1978 (12) TMI 179 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of items 102 and 83 of the First Schedule to the A.P. General Sales Tax Act regarding taxation of water-meters.

Detailed Analysis:

The primary issue in this tax revision case before the Andhra Pradesh High Court was the classification of water-meters for tax purposes under the A.P. General Sales Tax Act. The specific question raised was whether water-meters fall under item 102 or item 83 of the First Schedule to the Act. The respondent, a dealer in sanitary goods, contended that water-meters should be considered as "machinery" under item 83, while the revenue authorities treated them as "water supply fittings" under item 102, which had different tax rates.

The assessing authority initially classified water-meters as "water supply fittings" under item 102, attracting a 6% sales tax rate. However, the Sales Tax Appellate Tribunal disagreed with this classification. The Tribunal held that water-meters should be treated as either "machinery" or "general goods," subject to a lower tax rate of 4%. The Tribunal's decision was based on the understanding that water-meters, which measure water consumption, do not qualify as "water supply fittings" as per the Act.

The High Court analyzed the definitions and scope of "water supply fittings" and "machinery" under the relevant items of the First Schedule. It emphasized that not everything related to water supply could be considered a "water supply fitting." Drawing an analogy with a motor used for water supply, the Court clarified that items like water-meters, which measure consumption but do not directly supply water, do not fit the definition of "water supply fittings."

Furthermore, the Court referred to a precedent from the Allahabad High Court, which classified water-meters as machinery due to their operation based on the transmission of energy from water movement. Even if water-meters were not considered machinery outright, the Court concluded that since they did not qualify as "water supply fittings," they could be categorized as "general goods" for taxation purposes, attracting a 4% tax rate.

In the final judgment, the High Court upheld the decision of the Sales Tax Appellate Tribunal, ruling that water-meters do not fall under the definition of "water supply fittings" in item 102. Therefore, regardless of whether they are classified as machinery or general goods, they are subject to a 4% tax rate. The Court dismissed the tax revision case brought by the revenue and directed each party to bear its own costs, citing the absence of a prior ruling on this specific issue in the Court.