1980 (4) TMI 281 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sales tax rate on specific goods used for generation, transmission, or distribution of electric power.

Analysis:
The case involved a dispute regarding the applicability of concessional sales tax rates on various items used for the generation, transmission, or distribution of electric power. The assessee, a company dealing in electrical goods, sought clarification on the tax rate applicable to items like copper wire, conductors, electric meters, etc. The Additional Commissioner initially held that the assessing authority must confirm the actual use of the goods for power-related purposes before granting any concession under the relevant notification. However, the Division Bench of the Board of Revenue later overturned this decision, emphasizing that the items in question were primarily required for electric power activities and did not need further scrutiny regarding their potential alternative uses. The Board concluded that the goods fell under the concessional tax rate category specified in the notification.

The Court examined the relevant notification that provided for different tax rates on specific goods. The notification included item 29, which covered all plants, equipment, and accessories necessary for electric power activities, taxed at a concessional rate of 5%. The Court highlighted that, except for copper wires, all other disputed items were exclusively used for power-related purposes, as acknowledged by the revenue's advocate. The Court emphasized that the classification of items for tax purposes should be based on their ordinary or commonly known purpose or use. It was established that the items in question were indeed essential accessories required for electric power activities, warranting the concessional tax rate of 5% under item 29 of the notification.

In conclusion, the Court ruled in favor of the assessee, holding that the disputed items were primarily intended for the generation, transmission, or distribution of electric power, justifying the application of the concessional tax rate specified in the notification. The decision was made based on the ordinary purpose and use of the items, disregarding any potential alternative uses. The reference was answered against the revenue and in favor of the assessee, with each party bearing its own costs.