CA V. Sundararajan
A dealer is engaged in importing and selling fork lift. For selling of fork lift the dealer is collecting taxes @5% (Capital goods-commodity code no -2025). However the assessing officer is of the view that fork lift will fall under the category of motor vehicles-and are liable to tax @14.5% under the clause 49 part c of First Schedule-commodity code no-350 and proposed to levy tax for the differential rate of tax together with interest.
Fork lift is used by the buying manufacturers for loading and unloading raw materials. Loading and unloading of raw materials forms part of the processing of goods.
Material-handling equipment is equipment that relate to the movement, storage, control and protection of materials, goods and products throughout the process of manufacturing – Wikipedia, the free encyclopedia.
Fork lift is a material handling equipment which is used in the state in the process of loading and unloading of raw materials into machinery for processing. This process is technically known as machine tending. Fork lift and its uses satisfy the conditions prescribed under section 2(11)-capital goods.
Advance ruling ACAAR No. 151/2013-14/ 10.07.2014 (Acts Cell- II- 9996- 10003/2014- The learned commissioner has ordered that Stacker Crane with a fork lift type mechanism used in automated storage and retrieval system. The stacker crane produced by the appellant dealers are used for raising or lowering the storage racks to any level and also extending racks in order to store or retrieve the stock of goods are taxable @5% as capital goods.
Stacker cranes are automated movement tool. Stacker cranes capable of vertical and lateral movement, just like a forklift. Their lifting mechanisms are even similar in shape to a forklift. Stacker crane help maximize vertical storage space volume instead of floor area because they can travel to much higher heights than alternative equipment like forklifts. – www.iqsdirectory.com/overhead-cranes/stacker–crane/.
Stacker is an alternate to a fork-lift or other material handling approach, roll storage systems are often described as a way of saving floor area, using your overhead space and reducing building costs. The most significant justifications for Roll-Stak systems are that they are faster and more accurate than other forms of material handling solutions because they take less space and reduce damage to inventory due to handling by fork-lift operators.
The primary and predominant function (use) of both Stacker crane and fork –lift is material handling. The functional utility and usage of the goods which is being classified must be taken in to account. So from the function of the equipment it is very clear that fork lift serves as material handling equipment directly used in the manufacturing process and therefore requires to be classified as Capital goods like Stacker crane.
Motor vehicle is defined in the Motor vehicles Act, 1988. Motor vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted there to form an external or internal source and includes a chassis to which a body has not been attached and a trailer but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises.
Fork lift is a vehicle of special type adopted for use only in the factory. Forklift’ does not require registration under Tamilnadu Motor Vehicles Rules. In view of the above forklifts are not covered under the definition of motor vehicles.
VAT principles are borrowed from CENVAT.
Forklift [used for loading & unloading raw material] falls within the Chapter Head ‘8427’, which is eligible for CENVAT Credit as per the definition of Capital Goods in terms with Rule 2(a) of CENVAT Credit Rules, 2004. Hence, CENVAT Credit can be availed on same. Reliance can be placed in the case of J.C.T. Electronics v. Commissioner Of Central Excise, Chandigarh [2000 (124) E.L.T. 541 (Tribunal)], which was also approved by Supreme Court.
Conclusion: Fork lift is capital goods and not motor vehicle and applicable rate of tax is 5%.