2010 (8) TMI 31 - SC - Central Excise

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 Schedule to U.P. Trade Tax Act, 1948 or as electronic goods under Entry No. 74(f) of the Notification No.1223 dated 31st March, 1992? Revenue s submission that goods work on principles of application of electric energy and also facilitate distribution and U.P. Trade Tax Act, 1948 as electrical energy, hence covered under Entry 16 of Schedule to U.P. Trade Tax Act, 1948 as electrical goods. Tribunal held that, the purpose for which it is used and the principles on which it works has come to the conclusion that the voltage stabilizer is electronic goods, for the purpose of taxation under U.P. Trade Tax Act. Held that- use of electricity by some components cannot be reason to classify goods as electrical. Electrical device can be electronic device but electronic device cannot be an electrical device. Thus the Tribunal order uphold.

Summary

Issues Involved:
1. Classification of voltage stabilizers as electrical or electronic goods under the U.P. Trade Tax Act, 1948.
2. Determination of the applicable tax rate for voltage stabilizers for the assessment years 1994-95 and 1995-96.

Issue-wise Detailed Analysis:

1. Classification of Voltage Stabilizers:
The primary issue was whether voltage stabilizers should be taxed as "electrical goods" under Entry No. 16 or as "electronic goods" under Entry No. 74(f) of the Notification No. 1223 dated 31st March, 1992, under the U.P. Trade Tax Act, 1948.

- Revenue's Argument: The revenue contended that voltage stabilizers are "electrical goods" because they operate on the principles of electric energy and facilitate the distribution and transmission of electrical energy. They argued that for goods to be classified as electronic, their functioning must be controlled by micro-processing chips, which is not the case for voltage stabilizers.

- Assessee's Argument: The assessee maintained that voltage stabilizers are "electronic goods" because they are made of electronic components, including microchips. They cited a certificate from the Principal Director of Electronic Service and Training Center, Ram Nagar, Nainital, and references from the textbook "Basic Electronic Engineering" by M.L. Anumani, which categorize voltage stabilizers as electronic goods.

- Tribunal's Decision: The Trade Tax Tribunal, Moradabad, held that voltage stabilizers are electronic goods, noting that electrical goods involve the consumption of electricity, while electronic devices function through the creation of an electron vacuum in semiconductor material. The Tribunal also referred to various government notifications and circulars categorizing voltage stabilizers as electronic goods.

- High Court's Decision: The High Court agreed with the Tribunal's reasoning, stating that the order of the Commissioner of Commercial Taxes, which classified voltage stabilizers as electrical goods, did not provide sufficient reasoning. Hence, the High Court dismissed the revenue's revision petition.

- Supreme Court's Decision: The Supreme Court upheld the Tribunal's and High Court's decisions, agreeing that voltage stabilizers involve the operation of electronic components and are used for regulating electrical energy for various appliances. The Court emphasized that while an electrical device can be an electronic device, an electronic device cannot be an electrical device. Therefore, voltage stabilizers should be classified as electronic goods under Entry 74(f).

2. Applicable Tax Rate:
The tax rate applicable to voltage stabilizers for the assessment years 1994-95 and 1995-96 was another point of contention.

- Revenue's Stand: The revenue assessed taxes on voltage stabilizers at the rate applicable to electrical goods, resulting in higher tax demands for the assessment years 1994-95 and 1995-96.

- Assessee's Stand: The assessee argued that the tax rate for voltage stabilizers should be 4%, as applicable to electronic goods under Entry 74(f) of the Notification No. 1223 and the amended Entry 74(a)(iii) of the subsequent Notification.

- Supreme Court's Conclusion: The Supreme Court concluded that since voltage stabilizers are classified as electronic goods, the tax rate applicable is 4% for the relevant assessment years, as specified under Entry 74(f) and the subsequent Notification.

Conclusion:
The Supreme Court dismissed the appeals filed by the revenue, affirming the decisions of the Trade Tax Tribunal and the High Court. The Court held that voltage stabilizers are electronic goods and should be taxed at the rate of 4% for the assessment years 1994-95 and 1995-96. The Court found no infirmity in the impugned judgment and ruled in favor of the assessee. There was no order as to costs.