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whether Cycle Frame Locks are Cycle Parts/Accessories under CGST Act.? (By Mr. Narendra Sharma)

Narendra Sharma
Advocate
M : 9415127075
9/76, Arya Nagar, Kanpur

e-mail : narendra.advo@rediffmail.com

Website : www.narendrasharmaandcompany.in 

Cycle Frame Locks are whether Cycle Parts/Accessories or not? Under CGST Act, 2017

Every assessee under the law is entitled to claim that its products is liable to tax under the scheme at lower rate. The object of law  is not to tax commodity in any way but only the  way which appears justified and sufficient in the context of entry in question.

It is also essential to mention that if an item is covered under two notifications then it is the notification which is more beneficial to the assessee which should be  applied.  This  principle was followed in the case of M/s. Shakti Lace Factory vs. Commissioner, Sales Tax, 1982 UPTC 814 and was later on followed in M/s. DEYS MEDICAL STORES LIMITED Vs. COMMISSIONER, TRADE TAX, U.P. [2004, STC (Vol. 134) P-1], as below :

There is also another aspect of the matter. In the case of Shakti Lace Factory Vs. Commissioner of Sales Tax, U.P. reported in [1984, 57 STC 261 (All.)] [Appl.] ; 1983 STJ 35, it has been observed by this Court that if a commodity falls under two notifications, then the notification which is beneficial to the assessee should be applied.

This issue has been under consideration before various courts from time to time, but we  have to consider it in the context of present GST Act, 2017. Meanwhile, it will be useful to traverse through the following decisions :

Full Bench of the Trade Tax Tribunal in M/s. Shyam Cycle Stores vs. CTT [2011 (Vol. 46) NTN (Tri-217) while considering the matter that  whether  cycle lock etc. are parts or accessories of cycle held that :-

For correct appreciation of the terms ‘Accessories’ and ‘parts’ it is necessary to go through the dictionary meaning of these terms and the pronouncements made by different higher Courts in this regard. In ‘Webster’s Third New International Dictionary’, the term ‘Accessory’ has been defined as under :-

‘An object or device that is not essential in itself but that adds to the beauty, convenience or effectiveness of something else.’

The word ‘accessories’ nowhere finds place in this entry. Having gone through the dictionary meaning of the words ‘part’ and ‘accessory’, it is clear at the very outset that the parts means components without which cycle cannot work as a cycle or cannot be successfully used. The word ‘accessory’ denotes the item not essential but is added to the commodity for effectiveness of the cycles. Applying the principles of common parlance and commercial parlance, it is clear that cycle can be successfully used even without chain cover, carrier, seat cover, bell and handle grip cover. It is also true that the role of cycle stand is somewhat different. Even the layman can safety conclude that a cycle stand is an essentiality for using the cycle. In this way, the Bench is of firm view that cycle stand clearly falls under the ambit of the term ‘parts'

In fact the Tribunal was considering whether various items of cycle like chain cover, carrier, seat cover, bell and handle grip cover are parts or accessories of cycle since at that time the relevant entry was of cycle parts and not accessories, therefore, this referred decision has a persuasive value, if not binding.

Though, this decision is not binding upon any authority, however, it has persuasive value.

Hon'ble Karnataka High Court in the case of M/s. Kumar Agencies and Another  Vs.  Commissioner of Commercial Taxes and Another [1989] 72-STC 140 (Kar.  HC)  considered  the  issue at length in the context of Notifications under the Karnataka Sales Tax Act, it will be useful to go through some of the part of judgment :

The clarification issued by the Commissioner as per annexure-B is obviously based on the insertion of entry 150 in the Second Schedule with effect from 18th November, 1983. Under the said entry, "all kinds of padlocks and locks" are brought to tax at single point. But the mere insertion of this entry should not make any difference as to the taxability of cycle locks under entry 14 treating them as accessories of bicycle.

I have already taken the view that cycle locks cannot be classified  along with "all kinds of padlocks and locks" nor can they  be  understood  as  padlocks and locks, the use of which is altogether different.

A brief legislative history relating to the levy of tax on the sale of cycle locks under the Act is necessary to be stated in order to properly appreciate the petitioners' case and decide the point in.

Entry 14 of the Second Schedule to the Act, as was found in the Act right from the inception, as inserted by Act 25 of 1957, read as follows

:"14. Bicycles, tandem cycles and cycle combinations"

This entry was substituted by Act 31 of 1958, and the substituted entry read as follows:

" Bicycles, tandem cycles (cycle combinations and parts and accessories and tyres and tubes thereof)."

By Act 9 of 1970, perambulators, children's tricycles and similar articles were also included in the said entry.

The petitioners' case is that cycle locks were being treated as "accessories" to cycles right from 1958 when the parts and accessories of cycles were inserted in entry 14 by Act 31 of 1958, which was the earliest enactment relating to cycle locks in the Sales Tax Act. The argument that is advanced on the basis of this factual position is that the tax on cycle locks from 1958 onwards was levied treating as an accessory to cycles and the department continued to tax it along with the cycles treating as an accessory of the cycle till 16th April, 1980 when entry 14 in the Second Schedule was omitted with effect from 17th April, 1980 from which day the sale of "cycle parts and accessories thereof" came to be exempted from the levy of tax on its being inserted in the Fifth Schedule. Again by Act 14 of 1987 item 44 of the Fifth Schedule was omitted with effect from 2nd April, 1987 and item 14 in the Second Schedule was reintroduced in the Act reviving the levy as before :

"14.      Bicycles, tandem cycles, cycle combinations and parts and accessories and tyres and tubes thereof, perambulators, children's bicycles and similar articles."

Parts vs. Accessories : Cycle

Meanwhile, we should also peruse the leading  case on cycle parts/accessories of Tamil  Nadu High Court.

  • T.I. Miller Ltd. vs Union Of India And Anr. on 20 July, 1983: 1987 (31) ELT 344 (Mad) :

The learned Judges after referring to some of the leading decisions of the Allahabad High Court held at p. 202 observed as follows :

"The principle which can be drawn from the above decisions appears to be that a thing is a part of the other only if the other is incomplete without it. A thing is an accessory of the other only if the thing is not essential for the other but only adds to its convenience or effectiveness.

  • "M/S Pragati Silicons Pvt. Ltd. vs Commissioner Of Central Excise [CASE NO.: Appeal (civil) 5345 of 2001]

15. The term 'accessory' is defined in The New Collins Concise Dictionary of the English Language (1982) as "a supplementary part or object, as of a car, appliance, etc". Other definitions for the accessory are found in the Advanced Law Lexicon (3rd edition, 2005) and include the following :

"Something of secondary or subordinate importance;

Something contributing in subordinate degree to a general result or effect; an adjunct or accompaniment;

Accessory is an article or device that adds to convenience or effectiveness of, but is not essential to, main machinery."

16. This Court has considered and decided as to what the meaning of the term 'accessory' is in a few earlier cases. In Annapurna Carbon Industries Co. v. State of Andhra Pradesh [(1976) 2 SCC 273], the Court was required to examine whether "arc carbon" was an 'accessory' to cinema projectors or other cinematographic equipment under item 4 of Ist Schedule to Andhra Pradesh General Sales Tax Act, 1957. Answering in the affirmative, the Court opined that :

We find that the term "accessories" is used in the schedule to describe goods which may have been manufactured for use as an aid or addition. A sense in which the words accessory is used given in Webster's Third New International Dictionary as follows:"

An object or device that is not essential in itself but that adds to the beauty, convenience, or effectiveness of some-thing else". Other meanings given there are:

"supplementary or secondary to something of greater or primary importance": "additional": "any of several mechanical devices that assist in operating or controlling the tone resources of an organ".

M/s. T.I. Miller Ltd. vs Union Of India And Anr. on 20 July, 1983: 1987 (31) ELT 344 (Mad) :-

being a fiscal statute it must be construed in favour of the assessee and not in favour of the Revenue. The Central India Spinning and Manufacturing Co. Ltd. V. The Municipal Committee, Wardha, A.L. T.P. Fernandes V. M.F. Queoros.

In view of the above, we should try to resolve the issues in a way it is beneficial to the assessee.

There are following two entries in the GST Schedule relating to Locks, directly as well as indirectly, of Bicycle, kindly peruse :-

Chapter 87 - Vehicles other than railway or tramway rolling -

stock and parts and accessories thereof. 

HSN 4
Digits

HSN 8
Digits

Description

CGST/SGST/ UTGST

IGST

8712

87120000

Bicycle and other cycles (including delivery tricycles) not motorised.

6%

12%

8714

 

Parts and accessories of bicycle and
other     cycles      (including             delivery tricycles) not motorised of 8712

6%

12%

Chapter 83 - Miscellaneous articles of base metal.

HSN 4
Digits

HSN 8
Digits

Description

CGST/SGST/ UTGST

IGST

8300

83000000

MISCELLANEOUS ARTICLES OF BASE METAL

 

 

8301

830140

Other Locks :

9%

18%

8301

83011000

Padlocks

9%

18%

8301

83011000

Padlocks of base metal

9%

18%

8301

83012000

Locks of a kind used for motor vehicles

9%

18%

8301

83011000

Other locks

9%

18%

8301

83014010

Combination locks

9%

18%

8301

83014011

Cylinder

9%

18%

8301

83014011

Locks of a kind used for doors of buildings

9%

18%

8301

83014090

Locks (other)

9%

18%

8301

83015000

Clasps and frames with clasps,
incorporating locks

9%

18%

8301

83016000

Parts

9%

18%

8301 83016000 Parts of padlocks and locks of base metal
9%
    18%

 It will be interesting to note that what the Hon'ble Apex Court held in M/s. Ram Avtar Budhai Prasad vs. S.T.O., Akola [(1961) 12 STC 286], is still being followed and therefore, it is the law of land :-

“It has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning “that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it.

CONCLUSION :

In view of the above, we may notice that cycle Frame Locks are exclusively meant for locking the bicycle whereas in the broader category of locks of all kinds, there is no be  fitting sub-entry and hence, Cycle Frame Lock shall fall within the entry "Parts and accessories of bicycle" and other cycles (including delivery tricycles) not  motorized  of 8712.