institution of application.
In case no such affidavit is filed and assessee is not served by Commissioner of Trade Tax, meaning thereby there is no notice or opportunity to the assessee and revision has not been filed in the manner prescribed in the Rules.
It is true that revision filed by Revenue, may not be dismissed for technical reasons, but where service has not been effected upon assessee for several years all together and Commissioner of Trade Tax apparently has failed to comply with statutory requirement of filing affidavit of service, this Court finds no justification, still to continue with said revision to remain pending and give further opportunity to Revenue, after such a long time.
This revision was filed in 2010 and till date affidavit of service has not been filed. In my view, it is fit case where this Court must reject revision having not been filed in accordance with rules and for noncompliance of requirement of Chapter 27 Rule 5(2) of High Court Rules.
Accordingly, this revision has to fail either way.
Dismissed accordingly."
(emphasis supplied)
The Department is not stated to have taken the matter further and it is submitted that the judgment rendered by the learned Single Judge of this Court on the revision aforementioned has attained finality. It is in the above backdrop that the rival submissions may now be noticed.
Admittedly, the Tribunal has proceeded to hold that Car Stereos are an accessory to a motor vehicle and therefore chargeable to tax under Entry 18. The view so taken represents a paradigm shift from the opinion which was formed by the Tribunal for A.Y. 200405, wherein it accepted the case of the assessee that Car Stereos were electronic goods and therefore liable to be charged to tax under Entry 75. The primary basis for the change in position as struck by the Tribunal is based upon a judgment rendered by the Supreme Court in Mehra Bros. v. The Joint Commercial Officer, Madras, AIR 1991 Supreme Court 1017 The Supreme Court in Mehra Bros. was considering the question as to whether Car Seat Covers were liable to be classified and treated as accessories to a motor vehicle. Dealing with the said issue, the Supreme Court in paragraph 5 of the report held as follows:
"5. In Supreme Motors v. State of Karnataka case (supra), the Karnataka High Court has taken different view. It held that the car seat covers, at best could make the seat more comfortable, but do not serve as aids to the vehicle as a whole, and therefore, they must fall outside the ambit of entry 73 of the Second Schedule to the Karnataka Sales Tax Act, 1957 and was not exigible to sales tax at 13 per cent. Undoubtedly this ratio would help the appellant. The learned Judges laid emphasis thus:
"Every part is useful to the car for its effective operation likewise should be the aid of the accessories in order to fall within the said entry. The accessory to a part which has no convenience or effectiveness to be entire car as such cannot in our opinion fall within entry 73."
Having given our anxious consideration, with respect, we are of the considered view that the test laid down by the Karnataka High Court that the accessories as a part must contribute for convenience or effectiveness in the use of the car as a whole is not a correct test. In our view the correct test would be whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty, elegance or comfort for the use of the motor vehicle or a supplementary or secondary to the main or primary importance. Whether an article or part is an accessory cannot be decided with reference to its necessity to its effective use of the vehicle as a whole. General adaptability may be relevant but may not by itself be conclusive. Take for instance Stereo or Air-conditioner designed and manufactured for fitment in a motor car. It would not be absolutely necessary or generally adapted. But when they are fitted to the vehicle, undoubtedly it would add comfort or enjoyment in the use of the vehicle. Another test may be whether a particular article or articles or parts, can be said to be available for sale in an automobile market or shops or places of manufacture; if the dealer says it to be available certainly such an article or part would be manufactured or kept for sale only as an accessory for the use in the motor vehicle. Of course, this may not also be a conclusive test but it is given only by way of illustration. Undoubtedly some of the parts like axle, steering, tyres, battery etc. are absolutely necessary accessories for the effective use of the motor vehicle. If the test that each accessory must add to the convenience or effectiveness of the use of the car as a whole is given acceptance many a part in the motor car by this process would fall outside the ambit of accessories to the motor car. That would not appear to be the intention of the legislature. Similarly in Free India Cycle Industries and Shadi Cycle Industries cases (supra), the Allahabad High Court held that cycle covers, Rexine Saddle Cover whether part or accessory of vehicle under item 34 of the notification dated April 5, 1961 issued by the State of U.P. under Sections, of the U.P. Sales Tax Act (15 of 1948) with the same reasoning, as was given by the Karnataka High Court to be not accessories. We express that the Allahabad High Court also has not laid down the test correctly."
(emphasis supplied)
It has further been pointed out that the aforesaid judgment was subsequently followed by the Supreme Court in Pragati Silicons (P) Ltd. v. Commissioner of Central Excise, Delhi, (2007) 9 SCC 470 which was considering the issue as to whether plastic name plates were liable to be treated as accessories to a motor vehicle. The said issue was answered by the Supreme Court in paragraph 21, in the following terms:
"21. It is evident therefore, that an ''accessory'' by its very definition is something supplementary or subordinate in nature and need not be essential for the actual functioning of the product. Applying the test laid down in Mehra Bros. case (supra), it cannot be denied that name plates add to the convenient use of the motor vehicle. Name plates serve a very useful purpose inasmuch as it gives an identity to the vehicle. Each vehicle comes with different brand name and in different models having distinct features. The manufacturers of different type of models of vehicles market them under a name and the vehicles are recognised and referred to by the name plate affixed on them. Name plates convey to the consumers the distinct features it carries. Undoubtedly they add effectiveness and value to the vehicle and are at the very least accessories of the vehicle. Thus, even if there was any difficulty in the inclusion of the plastic name plates as ''parts'' of the motor vehicles, they would most certainly have been covered by the broader term Accessory''. In this view of the matter, we are of the opinion that the Tribunal has erroneously come to the conclusion that ''plastic name plates'' are not ''parts and accessories'' of motor vehicles for the purposes of headings 87.08 and 87.14."
(emphasis supplied)
The principles enunciated by the Court in Mehra Bros. were reiterated.
Sri S.D. Singh, learned Senior Counsel has contended that Mehra Bros. is not an authority for the proposition that Car Stereos are accessories to a motor vehicle. He submits that the primary and in fact the sole issue which stood raised for determination before the Supreme Court in Mehra Bros. was whether car seat covers were liable to be treated as accessories. Sri Singh placing reliance upon the tests as formulated by Supreme Court in Mehra Bros. has contended that a Car Stereo can never be treated as an adjunct, an accompaniment or an addition for the convenient use of another part of the vehicle. It is submitted that car stereos also do not add to the beauty, elegance or comfort for the use of the motor vehicle. He submits that the case before the Supreme Court was essentially in respect of an intrinsic part of a motor vehicle, namely the car seat and its cover, and it was in the aforesaid backdrop that the Court proceeded to hold that the cover of a car seat would be also liable to be treated as an accessory. Sri Singh submits that the observation in paragraph 5 in respect of car stereos and air conditioners was only by way of in illustration and does not represent the ratio decendi of the judgment itself.
The second limb of the submission advanced by Sri Singh is based upon the dismissal of the revision of the Department on 6 September 2014. Referring to what the learned Single Judge recorded at that stage he submits that the same clearly amounts to an affirmation of the view taken by the Tribunal in A.Y. 200405. In view of the above, Sri Singh would submit, the issue stands settled in favour of the assessee and against the revenue and therefore binds the respondents to hold that a car stereo is not an accessory to a motor vehicle.
Sri Pandey, learned Standing Counsel, on the other hand, has taken the Court through the detailed judgment rendered by the Tribunal and submits that the view taken by the Larger Bench is in consonance with the principles laid down by the Supreme Court in Mehra Bros. He submits that a car stereo is liable to be treated as an accessory by virtue of it being an article which aids in the comfort and use of the vehicle even though, it may be of a supplementary or secondary character. He has further placed reliance upon what stands noted in the judgment of the Tribunal to the effect that on occasions a car stereo is sold along with the car and sometimes fitted separately. This circumstance, he submits, is also an indicator of a car stereo being an accessory to a motor vehicle. Sri Pandey submits that the Tribunal has rightly held that the principles of res judicata do not apply to assessment proceedings taken undertaken under a taxing statute. Referring to the competing entries extracted at the beginning of this judgment, Sri Pandey contends that Entry 18 was a specific entry dealing with accessories of motor vehicles and must therefore override Entry 75 which was of a general character. It is these rival submissions which fall for consideration.
The first issue which arises for determination is whether Sri Singh is correct in his submission that the judgment rendered by the learned Single Judge on 6 September 2014 binds or at least clinches the issue in favour of the assessee. This Court notes that the learned Single Judge while dismissing the revision has proceeded to hold that the Tribunal while rendering judgment in A.Y. 200405 had recorded findings of fact and that nothing could be placed to show that the view taken by it suffered from any error either of fact or of law. The learned Single Judge then proceeds to record a concession made by the Standing Counsel who appeared in proceedings to the effect that he could not dispute that no question of law, in fact, arose from the order of the Tribunal. The learned Single Judge then proceeded to consider as to whether the revision as filed was in compliance with the provisions of Chapter XXVII Rule 5 of the Allahabad High Court Rules, 1952. In the facts of that case, the learned Single Judge proceeded to hold that there has been a failure to comply with the provisions of the said rule. The learned Single Judge thereafter proceeded to hold in paragraph 9 that the revision was liable to fail "either ways". This Court notes that the judgment rendered by the learned Single Judge on 6 September 2014 primarily proceeded on the ground that the Standing Counsel had been unable to show or establish any error of fact or law in the order of the Tribunal. The revision came to be dismissed upon the learned Single Judge taking the view that no question of law arose therefrom. There is no discussion on the subject as to whether car stereos were liable to be treated as accessories to a motor vehicle or electronic goods. From a reading of the said order it is clear and apparent that there was neither an enunciation of a legal principle or a categorical finding to the effect that car stereos were not liable to be treated as accessories. All that can be deduced from the said order is that in the facts of that case, the learned Single Judge came to hold that no question of law arose from the order of the Tribunal. The judgment of the learned Single Judge, in the opinion of this Court, was not an affirmation of the view taken by the Tribunal in A.Y. 200405 to the effect that a car stereo is not an accessory to a motor vehicle. This, in the opinion of this Court, is not a declaration of the law by the learned Single Judge that a Car Stereo is not an accessory to a motor vehicle and is liable to be taxed as falling under Entry 75. More importantly, the Court notes that the learned Single Judge neither notes nor considers Mehra Bros. or Pragati Silicons (P) Ltd. The issue, in the considered view of this Court as to whether a Car Stereo is liable to be treated as an accessory to a motor vehicle, is liable to be judged and answered on the basis of the principles and tests as enunciated by the Supreme Court in the two judgments mentioned above. In the absence of consideration of the said two precedents by the learned Single Judge, the dismissal of the revision on 6 September 2014, neither binds this Court nor did it bind the Tribunal which rendered judgment which is impugned herein.
This then takes the Court to the issue on merits and as to whether a car stereo is liable to be viewed as an accessory to a motor vehicle. The Notifications of 2001 and 2003 in clear and unambiguous terms place components, parts and accessories of vehicles in the company of and under the generic entry of motor vehicles. The said issue is liable to be considered in light of the tests elucidated by the Supreme Court in Mehra Bros.
While it is true that Mehra Bros. was considering the issue of whether a car seat cover is liable to be treated as an accessory it is also an authority for answering the issue as to what article would in fact be liable to be viewed as an accessory to a motor vehicle. To answer the said issue the Supreme Court formulated the following tests:
A. Whether the article is an adjunct or addition for the convenient use of other parts of a vehicle;
B. Adds to the beauty, elegance or comfort for the use of the motor vehicle; and
C. Whether it is a supplementary or secondary to the main or primary and important purpose.
More importantly what must be borne is the test which the Supreme Court rejected. In order to arrive at a correct answer to the question posed before this Court, it is imperative that one steer clear of posing a wrong question in order to answer whether car stereos are in fact accessories to a motor vehicle. Now this much is clear that while rendering judgment in Mehra Bros., the Supreme Court overruled the test formulated by the Karnataka High Court which was to the effect that the accessory must add to the convenience or effectiveness of the use of a car as a whole. The negation of this test as formulated by the Karnataka High Court is of significance. If the test was to be that the accessory must add to the convenience or effectiveness of the use of the car as a whole, it would clearly narrow down the number of article which may be liable to be treated as an accessory. This simply because there would then have to be a direct corelation and connection between the accessory and its use of being of convenience and effectiveness for the use of the car as a whole. This in the view taken by the Supreme Court was held to be not the correct test. The second aspect of significance which flows from Mehra Bros. is where the Supreme Court specifically refers to stereos and air conditioners and holds that when they are fitted to the vehicle they indeed add to the comfort and enjoyment to the use of the vehicle. Significantly, the test which was laid down by the Supreme Court in Mehra Bros. thereafter was whether a particular article or a particular part could be said to be available for sale in an automobile market or shop or a place of manufacture. Their Lordships, then further proceeded to hold that if a dealer were to state that the same is available as an article or part which was manufactured or kept for sale only as an accessory for the use in motor vehicles, the same would also be indicative that it was liable to be treated as an accessory. It however must be noted that Their Lordships did observe that the above may or may not be a conclusive test and was given only by way of illustration.
A car stereo is undoubtedly available as an article in an automobile market or shop or a place of manufacture. The Tribunal noted that in many cases a car stereo is either pre-fitted in a motor vehicle and in other instances fitted subsequently. A car stereo, in the opinion of this Court, would therefore be liable to be treated as an accessory. It cannot be gainsaid that a car stereo does add to the comfort for the use of a motor vehicle. It enables a driver undertaking a long journey to enjoy the ride and makes the trip pleasurable. Viewed in this sense, it must be held to be an article which adds to the comfort for the use of the motor vehicle. In view of the above, whether the Court applies the comfort test or whether it applies the test of whether an article can be said to be available for sale in an automobile market, on both scores, the answer must be in favour of the revenue and against the assessee.
The entry of "accessories" as noted above was placed specifically in the company of and under the heading of motor vehicles. The other competing entry upon which reliance was placed was of microwave ovens and all other electronic goods "not specified anywhere else". Even if a car stereo be viewed as "electronic goods", they would stand comprised in Entry 18 by virtue of being an accessory to a motor vehicle. They were in this sense,though electronic goods, but since specified elsewhere they would stand excluded and extracted from Entry 75.
In light of the above, the questions raised stand answered against the assessee and in favour of the revenue.
The revisions are accordingly stand dismissed.