2008 (8) TMI 810 - HC - VAT and Sales Tax

Whether the supply of electric meter by the appellant-Board to the consumer on payment of periodical hire charges to the appellantBoard under a duly executed agreement for such supply of meter amounts to sale within the meaning of section 2(j)(iv) of the H.P. General Sales Tax Act 1968 read with other relevant provisions thereof is allowed to be referred to the honourable High Court as it is arising from the order of this Tribunal? Held that - As no right in the meter has been transferred to the consumer. We therefore hold that the hiring of the meter does not amount to a sale. Appeal dismissed.The substantial question of law is answered against the Revenue and in favour of the assessee.

Summary

Issues:
Determining whether the supply of electric meters by the appellant-Board to consumers under a hire agreement constitutes a 'sale' under the Himachal Pradesh General Sales Tax Act, 1968.

Analysis:
The case involved the Himachal Pradesh State Electricity Board supplying electric meters to consumers for measuring electricity, retaining a security deposit, and charging hire charges. The assessing authority considered this hire agreement as a 'sale' under section 2(j)(iv) of the Act, leading to sales tax assessment. Appeals were made to higher authorities, culminating in the H.P. Sales Tax Tribunal ruling that renting out the meter did not amount to a sale. The main contention centered on whether the right to use the meter was transferred to the consumer. The Indian Electricity Act, 1910, specified the licensee's duty to maintain and access the meter, with consumers having the choice to purchase or hire the meter. The court emphasized that the meter was primarily for the licensee's benefit, with consumers having limited rights over its use, such as not being able to change or remove it. The court held that no right in the meter was transferred to consumers, as the meter was hired solely for measuring electricity supply, aligning with statutory provisions.

The court rejected the Revenue's argument that renting out the meter constituted a sale, citing a similar decision by the Punjab and Haryana High Court. The court highlighted that charging rent for connecting instruments did not equate to a sale of goods, emphasizing the utility of the meter being tied to the electricity supply. Ultimately, the court ruled in favor of the assessee, stating that the hiring of the meter did not amount to a sale, as no transfer of interest in the meter occurred. The judgment provided a detailed analysis of the legal provisions, contractual arrangements, and consumer rights in the context of electricity meter supply, aligning with statutory frameworks and precedents to determine the tax implications of such transactions under the sales tax law.