1980 (9) TMI 245 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the assessing authority to initiate proceedings under section 22 and section 21 of the U.P. Sales Tax Act.
2. Applicability of item No. 7 versus item No. 7-A of the notification dated 1st October, 1965, for taxing the turnover of electric K.W.H. meters.
3. Validity of the notices issued under sections 22 and 21 of the U.P. Sales Tax Act based on the decision in the Scientific Importers' case.

Detailed Analysis:

1. Jurisdiction of the Assessing Authority:
The petitioners contested the jurisdiction of the assessing authority to initiate proceedings under section 22 of the Sales Tax Act, arguing that the assessment orders did not suffer from any apparent error. They claimed that the decision in the Scientific Importers case did not apply to their assessments and that the assessing authority had no jurisdiction to issue the impugned notices. The court found that the only material basis for issuing the notices was the observation in the Scientific Importers case, which the petitioner argued was not accurate. The court agreed that it would be difficult for the sales tax authorities to overlook or explain these observations and that only this court could clarify the correct legal position.

2. Applicability of Item No. 7 vs. Item No. 7-A:
The main controversy centered around whether the turnover of the sales of electric K.W.H. meters is covered by item No. 7 or item No. 7-A of the notification dated 1st October, 1965. Item No. 7 covers "electrical goods other than equipment, plants and their accessories required for generation, distribution and transmission of electrical energy," while item No. 7-A covers "electrical equipment, plants and their accessories required for generation, distribution and transmission of electrical energy." The court found that electric K.W.H. meters are electrical equipment required for the distribution of electrical energy, as they are used by distributors to measure the quantity of energy consumed by customers. Therefore, the turnover of such meters falls under item No. 7-A and is taxable at the rate of 7 percent.

3. Validity of Notices Issued Under Sections 22 and 21:
The court examined the decisions in the cases of Commissioner of Sales Tax, U.P. v. Import Association and Commissioner of Sales Tax, U.P. v. Scientific Importers. It found that neither case established that K.W.H. meters are not required for the distribution of electrical energy. The court rejected the respondent's argument that instruments for measuring electrical energy supplied to consumers are not required for distribution. It held that the action of the respondent in issuing notices under sections 22 and 21 based on these decisions was not legally justified.

Conclusion:
The court allowed the petitions, quashing the notices issued under sections 22 and 21 of the Sales Tax Act. It concluded that electric K.W.H. meters fall under item No. 7-A of the notification dated 1st October, 1965, and that the assessing authority had no jurisdiction to issue the impugned notices. The court found that the assessment orders did not suffer from any error, much less an apparent error, and that the turnover had been correctly taxed at the rate of 7 percent.