1987 (11) TMI 94 - SC - VAT and Sales Tax

TURNOVER EXEMPTIONS SALE OF CEMENT TO LICENSED ELECTRICITY UNDERTAKING FOR USE IN GENERATION OR DISTRIBUTION OF ELECTRICITY - CERTIFICATES ISSUED THAT CEMENT WAS REQUIRED FOR USE IN GENERATION OR DISTRIBUTION OF ELECTRICITY

Summary

Issues:
Interpretation of Section 5(2)(a)(iv) of the Punjab General Sales Tax Act for exemption on sales of cement to Punjab State Electricity Board based on certificates issued by the Board.

Detailed Analysis:

1. Background: The case involved appeals against a decision of the High Court of Punjab & Haryana regarding the exemption granted under Section 5(2)(a)(iv) of the Act for sales of cement to the Punjab State Electricity Board based on certificates issued by the Board.

2. Exemption Claim: The respondent-assessee supplied cement to the Board based on certificates stating the cement was for use in the generation or distribution of electrical energy. Initially, the sales were exempted under Section 5(2)(a)(iv) of the Act.

3. Reopening of Assessment: Subsequently, the assessment was reopened, and additional demands were made by the Deputy Excise and Taxation Commissioner, contending that the exemption was not applicable as the cement was not used directly in activities related to electrical energy generation or distribution.

4. Tribunal and High Court: The assessee challenged the additional demands before the Sales Tax Tribunal, which upheld the demands. A reference was made to the High Court, which concluded that the assessee did not need to prove the actual use of cement in electrical energy activities to claim the exemption.

5. Interpretation of Exemption Clause: The appellant argued that the exemption required proof of actual use of the cement in electrical energy activities. However, the Court held that the phrase "for use" in the exemption clause meant "intended for use," not necessarily actual use.

6. Precedent and Interpretation: Reference was made to a previous decision by the Madhya Pradesh High Court, but the Court distinguished it, emphasizing the intention behind the use of goods for exemption eligibility.

7. Intent vs. Actual Use: The Court clarified that the crucial factor was whether the cement was intended for direct use in electrical energy activities, as evidenced by the certificates issued by the Board, regardless of some cement being used for other purposes.

8. Conclusive Certificates: The Court noted that the certificates issued by the Board were crucial in determining the exemption eligibility, emphasizing their importance in establishing the intent behind the sale of goods.

9. Conclusion: Ultimately, the Court dismissed the appeals, upholding the decision that the exemption applied based on the intended use of the cement for electrical energy activities, as indicated by the certificates issued by the Board.