Case: CTO ANTI EVASION CIRCLE III RAJASTHAN JAIPUR Vs. M/S PRASOON ENTERPRISES JAIPUR

3. The appeal involves a short point as would be clear from the undisputed facts stated infra4. The appellant herein-State of Rajasthan (Commercial Tax Department) is the revision petitioner whereas the respondent herein is the respondent of the revision petition before the High Court out of which this appeal arises5. The respondent is engaged in the business of trading of spare parts of mining machinery, steel wire ropes, standard wires, wire rods etc. These goods are subjected to payment of Value Added Tax (VAT) under the Rajasthan Value Added Tax Act, 2003 (hereinafter referred to as VAT Act). The respondent is a registered dealer under the VAT Act6. The Commercial Tax Officer (AE) [hereinafter referred to as CTO] conducted a survey in the respondents business premises on 16.03.2009 and it was noticed therein that the respondent was charging VAT at the rate of 4% on Mobile Crane Wire Ropes7. It is with this background fact, the question arose before the taxing authorities under the VAT Act as to which is the proper Entry under the VAT Act for charging tax on Mobile Crane Wire Ropes8. The aforementioned question arose before the CTO in the assessment proceedings, which were initiated against the respondent in their business premises as a result of the survey conducted by the CTO and also arose before the Deputy Commissioner, Commercial Tax Department to seek his advance ruling on the aforementioned question9. The CTO and the Deputy Commissioner were of the view that the rate of tax chargeable to the goods in question is 12.5% as prescribed in the Residuary Entry in Schedule V under the Act and not 4% as prescribed in Entry 155 of Schedule IV of the VAT Act10. In other words, both the taxing authorities were of the view that the proper Entry for payment of tax on these goods is the Residuary Entry of Schedule V, which prescribes the rate of tax as 12.5%11. The CTO accordingly initiated the assessment proceedings against the respondent for the Assessment Year 2007-2008. By assessment order dated 16.03.2009, it was held that the respondent was liable to pay VAT at the rate of 12.5% under the Residuary Entry of Schedule V of the VAT Act. Since the respondent had deposited the tax at the rate of 4% treating the goods in question as falling in Entry 155 of Schedule IV, the notice was issued to the respondent to pay the difference amount of VAT along with penalty and the interest payable under the VAT Act12. The respondent felt aggrieved and filed appeal before the Deputy Commissioner (Appeals). By order dated 02.12.2010, the Appellate Authority allowed the appeal and set aside the order of the CTO (AE). The Appellate Authority held that the ropes in question were essentially used in Mobile Cranes as part of the Mobile Cranes. It was held that a Mobile Crane is not complete and nor it can effectively function without the use of the rope. It was, therefore, held that the rope is a part of a Mobile Crane and chargeable to VAT in accordance with rates prescribed in the Entry 155 of Schedule IV of the Act13. The State (CTO) felt aggrieved and filed appeal before the Rajasthan Tax Board under Section 83 of the VAT Act. By order dated 06.01.2016, the Board dismissed the appeal and affirmed the order of the Deputy Commissioner. The State (CTO) felt aggrieved and filed revision petition in the High Court of Rajasthan Bench at Jaipur14. By impugned order, the High Court dismissed the revision and upheld the order of the Board, which has given rise to filing of this appeal by way of special leave by the State (CTO) in this Court.

Reasoning:
25. Mere reading of Entry 155 quoted above would go to show that the goods called Hydraulic excavators (earth moving and mining machinery), Mobile Cranes and Hydraulic Dumpers (including parts thereof) are chargeable to tax at the rate of 4%28. When we apply this principle to the facts of the case at hand then we find no difficulty in holding that the wire ropes used in the Mobile Cranes are a part of the Mobile Cranes and thus fall in Entry 155 of Schedule IV of the VAT Act30. The respondent has filed (Annexure R-1), the complete literature with a view to show as to how the Mobile cranes are designed, structured, built and operated in the field when it put to its ultimate use by the consumer. They have also filed the details of the specification issued by the Bureau of Indian Standards specifying therein the strength of each wire rod/rope, which is used in the manufacture of different kind of Cranes31. Mere perusal of the literature would go to show that the Mobile Cranes are not complete without the wire ropes. In other words, in order to use the Mobile Cranes and make them operational, the use of wire ropes is essential. If wire ropes are not fitted in the Mobile Cranes, they will not function much less effectively32. It is for this reason, we are of the considered opinion that the Mobile Crane Wire Rope is an essential part of the Mobile Crane and, therefore, falls in Entry 155 of Schedule IV of the VAT Act. It is, therefore, taxable at the rates prescribed for the goods specified in Entry 15533. We, however, make it clear that we have examined only the question of taxability of the wire ropes in the context of its use in Mobile Cranes as would be clear from the question posed by the High Court in Para one of the impugned order.