2013 (5) TMI 58 - HC - VAT and Sales Tax

Rate of tax on electrical washing machines - 12% or 8% or 5% - notification no.298 dated 29.1.2000 u/s 3-A of the U.P. Trade Tax Act - Held that - When the finding of the tribunal itself is that the assessee is manufacturing fully automatic washing machines, then the conclusion drawn by the tribunal that it is liable to be covered as electrical item, is not justified in view of judgment of B.P.L. Versus State of A.P. (2001 (1) TMI 87 - SUPREME COURT OF INDIA) wherein held that electrical appliances are quite different from electronic appliances and therefore electrical goods which are not to be covered under the entry electronic equipments. Thus fully automatic machines manufactured by the assessee should be taxed at the rates applicable to the electronic equipments i.e. to say that at the rate of 8%. The impugned order of the tribunal is set aside.

Summary

Issues:
Interpretation of tax rates for electrical washing machines under U.P. Trade Tax Act based on specific entries in the notification.

Analysis:
The revisionist company challenged the Tribunal's order assessing electrical washing machines at 12% tax under Entry 3 (ii) of notification no.298 dated 29.1.2000, contending that the correct tax rate should be 8% as per the same notification. The crux of the issue revolved around whether electrical washing machines fall under the category of 'electrical goods' or 'electronic goods' as per the notification.

The counsel for the assessee argued that the specific entries in the notification distinguish between 'electronic goods' and 'electrical goods,' emphasizing that electrical washing machines should not be classified as 'electrical goods.' Reference was made to a Supreme Court decision highlighting the distinction between electrical and electronic appliances to support this argument.

The notification itself provided detailed descriptions of electrical and electronic goods, specifying the point of tax and the corresponding tax rates for each category. The learned standing counsel for the State contended that since 'washing machines' were specifically mentioned in Entry 3 (ii) as 'electrical goods,' they should be excluded from 'electronic goods.'

However, the Tribunal's order acknowledged that the product in question was a fully automatic electronic washing machine, indicating that it should not be classified solely as an 'electrical good' based on Entry 3 of the notification. The High Court referred to the Supreme Court's decision in B.P.L. vs. State of A.P., which distinguished between automatic electrical appliances and electronic goods, granting tax benefits to electronic goods, including electronic washing machines.

Additionally, the Bombay High Court's ruling in Commissioner of Sales Tax, Mumbai vs. M.I.R.C. Electronic Ltd. supported the classification of electronic washing machines as electronic appliances, emphasizing the difference between 'electric' and 'electronic' devices based on their components and functionality.

After considering the arguments and precedents, the High Court concluded that the fully automatic washing machines manufactured by the assessee should be taxed at the rate applicable to electronic equipment, i.e., 8%, overturning the Tribunal's decision to tax them at 12%. The writ petition was allowed, with no costs awarded.

In essence, the judgment clarified the classification of electrical washing machines under the U.P. Trade Tax Act, emphasizing the distinction between 'electrical' and 'electronic' goods based on specific entries in the notification and relevant legal precedents.