S. Chander and Company vs The State of Tamil Nadu

Balasubrahmanyan, J.—The question in the this case is whether metallic galvanised steel flexible pipes fall under entry 3 of the First Schedule

to the Tamil Nadu General Sales Tax Act, 1959. Entry 3 is as follows :

Motor vehicles including motor cars, motor taxi-cabs, motor cycles and cycle combinations, motor scooters, motorettes, motor omnibuses, motor

vans and motor lorries, chassis of motor vehicles, bodies built on chassis of motor vehicles belonging to others (on the turnover relating to bodies),

component parts of motor vehicles, all varieties of trailers, by whatever name known, tyres (including pneumatic tyres) and tubes ordinarily used

for motor vehicles and trailers (whether or not such tyres and tubes are also used for other vehicles), and articles (excluding batteries) adapted for

use generally as parts and accessories of motor vehicles and trailers.

The pertinent point on which attention has to be paid is to see whether the articles dealt in by the assessee in this case can be regarded as

articles adapted for use generally as parts and accessories of motor vehicles and trailers"". The article in question, described as metallic galvanised

steel flexible pipe, is a manufactured article of some length. When cut to size, the pipe can be used as a component part for trucks as vacuum pipe

or as hydraulic air-brake. There was evidence on records to show that the assessee had sold the metallic galvanised steel flexible pipes to

purchasers who were themselves dealers is automobile parts and components. The Board took the view that since the assessee had sold the

galvanised steel flexible pipes to automobile dealers for being sold by them as automobile components after being cut to size, the article in question

must be regarded as falling within the ambit of entry 3 of the First Schedule to the Act.

The contention of the assessee, on the other hand, was based on a demonstration from its record of sales which showed that several

transactions of sale of the metallic galvanised steel flexible pipe had been effected to purchasers who were not dealers in automobile parts or

components. It was represented by reference to the trade catalogue that these pipes could be used not only for making automobile parts, such as

vacuum pipes and hydraulic air-brakes for trucks, but also as pipes for conveying black hydrocarbon, for distribution of air, oils, blast furnace on

tankers, non-corrosive liquids and also as vibration absorbers, not to speak of other uses. The assessee, accordingly, contended that the articles

dealt in by it cannot be branded as ""articles adapted for use generally as parts and accessories of motor vehicles and trailers"" within the meaning of

entry 3 of the First Schedule. The Board, however, rejected this contention. The Board happened to deal with this question because the Appellate

Assistant Commissioner dealing with the assessee''s income for 1972-73 had taken the view that the galvanised steel flexible pipes being sold by

the assessee must be taxed at the multi-point rate then prevailing, namely, 3 1/2 per cent, and cannot be brought within the purview of entry 3 of

the First Schedule and taxed at 13 per cent single point. Disagreeing with this decision of the Appellate Assistant Commissioner, the Board took

suo motu revision proceedings. It was in these proceedings that the Board recorded their determination that the article dealt in by the assessee did

fall within entry 3 of the First Schedule and was assessable to single point tax at the rate of 13 per cent.

We may observe that both the assessee and the departmental authorities have not approached from the proper perspective the question whether

entry 3 applied or not to this case. We have earlier referred to the text of the entry and also to the operative part of the language of that entry

having a bearing to the facts in this case. The crucial words of the entry show that in order to be brought within the mischief of this entry, the

articles in question must be generally adapted for use as parts and accessories of motor vehicles and trailers. The emphasis, in our judgment, is on

the expression ""adapted for use generally"". We have earlier observed that whereas the department sought to interpret the facts in this case by

concentrating on the sales effected by the assessee to dealers of automobile parts and accessories, the assessee for its part, placed particular

reliance on the existence of a number of items of sales to non-automobile dealers. The department''s case was that because the assessee effected

sales to automobile dealers, the article must be regarded as adapted for use generally as accessories to motor vehicles. The attempt on the part of

the assessee was to show that the article had uses other then as component parts of motor vehicles and this was proved by the extent of sales to

non-automobile undertakings. Each side relied on the factual existence of sales in the returned turnover. We, however, venture to think that what

entry 3 demands is not a survey of the assessee''s turnover, break-up wise, in order to find out whether the bulk of the sales of this article is

directed to dealers of automobile parts so that it can be said that the articles were adapted for use generally as motor vehicle parts or accessories.

It seems to us that the enquiry which entry 3 demands is in quite a different sphere. When it is provided that the articles must be adapted for use

generally as motor vehicle parts and accessories, what is meant is that in the very line of trade of this article it is by and large being used as motor

vehicle part. This would require not so much a survey of the statistics of the assessee''s own turnover, but rather a general survey of the trend of

trade in the particular commodity. If, on a consideration of the trend of sales and the trend of the commercial user of the commodity, it is found that

the article is generally adapted for use as motor vehicle part or accessory, and not otherwise, then the article can be regarded as falling within entry

3 of the First Schedule.

This line of approach to the problem in this case has not been pursued by any of the authorities. The result has been entirely unsatisfactory at

each stage of the proceedings, no matter which decision was come to by which authority. We, therefore, deem it necessary to set aside not only

the order of the Board but also the order of the Appellate Assistant Commissioner and the assessment order. We direct the assessing authority to

consider the case afresh in order to find out whether the article dealt in by the assessee is taxable at multi-point or whether it would come within the

mischief of entry 3 of the First Schedule. The decision of the assessing authority has got to be arrived at after instituting the objective inquiry, not

turnover-wise by an analysis of the assessee''s turnover, but trade-wise, on a study of the nature of the article and its general adaptability according

to prevailing manufacturing trends.

In the result, this appeal is allowed on the terms aforesaid. There will be however no order as to costs.

Petition allowed.