2004 (8) TMI 693 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exemption eligibility of turnover related to electrical works, transformers, and foundation work under Entry 57 of the Fifth Schedule to the Karnataka Sales Tax Act.
2. Interpretation of the term "wind mill" under the Karnataka Sales Tax Act.
3. Applicability of expert opinions in determining the components of a wind mill.
4. Distinction between movable and immovable property for tax exemption purposes.

Issue-wise Detailed Analysis:

1. Exemption Eligibility of Turnover Related to Electrical Works, Transformers, and Foundation Work:
The petitioner company claimed exemption on the entire turnover related to the supply, erection, and commissioning of wind mills under Entry 57 of the Fifth Schedule to the Karnataka Sales Tax Act. The assessing authority allowed deductions for certain parts but disallowed exemptions for turnover related to foundation work, electrical work, and transformers, levying a tax on these components. The appellate authority and the Tribunal upheld this view, stating that these components do not form part of the wind mill as per Entry 57.

2. Interpretation of the Term "Wind Mill":
The Tribunal and the assessing authority interpreted "wind mill" narrowly, excluding foundation work, electrical work, and transformers from the exemption. The Tribunal reasoned that transformers and electrical works serve different functions and thus do not form part of the wind mill. The foundation work, although necessary for installation, was also excluded from exemption as it was not considered a component of the wind mill under Entry 57.

3. Applicability of Expert Opinions:
The Karnataka Renewable Energy Development Limited, an expert body, opined that wind mills include electrical work, transformers, and foundation. However, the Tribunal and the Court held that while expert opinions are valuable for understanding the functionality of wind mills, they cannot be the sole basis for interpreting statutory entries. The Court emphasized that statutory definitions and popular meanings in commercial parlance should guide the interpretation.

4. Distinction Between Movable and Immovable Property for Tax Exemption Purposes:
The Court discussed the distinction between movable and immovable property, noting that the Sales Tax Act exempts only movable property. Once a wind mill is embedded in the earth with a concrete foundation, it becomes immovable property, which is not exempt under the Act. Therefore, the foundation work does not qualify for exemption. However, the Court recognized that electrical work and transformers are integral to the functionality of the wind mill and should be considered part of it for exemption purposes.

Conclusion:
The Court set aside the Tribunal's order regarding the non-exemption of electrical works and transformers, recognizing them as vital parts of the wind mill. However, it upheld the Tribunal's view on the foundation work, stating it becomes immovable property once installed and thus does not qualify for exemption. The matter was remanded to the assessing authority to redo the assessment in light of these observations, emphasizing the need to distinguish between movable and immovable components for tax purposes.