2020 (3) TMI 145 - HC - VAT and Sales Tax

Classification of goods - galvanized poles - whether the galvanized poles would fall into the category of transmission line material and would be liable to be taxed at the rate of 4%, rather than unclassified items? - HELD THAT - The Galvanized Poles used for light is a specific product which is used only for the purposes of street lightening, while the entry under which tax liability is sought which is at Serial No. 236 pertains to overhead transmission lines material. The over head transmission lines material has further been described in Section 2 (aaa), where transmission line has been defined which includes transmitting electricity from a generating station to another generating station or a sub-station etc. clearly the said definition would not include galvanized poles which is used for lighting. Undoubtedly the Feeder Pillar is used for transmission of electricity while galvanized poles used for lighting are not used for transmission of electricity. The findings recorded by the Tribunal are clearly flawed and therefore the order of the Commercial Tax Tribunal dated 01.June.1999 deserves to be set-aside and the galvanized poles used for lighting are liable to be taxed, as unclassified items - revision allowed.

Summary

Issues:
1. Classification of galvanized poles for tax purposes under the Value Added Tax Act, 2008.
2. Interpretation of the category of electricity transmission material for taxation.
3. Application of definitions of transmission lines in determining tax liability.

Analysis:
1. The appeal challenged the Commercial Tax Tribunal's decision to classify galvanized poles as "transmission line material" for taxation at 4% rather than as unclassified items at 12.5%. The key issue was whether galvanized poles used for lighting could be considered under the category of electricity transmission material.

2. The Tribunal's decision was based on the interpretation that galvanized poles manufactured by the assessee were used for transmission of electricity, falling under the category of "Feeder Pillar" and thus attracting a tax liability at 4%. The Tribunal considered all electrical goods used for transmission of electricity as covered under Schedule 2 Part C, Serial No. 236, including galvanized poles used for lighting.

3. The Revenue argued that galvanized poles used for lighting were distinct from overhead transmission line material described in Serial No. 236, citing the definition of transmission lines from the Electricity Supply Code 2005. They emphasized that transmission lines were specifically for transmitting electricity between generating stations, which did not apply to galvanized poles used for lighting.

4. The High Court judge, after reviewing the arguments and records, concluded that galvanized poles used for lighting were a separate product from overhead transmission line material. The judge emphasized that the definition of transmission lines did not encompass galvanized poles used for lighting, which were specifically for street lighting purposes.

5. The judge found the Tribunal's reasoning flawed in equating galvanized poles with Feeder Pillars for tax purposes, as Feeder Pillars were indeed used for transmission of electricity, unlike galvanized poles used for lighting. Therefore, the judge ruled in favor of the Revenue, setting aside the Tribunal's decision and determining that galvanized poles used for lighting should be taxed as unclassified items at 12.5%.

6. In conclusion, the High Court allowed the revision in favor of the Revenue, highlighting the distinction between galvanized poles used for lighting and overhead transmission line material for tax classification under the Value Added Tax Act, 2008.