Madras High Court upholds levy of tax on electronic music instruments

The Madras High Court has upheld the notifications of the Commercial Taxes department levying and collecting general sales tax on sale of electronically made Indian music instruments.

There are no merits in the contentions raised by the petitioner, Justice SM Subramaniam said while dismissing a writ petition from city-based Radel Electronics Private Limited, on September 3.

The petition filed in 2008 sought to quash a notification dated December 30, 2006 of the Commercial Taxes department as ultra vires of Sec.17 of the TNGST Act and Articles 14, 19 (1) (g) and 265 of the Constitution and hence, liable to be declared as null and void. It also sought to quash the subsequent clarifications issued in 2007 and 2008. The petitioner contended it had claimed exemption on the sale of the Indian Musical Instruments in terms of an earlier GO dated February 12, 2004 and obtained the exemption. This notification granting exemption was superseded by the impugned December, 2006 GO, petitioner contended.

The government counsel submitted that the exemption was provided only to traditional and handmade music instruments to encourage poor artisans engaged in the manufacturing of those instruments from generation to generation, who are normally living in penurious circumstances. The exemption was given to make available the instruments within the reach of poor and needy artisans, so as to develop the traditional Indian music as far as possible, which is synonymous of Indian culture and tradition. In this case, the petitioner company, having its manufacturing facility at Bangalore, was producing and selling electronic musical instruments. All the musical instruments manufactured and sold by the petitioner were electronically operated, and hence the petitioner, under the guise of selling musical instruments, was only marketing the electronic instruments manufactured en masse with the aim of making profit in the business.

Therefore, the authority has correctly approached the issue by issuing pre-revision notices. The judge said the State has not intended to grant exemption in respect of large scale manufacturers of electrically made Indian Musical Instruments. Such Indian musical instruments, using electronic technologies, were to be classified as electronic instruments, which would squarely fall under 14 (iv) of Part D of the first schedule of TNGST Act, 1959.

This apart, when tax liability was fixed for electronic instruments , it is to be construed that Indian musical instruments electrically manufactured is to be classified as electronic instruments. At the outset, whether it is Indian Musical Instruments or any other instruments, if it is an electronic instrument, then the same would fall under the further classification of electrical instruments and cannot be construed as traditionally manufactured Indian musical instruments, for which exemption was granted with the specific intention to grant the relief to poor artisans, who were all engaged in the manufacturing of these instruments from generation to generation and living in penurious circumstances in the State. The judge pointed out that the exemptions granted by invoking Sec. 17 of the TNGST Act remains as it is in respect of Indian musical instruments and the impugned December 2006 notification was issued to clarify the Indian Musical Instruments, which all were falling under the exemption clause notified in the February 2004 notification. Therefore, the subsequent notification was clarificatory in nature and cannot be construed as cancellation of the exemption already granted. Moreover, no writ against a 'notice 'was to be entertained in a routine manner. If at all the petitioner was aggrieved, it could raise its objections along with the documents and the evidence, the judge said and dismissed the petition.