2011 (7) TMI 1031 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of tax entry classification for cables and switches used in works contract; Applicability of tax rate under entry 55 or entry 87.

The High Court of Rajasthan heard a revision petition filed by the Revenue against an order of the Tax Board. The Tax Board had upheld the first appellate authority's decision, which taxed cables and switches used by a contractor at 6% under entry 55 of a specific notification. The assessing authority had initially taxed these items at 12% under entry 87. The Revenue argued that since the contractor was not a power generating company, the items should be taxed at 12%. The court noted the absence of opposition from the respondent. The Revenue cited a Madras High Court decision to support their argument that the specific use of an article does not determine its tax classification. However, the court held that cables and switches used in works contracts fell under entry 55, which covers items required for the exclusive use in the generation, transmission, or distribution of electric power. The court distinguished entry 87, which includes domestic appliances but not goods used for power distribution. Therefore, the court concluded that the assessing authority erred in applying entry 87 and upheld the Tax Board's decision to tax the items at 6% under entry 55.

In conclusion, the High Court dismissed the revision petition filed by the Revenue, stating that the goods in question, namely cables and switches used in works contracts, should be taxed at 6% under entry 55 of the notification. The court found that the assessing authority had incorrectly applied entry 87, which covers domestic appliances, instead of entry 55, which pertains to items required for the exclusive use in the generation, transmission, or distribution of electric power. The court emphasized that the specific use of the items for power distribution was key in determining the applicable tax entry. The court's decision was based on a detailed analysis of the relevant tax entries and their scope, ultimately leading to the dismissal of the Revenue's revision petition.