2010 (8) TMI 746 - SC - VAT and Sales Tax

Classification - whether the voltage stabilizer manufactured and sold by the assessee (respondent herein) ought to be taxed as electrical goods under entry No. 16 of the Schedule to the U.P. Trade Tax Act, 1948 or as electronic goods under entry No. 74(f) of Notification No. 1223 dated March 31, 1992 - Held that - voltage stabilizers were electronic goods falling within entry No. 74(f) of Notification No. 1223 dated March 31, 1992, passed under the U. P. Trade Act, 1948, and were liable to sales tax under the U.P. Trade Tax Act, 1948, at the rate of four per cent.

Summary

Issues Involved:
1. Classification of voltage stabilizers as "electrical goods" or "electronic goods" under the U.P. Trade Tax Act, 1948.
2. Applicability of tax rates based on the classification.
3. Interpretation of relevant statutory entries and notifications.

Issue-wise Detailed Analysis:

1. Classification of Voltage Stabilizers:
The primary issue in these civil appeals was whether voltage stabilizers manufactured and sold by the assessee should be taxed as "electrical goods" under entry No. 16 of the Schedule to the U.P. Trade Tax Act, 1948, or as "electronic goods" under entry No. 74(f) of Notification No. 1223 dated March 31, 1992. The Revenue contended that voltage stabilizers are "electrical goods," while the assessee argued they are "electronic goods." The Tribunal, after considering the components, purpose, and principles of voltage stabilizers, concluded that they are electronic goods. The Tribunal's decision was based on the fact that electrical goods involve the consumption of electricity, whereas electronic devices function through the creation of an electron vacuum in the semiconductor material. The Tribunal also referenced a certificate from the Principal Director of Electronic Service and Training Centre of Ram Nagar, Nainital, and the textbook "Basic Electronic Engineering" by M.L. Anumani, both categorizing voltage stabilizers as electronic goods.

2. Applicability of Tax Rates:
The assessing officer had initially directed the assessee to pay sales tax based on the rate applicable to electrical goods. However, the assessee claimed they were liable to pay taxes at the rates applicable to electronic goods, which was four percent for the assessment years 1994-95 and 1995-96. The Tribunal modified the assessment order, holding that voltage stabilizers should be taxed as electronic goods. The High Court upheld this decision, rejecting the Revenue's reliance on another case where voltage stabilizers were classified as electrical goods, as the order did not provide any reasoning for such classification.

3. Interpretation of Relevant Statutory Entries and Notifications:
The relevant entries under consideration were entry 16 and entry 74 of the Schedule to the U.P. Trade Tax Act, 1948. Entry 16 included all electrical goods, instruments, apparatus, appliances, and articles that require electrical energy for use. Entry 74(f) covered all other electronic goods, parts, and accessories not specified elsewhere. The court also examined the definitions and characteristics of electrical and electronic goods. It was noted that an electronic device can be an electrical device, but an electrical device cannot be an electronic device. The court referred to definitions from the Law Lexicon and the book "Interpretation of Words, Phrases Commodities under Sales Tax Laws" by M.P. Agarwal to understand the distinction between electrical and electronic goods. Voltage stabilizers, which involve the operation of electronic components and serve the purpose of regulating electrical energy, were found to fit the description of electronic goods.

Conclusion:
The Supreme Court agreed with the Tribunal's reasoning and conclusion that voltage stabilizers are electronic goods for the purpose of taxation under the U.P. Trade Tax Act. The appeals by the Revenue were dismissed, with no order as to costs. The court also referenced previous cases, such as Williams Tacks and Co. Ltd. v. State of Madras and BPL Ltd. v. State of Andhra Pradesh, but found them not applicable to the present case.