1981 (1) TMI 236 - HC - VAT and Sales Tax

Issues Involved:

1. Classification of rectifiers under the Bombay Sales Tax Act, 1959.
2. Determination of whether rectifiers fall under entry 20 in Schedule C or entry 22 in Schedule E.
3. Interpretation of the term "electrical goods" within the context of the Act.

Issue-wise Detailed Analysis:

1. Classification of Rectifiers:

The applicants, registered dealers under the Bombay Sales Tax Act, 1959, manufacture and sell rectifiers. They were assessed to payment of sales tax by the Sales Tax Officer based on the classification of rectifiers under entry 20 in Schedule C rather than the residuary entry 22 in Schedule E. The Assistant Commissioner and the Tribunal upheld this classification. The High Court was approached to determine if the rectifiers fell under entry 20 in Schedule C or entry 22 in Schedule E.

2. Determination of Appropriate Entry:

The primary question referred to the High Court was: "Whether the Tribunal was right in holding that the rectifiers manufactured and marketed by the petitioners were not covered by entry No. 15 of Schedule C nor by entry No. 22 of Schedule E but are covered by entry No. 20 of Schedule C of the said Act?" Initially, the Tribunal's statement of the case lacked sufficient detail, prompting the High Court to request a supplementary statement.

3. Interpretation of "Electrical Goods":

The description of goods in entry 20 in Schedule C (from 15th July, 1962, onwards) reads: "Electrical goods, other than those specified in any other entry in this schedule or in any other schedule." The core issue was whether rectifiers could be described as electrical goods. The rectifiers convert alternating current into direct current for various industrial uses. The applicants argued that rectifiers do not consume electricity and thus should not be classified as electrical goods. However, the court rejected this argument, stating that consumption of electricity is not a decisive criterion. Instead, the purpose and direct connection with electricity (production, distribution, transmission, or utilisation) are more relevant.

The court provided examples to illustrate that many items requiring electrical energy are not necessarily classified as electrical goods (e.g., electric railway engines, electric typewriters). Conversely, items like electrical wires and plugs, which do not consume electricity but are integral to its transmission, are classified as electrical goods.

Conclusion:

Applying these principles, the court concluded that rectifiers have a direct nexus with the utilisation of electricity, as their primary function is to convert alternating current into direct current, making them electrical goods under entry 20 in Schedule C. The court also referenced similar cases from other jurisdictions (e.g., State of Andhra Pradesh v. Indian Detonators Ltd., William Jacks and Co. Ltd. v. State of Madras, Commissioner of Sales Tax v. Import Association, Allahabad) to support its decision.

Judgment:

The High Court answered the question in the affirmative, in favor of the department and against the applicants. The applicants were ordered to pay costs of Rs. 300 in Sales Tax Reference No. 31 of 1976, with no order as to costs in the other references. The fees deposited by the applicants were to be adjusted against the order of costs, with the balance refunded to the applicants.

References answered in the affirmative.

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