2009 (2) TMI 785 - HC - VAT and Sales Tax

Whether the cooler pump a component of an air-cooler can be termed as an electrical appliance and attract tax at the first stage of sale under section 18 read with entry 16? Whether the cooler pump is monoblock pump and is excluded from the levy of tax at the first stage of sale under entry 16? Whether interest under section 25(5) is justified even when the honourable Supreme Court in a judgment dated May 13 1994 in the case of Frick India Limited v. State of Haryana read with judgment reported as 1994 95 STC 188 has held that in these circumstances the interest under section 25(5) is not leviable? Held that - When the facts of the present case are examined in the light of the principle laid down in Rajindra Electric Store s case 1996 (1) TMI 393 - PATNA HIGH COURT no doubt is left that a cooler pump in itself cannot be of any use and it is incapable of cooling the air in the absence of air-cooler/desert cooler fitted with various other items. If the cooler pump independent of any other item is capable of rendering service to the buyer then it might be regarded as an electrical appliance which indeed is not the situation. Therefore we are of the view that the first question of law deserves to be answered in favour of the dealer and against the Revenue. As far as second question is concerned it is also bound to be answered in favour of the dealer and against the Revenue because mono-block pumps are entirely different as has been conceded by the learned counsel for the parties. The third question regarding payment of interest would not arise once the first question has been answered in favour of the dealer because if the dealer is not liable to pay any tax at the first stage of sale under section 18 of the Act read with entry 16 then the question of payment of interest under section 25(5) of the Act would not arise.

Summary

Issues:
1. Whether a cooler pump can be termed as an electrical appliance and attract tax under section 18?
2. Whether a cooler pump is excluded from tax levy as a monoblock pump?
3. Whether interest under section 25(5) is justified?

Analysis:
Issue 1:
The case involved a dispute regarding the classification of a cooler pump as an electrical appliance for tax purposes under section 18 of the Haryana General Sales Tax Act. The dealer contended that a cooler pump, being a component of an air-cooler, should not be considered an electrical appliance covered under entry 16 of the notification. The court examined the notifications of December 30, 1987, and March 18, 1988, which clarified the scope of electrical appliances. The court found that the omission of the words "their parts" in the later notification indicated that only complete electrical appliances were intended to attract tax, not their parts. Additionally, the court noted that a cooler pump alone lacked utility and required integration with an air-cooler to function, as per ISI specifications. Relying on precedent and definitions of electrical appliances, the court concluded that a cooler pump did not qualify as an electrical appliance under the relevant notification.

Issue 2:
Regarding the second issue, the court determined that monoblock pumps were distinct from cooler pumps, as acknowledged by both parties. This distinction implied that monoblock pumps should not be subject to the same tax treatment as cooler pumps. Consequently, the court ruled in favor of the dealer on this issue.

Issue 3:
The third issue pertained to the justification of levying interest under section 25(5) in light of the preceding determinations. The court clarified that if the dealer was not liable to pay tax on cooler pumps under section 18, the question of interest did not arise. Therefore, given the resolution of the first two issues in favor of the dealer, the court deemed the third question regarding interest payment irrelevant. As a result, the court answered the reference in favor of the dealer on all counts, providing a comprehensive analysis and legal reasoning for each issue raised in the case.