2018 (3) TMI 815 - HC - VAT and Sales Tax

Rate of tax - Un-interrupted Power Supply Systems (UPS) - Validity of clarification issued by the first respondent, dated 13.01.2006, in Clarification No.11/2006 - first respondent stated that the UPS with built in battery, or attached to batteries is also known as Inverter and taxable at 16% under Entry No.5(i) of Part-E of the First Schedule to the TNGST Act, and if imported, it is taxable at 20% under Entry No.9 of 11th Schedule. Held that - the observation made in the impugned clarification that UPS is also known as Inverter is not substantiated by any material, and appears to be a personal opinion of the Authority. That apart, the clarification states that the UPS should be treated as Inverter, and taxable at 16% under Entry No.5(i) of Part E of the First Schedule - This entry cannot made applicable, since it deals with Generators, Generating Sets, Transformers and Non-Electronic Voltage Stabilizers. Therefore, the impugned clarification is wholly flawed. Though the articles are not authenticated, it gives a broad distinction between a UPS and Inverter. The subtle but relevant distinction, which has been shown is that UPS is used in the Desktop Computers, and provides power in the case of power-cut, and the Computer does not shut down, whereas, the Inverter is only a power back up solution, it converts Direct Current into battery current electricity, and mainly used to supply back up power for homes and offices, and cannot be used for a Computer system. That apart, there is a gross difference in back up time for both UPS and Inverter, apart from the circuitry difference. The impugned clarification is incorrect and cannot be made applicable to the petitioner - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to clarification issued by the first respondent regarding the tax rate for Un-interrupted Power Supply Systems (UPS) under the Tamil Nadu General Sales Tax Act, 1959.

Analysis:
The petitioner, a registered dealer under the TNGST Act, filed a Writ Petition seeking to quash a clarification issued by the first respondent regarding the tax rate for UPS. The clarification stated that UPS with built-in battery or attached to batteries is taxable at 16%. The petitioner argued that the clarification was contrary to earlier notifications by the government, which classified UPS as a separate product taxable at 4%. The petitioner also provided material showing the distinction between UPS and Inverter, highlighting their different functionalities and applications.

The court noted that no action was taken by the Assessing Officer based on the impugned clarification for the relevant assessment years, and the TNGST Act had been replaced by the Tamil Nadu Goods and Service Tax Act, 2017. The court found that the impugned clarification had become irrelevant and infructuous due to these reasons. Additionally, the court pointed out discrepancies in the clarification, such as the incorrect classification of UPS as an Inverter and the misapplication of the tax rate entry. The court concluded that the impugned clarification was flawed and not substantiated by any material evidence.

Based on the arguments presented and the evidence provided by the petitioner, the court allowed the Writ Petition, setting aside the impugned order. The court found in favor of the petitioner, emphasizing the incorrectness of the clarification and confirming that it should not be applied to the petitioner. The judgment concluded without imposing any costs on either party, and the connected miscellaneous petition was closed.