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K.G. Products Salem v/s The Joint Commissioner (CT) (SMR) Office of the Special Commissioner & Commissioner of Commercial Taxes Chennai

Company & Directors' Information:- KG CORPORATION LIMITED [Active] CIN = U40100DN2005PLC000185

Company & Directors' Information:- SMR INDIA PRIVATE LIMITED [Active] CIN = U17290DL2012PTC237165

Company & Directors' Information:- COMMERCIAL PRODUCTS LTD. [Strike Off] CIN = U24232WB1941PLC010698

    T.C. (R) No. 1918 of 2006

    Decided On, 10 December 2014

    At, High Court of Judicature at Madras


    For the Petitioner: Lakshmi Sriram, Advocate. For the Respondent: A.R. Jayaprathap, Special Govt. Pleader.

Judgment Text

(Prayer: Revision under Section 37 of the Tamil Nadu General Sales Tax Act, 1959 against the order of the Joint Commissioner dated 31.3.1999 passed in Ref.No.MM1/11633/94 (SMR No.615/96).)

R. Sudhakar, J.

1. This revision is filed under Section 37 of the Tamil Nadu General Sales Tax Act, 1959 against the order of the Joint Commissioner dated 31.3.1999 passed in Ref.No.MM1/11633/94 (SMR No.615/96) and the same was admitted on the following question of law:

'Whether, on the facts and in the circumstances of the case, the main cord connecting the table cord and the main switch is an electronic good or electrical good?'

2.1. The facts in a nutshell are as under: The appellant is a dealer and an assessee on the file of the Commercial Tax Officer, Salem. The assessee was originally assessed on the total and taxable turnover of Rs.2,54,371/- for the assessment year 1991-1992 under the Tamil Nadu General Sales Tax Act, 1959. In the said assessment, the main cord connecting the table cord and the main switch was assessed as electronic goods taxable at the rate of 3%.

2.2. Pursuant to the same, the Assessing Officer revised the said assessment treating the item in question as electrical goods and applied higher rate of tax at 10% in lieu of the original assessment at 3%.

2.3. Aggrieved by the said order, the assessee appealed to the Appellate Assistant Commissioner (CT), Salem. The First Appellate Authority, by order dated 21.10.1993, while observing that the tape recorder cord manufactured by the appellant was an exclusive one for the use in the operation of the tape recorder alone, held that the same should be assessed to tax at the rate of 3% as applicable to electronic goods. To arrive at such finding, the first appellate authority relied on an earlier order passed by the Appellate Assistant Commissioner in the assessee's own case in A.P.No.329/1990, dated 22.11.1990.

2.4. Thereafter, the respondent herein exercising the power of suo motu revision set aside the order passed by the first appellate authority and held that the main cord connecting the switch and the instrument cannot be described as electronic goods. In effect, the goods in dispute were assessed at 10% as applicable to electrical goods.

2.5. Assailing the said order, the present revision is filed on the substantial question of law referred supra.

3. Heard Mrs.Lakshmi Sriram, learned counsel for the petitioner and Mr.A.R.Jayaprathap, learned Special Government Pleader appearing for the respondent and perused the orders passed by the respondent herein and the authorities below.

4. In the case on hand, the goods involved are cord wires connecting the plug point and the instrument. The core issue to be decided is whether the cord wire should be assessed as 'electronic goods' or 'electrical goods'.

5. To determine the category under which an article falls, namely, whether it is an electronic or electrical device, the tests to be satisfied have been set out by this Court in Deputy Commissioner of Commercial Taxes, Madurai Division v. Ravi Auto Stores [1968] 22 STC 172 (Mad.). In the said decision, this Court while considering whether welding electrodes are "electrical goods", formulated the tests as follows :

"Intrinsically, the goods in question must be electrical goods and, secondly, their use cannot be had without electrical energy. Merely because an article cannot be used without electricity, it may not be decisive. It is necessary that, apart from that fact, the article, by its very nature, answers the description of 'electrical goods'.'

(emphasis supplied)

As an illustration, it was observed in the said decision as under:

'For instance, the use of a motor-car cannot be had without batteries or a dynamo fitted to it. But on that account, can it be said that motor-car is "electrical goods"? The answer, it seems to us, should be in the negative. Likewise, in electroplating, solution of silver or gold particles is used through which electricity is passed in the process of electro-plating. In our view, because electro-plating by that process cannot be had without the use of electricity, it cannot be said that the silver or gold particles are electrical goods by themselves. In the same way, electrodes, though cannot be used without electrical energy in welding process, do not appear by themselves to be electrical goods.'

On the basis of these tests, it was held by this Court that welding electrodes were not "electrical goods".

6. Likewise, in J.B.Advani-Oerlikon Electrodes, Pvt. Ltd. v. Commissioner of Sales Tax, M.P. [1972] 30 STC 337, the Madhya Pradesh High Court while dealing with a similar issue held that in order to name an article as electrical goods, two things are necessary: (i) its use cannot be had without electrical energy; and (ii) by its very nature it should answer the description of electrical goods.

7. The Supreme Court in Commissioner of Trade Tax v. Parikh Gramodyog Sansthan, (2010) 34 VST 1 (SC), while dealing with the classification of voltage stabilizers, referred to the meaning of the expression 'electronic goods' and quoted as under:

'Electronic goods:

Shri M.P. Agarwal in his book Interpretation of Words, Phrases & Commodities under Sales Tax Laws has stated, 'the fact that the electronic goods cannot be used without the aid of electricity is not the only criterion to determine whether those goods can be treated as electrical goods. The really important criterion is whether those goods are regarded as electrical goods in common parlance. It might consist of electronic systems, instruments, appliances, apparatus, equipment operating on electronic principles and all types of electronic components, parts and materials.'

(emphasis supplied)

In the said decision, the Supreme Court also observed that:

'... an electrical device can be an electronic device, but an electronic device cannot be an electrical device.'

8. The Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola, AIR 1961 SC 1325, held that when a word is not defined in the Act, being a word of everyday use, it must be construed in its popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. In other words, it is to be construed as understood in common language.

9. 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. v. Commissioner of Trade Tax, (2008) 8 SCC 369, 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.

10. In the case on hand, 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.

11. The view taken by this Court treating the cord wire as an electronic device merely transmitting electrons from the main switch to the tape-recorder is fortified by a decision of a Division Bench of the Andhra Pradesh High Court in New Tech Services (P) Ltd. v. Commissioner of Commercial Taxes and another, (2003) 132 STC 587, wherein while considering the nature of 'Cable Connectors', it was held as under:

'8. ...... In view of the language used in clause (II) (2) of G.O.Ms.No.721, Revenue, dated 1.7.1985, we are of the view, the Commissioner of Commercial Taxes is not justified in denying the benefit available under G.O.Ms.No.721, to the appellant saying that the connectors are not liable to treated as electronic goods

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. Moreover, the material which is used to connect two cables is a conductor through which electrons are to be passed. It is not disputed that the conductor is not an electronic good. Even on this basis also the view taken by the Commissioner could be set at naught. That apart, since clause (II) (2) of G. O. Ms. No. 721 is an inclusive definition, which includes 12 items like consumer electronics etc., in our considered view, the order passed by the Commissioner exercising jurisdiction under Section 20 (1) of the Act is practically unsustainable.' (emphasis supplied) 12. 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'. For the foregoing reasons, we allow this revision and set aside the order passed by the respondent by answering the question of law in favour of the petitioner. No costs.