2013 (4) TMI 530 - HC - VAT and Sales Tax

Determination of tax liability - power supply devices - trade tax paid by the petitioner on the sale of Inverters, UPSSs and batteries at the rate of 4%. For the Assessment Year 2003-04, the A.O assessed the tax liability on these goods at the rate of 10%. Commissioner of Trade Tax U.P. has issued a Circular dated 02.09.2000 in which it has been held that Inverters, and UPSSs work as power supply devices and trade tax at the rate of 4% was payable on it. Held that - The Circular of the Commissioner Trade Tax dated 02.09.2000 has been superseded by the Circular dated 03.09.2003. A bare perusal of the Circular dated 03.09.2003 does not show that the Commissioner Trade Tax U.P. has considered the various factors before deciding that Inverter and UPSS are electrical goods. Following the judgement of Apex Court in State of Goa and others Vs. Leukoplast (India) Ltd., 1997 (2) TMI 124 (SC) the matter is remanded back to the A.O. Writ petition is disposed off.

Summary

Issues:
1. Quashing of assessment order for Assessment Year 2004-05 under U.P. Trade Tax Act, 1948.
2. Classification of Inverter, UPSS, and batteries as electrical goods or electronic components.
3. Applicability of trade tax rates on Inverters and UPSS.

Analysis:
1. The writ petition sought to quash the assessment order for the Assessment Year 2004-05, challenging the classification of Inverter and UPSS as electrical implements subject to 10% trade tax, while the petitioner paid tax at 4%. The petitioner contended that previous appellate orders and judgments established Inverters and UPSSs as 'power supply devices' attracting 4% tax, contrary to the impugned order. The respondents argued that Inverters and UPSs are electrical goods, supported by a Circular specifying 10% tax rate. The Court examined the history of tax assessments and settled controversies, emphasizing the need for a detailed inquiry to determine the classification.

2. The Court analyzed the relevant entries under U.P. Trade Tax Act, highlighting Entry 3 for electrical goods taxed at 10% and Entry 75 (ii) for electronic components taxed at 4%. It deliberated on the functionality of Inverters and UPSSs as power supply devices operated by electrical energy, emphasizing the need for a fact-finding authority to ascertain the proper classification based on common parlance and manufacturing components. The Court noted the complexity of the issue requiring detailed investigation beyond the scope of summary proceedings.

3. Referring to Circulars issued by the Commissioner of Trade Tax, the Court emphasized the need for a comprehensive assessment considering various factors to determine whether Inverters and UPSSs should be classified as electronic components or electrical implements. Citing precedents, the Court directed the matter to be remanded to the Assessing Officer for a fresh decision on the classification of Inverters and UPSSs, while confirming the assessment for other goods. The petitioner was instructed not to raise objections regarding limitation during the reassessment process.

This detailed analysis of the judgment highlights the complexities involved in determining the classification of goods for tax purposes under the U.P. Trade Tax Act, emphasizing the importance of thorough investigations and adherence to legal procedures in resolving such disputes.