1992 (11) TMI 267 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry 17 of Schedule "A" to the Punjab General Sales Tax Act, 1948 regarding the classification of electric motors for sales tax purposes at either 6% or 10%.

Analysis:
The judgment pertains to two General Sales Tax References concerning the assessment years 1974-75 and 1975-76, focusing on whether electric motors fall within the exception of entry 17 of Schedule "A" to the Punjab General Sales Tax Act, determining the applicable sales tax rate. The dealer, a registered dealer of electric goods, contested the assessment by the Assessing Authority, claiming electric motors were essential for generation, transmission, or distribution of electric power. The Deputy Excise and Taxation Commissioner partially accepted the dealer's appeal, later dismissed by the Sales Tax Tribunal, leading to a reference to the High Court.

The central issue revolved around whether electric motors qualified as electrical equipment required for energy generation, transmission, or distribution, falling under the exception to entry 17 of Schedule "A" for a 6% tax rate. The Court emphasized the predominant usage of the item for the specified purpose to determine its classification. Despite various uses of electric motors in gadgets like computers and refrigerators, the Court held that they were not exclusively or predominantly utilized for energy generation, transmission, or distribution.

The Court distinguished the case of "super-enamelled copper wire" from the present scenario, clarifying that specific accessories may be considered equipment for energy generation, unlike electric motors. The judgment highlighted the distinction between goods that generate electricity and those consuming it, asserting that electric motors primarily convert electric energy into mechanical energy for motion, aligning with a 10% tax rate.

The Court referenced official memos specifying the tax treatment of electric motors, emphasizing that unless used in energy generation, transmission, or distribution, they are subject to a 10% tax rate. The dealer's argument based on historical memos granting concessions for a 6% tax rate was refuted, emphasizing the need to interpret the current statutory provisions accurately.

Ultimately, the Court ruled that electric motors did not qualify as excepted goods under entry 17 of Schedule "A," rendering them liable to a 10% sales tax rate, contrary to the dealer's claim for a 6% rate. The judgment concluded by answering the reference question negatively, affirming the higher tax rate for electric motors.