KIRLOSKAR BROS LTD. Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS appeal is preferred by the assessee M/s. Kirloskar Brothers Limited, R.P. Road, Secunderabad aggrieved by the revision of assessment made by the Dy. Commissioner (CT), Secunderabad Division vide his order dated 15.2.96 in exercise of his powers U/s. 20(2) of APGST Act regarding the final assessment made by the Commercial Tax Officer for the year 1992 -93 under APGST Act vide his order dated 22.8.94 in assessment No. 1406/92 -93. The issue relates to the matter of Sales Tax in respect of two disputed turnovers. The first is Rs. 79,91,860/ - relating to the first sales of pumps. The C.T.O., treated pumps as machinery and levied tax at 6% as per Entry 83 of the Ist Schedule to APGST Act. The Dy. Commissioner wanted to revise the rate of tax and enhance the same to 7% treating pumps as accessories to electric motors and oil engines mentioned in Entry 126 of the Ist Schedule to the said Act.

(2.) THE second disputed turnover is Rs. 64,50,880/ - stated to be relating to repair charges or re -conditioning charges of compressors. The assessing authority in the first instance proposed levy of tax on this turnover stating it to be relating to the sale of compressors. But, after receiving objections and considering them he allowed exemption on this turnover stating that the transaction does not involve any sale and that turnover relates to repair charges. The Dy. Commissioner proposed in his show cause notice issued for revision levy of purchase tax on this turnover U/s. 6A of APGST Act and also levy of Sales Tax on the double the amount of this turnover which is Rs. 1,29,01,760/ - taking the view that the appellant purchased defective compressors and replaced them by new compressors which amounted to sale of new compressors. He presumed the turnover relating to the said sales to be double the amount called as repair charges. But, ultimately he dropped purchase tax U/s. 6A on this turnover after receiving objections from the assessee and considering them. But, he confirmed the levy of sales tax on the turnover of Rs. 1,29,01,760/ - and levied the same @ 10%.

(3.) BUT , the Dy. Commissioner did not agree with the contention raised by the appellant that this turnover relates only to repairing charges and that there is no sale involved. He observed that the dealer is creating a facade of barter to suppress the real nature of the transaction while accepting the defective compressor, instead of raising a clear Invoice No. 1) Valuing the defective compressor beyond its warranty period for its value. 2) Indicating price of the new/effective compressor being sold and 3) Setting of the value of the 1st item against the value of the second Item. For treating the transaction as sale, the first ground stated by him is about the high amount received by the assessee while receiving defective compressor and replacing the same with a repaired compressor. He considered the price list circulated by the Head Office of the assessee company at Pune under the Heading of Repairing Charges list and from this he observes that it indicates two different prices, one for the compressor which is un -cut and second for the cut -open compressor and these variations are of an average 75% of the value of the new compressor. He further observes that the dealers are making distinction between un -cut compressors and cut -open compressors while accepting the same for repairs, but while issuing there is no such distinction and this indicates that there is only one type of compressors standard in nature which are being called repaired compressors. He states that the remaining 25% of the cost of the new compressor should be equated to the value of the defective compressor. The other ground relied upon by him is that in this transaction there is no continuing titular relationship between the owners and the goods. He observes that the customer is giving up all his rights over the defective compressor and the dealer is giving up all his rights on the new effective compressor and after the transaction there is no link between the dealer and the customer for these goods and thus it is perfect sale transaction and acceptance of a part of the value in the form of goods cannot convert the entire transaction into a barter trade. The third ground given by him is that the dealer is collecting Sales Tax on this transaction and therefore it should be considered as a sale transaction.