1980 (12) TMI 161 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of whether neon signs are considered as "electrical goods" under sales tax law.

Analysis:
The High Court of Delhi addressed three sales tax references concerning whether neon signs sold by the respondent fall under the definition of "electrical goods" as per the sales tax law. The neon signs in question are operated by electricity and are shaped like letters, visible both during the day and at night. The court examined various cases to determine the classification of goods as "electrical goods."

In William Jacks & Co. Ltd. v. State of Madras, the court considered machinery with electrical motors and established that the use of electric energy is essential for categorizing goods as "electrical goods." Similarly, in J.B. Advani-Oerlikon, Electrodes, Pvt. Ltd. v. Commissioner of Sales Tax, M.P., electrodes used for welding were not classified as "electrical goods" despite requiring electrical energy for operation.

Another case discussed was William Jacks and Co. Ltd. v. State of Madras, where lathes driven by electricity were not considered as "electrical goods" since they could function with alternative power sources. The court also examined whether an agricultural tractor could be labeled as "electrical goods" in William Jacks and Company Limited v. State of Madras.

The court referred to the Supreme Court's judgment in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola, emphasizing the popular sense of terms over botanical definitions. Additionally, in State of Andhra Pradesh v. Indian Detonators Ltd., Hyderabad, electric detonators were not classified as "electrical goods" due to their dependency on chemical mixtures for explosive power.

The court concluded that neon signs, while dependent on electricity for illumination, could still function without it, distinguishing them from typical electrical goods. Despite the utility being affected at night without electricity, the signs remained visible during the day, indicating they are not solely classified as "electrical goods." Consequently, the court ruled in favor of the dealer, determining that neon signs do not fall under the category of "electrical goods."

In summary, the court answered the reference question in the negative, holding that the neon signs in question are not covered by the term "electrical goods." The judgment favored the dealer, and each party was directed to bear their own costs in the three cases.