2015 (3) TMI 697 - HC - VAT and Sales Tax

Classification - Cord wire - Electronic good or Electrical good - Held that - In the case on hand, during the relevant assessment year 1991-92, the cord wire was not included in the entires and there was uncertainty as to whether it is electrical or electronic device. It is beyond any cavil that for the earlier assessment years and all subsequent assessment years, the department has assessed cord wires as electronic goods. That being the position, the onus lies on the department to prove that cord wires are not electronic goods. The department has not produced any material evidence to show that cord wires are electrical goods. The said view is fortified by a decision of the Supreme Court in Ponds India Ltd. 2008 (5) TMI 46 - SUPREME COURT , wherein it has been emphatically held that if an entry had been interpreted consistently in a particular manner for several assessment years, ordinarily it would not be permissible for the Revenue to depart therefrom, unless there is any material change; and that the burden of proof is on the taxing authorities to show that the item in question is taxable in the manner claimed by them. Further, the cord wire, which connects the main switch with the instrument, is transmitting electricity from the main switch to the instrument. Of course, the cord wire functions based on the electrical energy it receives from the main switch and transmits to the instrument. These cord wires are manufactured for a special and limited purpose for transmitting electricity to tape recorder. In other words, they are specially designed for a specific purpose, namely, to supply external power to the tape recorder. They cannot be regarded as electrical goods in common parlance. This aspect has been overlooked by the Tribunal. In such view of the matter, we have no hesitation to hold that the cord wire connecting the main switch with the instrument would not fall under the category of electrical goods and should be treated as electronic goods . - Decided in favour of appellant.

Summary

Issues:
1. Classification of cord wire as electronic goods or electrical goods.

Analysis:
The case involved a revision filed under Section 37 of the Tamil Nadu General Sales Tax Act, 1959, challenging an order of the Joint Commissioner regarding the classification of the main cord connecting the table cord and the main switch as either electronic goods or electrical goods. The appellant, a dealer assessed for the assessment year 1991-1992, initially faced a 3% tax rate on the main cord, which was later revised to 10% by the Assessing Officer. The Appellate Assistant Commissioner ruled in favor of the appellant, considering the cord as an electronic good. However, the respondent set aside this decision, leading to the current revision.

The core issue was to determine whether the cord wire connecting the plug point and the instrument should be classified as electronic goods or electrical goods. The court referred to previous judgments to establish the criteria for such classification. Citing Deputy Commissioner of Commercial Taxes v. Ravi Auto Stores, it was highlighted that an item must be intrinsically electrical and require electrical energy for its use to be classified as electrical goods. The court also referred to J.B. Advani-Oerlikon Electrodes v. Commissioner of Sales Tax, M.P., emphasizing that an article must both require electrical energy for use and inherently fit the description of electrical goods to be classified as such.

Further, the Supreme Court's decision in Commissioner of Trade Tax v. Parikh Gramodyog Sansthan was referenced to define electronic goods as items operating on electronic principles and components, parts, and materials related to electronic systems. The court also emphasized that an electrical device can be electronic, but not vice versa. Additionally, the court relied on Ramavatar Budhaiprasad v. Assistant Sales Tax Officer to interpret words in their popular sense, as understood in common language.

The court noted that the department had consistently assessed cord wires as electronic goods in previous and subsequent assessment years. Since the department failed to provide evidence that cord wires were electrical goods, the burden of proof lay with the taxing authorities. The court concluded that the cord wire, designed for a specific purpose of transmitting electricity to a tape recorder, should be classified as electronic goods, not electrical goods. This decision was supported by a previous judgment of the Andhra Pradesh High Court regarding cable connectors.

In conclusion, the court allowed the revision, setting aside the respondent's order and ruling in favor of the petitioner, classifying the cord wire as electronic goods. No costs were awarded in this judgment.