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2009 DIGILAW 396 (PNJ)

KHAITAN ELECTRICALS LTD. v. STATE OF HARYANA.

2009-02-25

H.S.BHALLA, M.M.KUMAR

body2009
JUDGMENT M.M. KUMAR - The instant reference under section 42 of the Haryana General Sales Tax Act, 1973 (for brevity, "the Act") has arisen out of common order dated July 14, 1994 (annexure "F") passed by the Sales Tax Tribunal, Haryana (for brevity, "the Tribunal") in S.T.A. Nos. 750 to 752 of 1993-94, in respect of assessment years 1989-90 to 1991-92. The Tribunal while accepting the application filed by the dealer, M/s. Khaitan Electricals Ltd., Faridabad, has referred the following questions of law for opinion of this court, vide order dated March 20, 1995 : "(i) Whether the cooler pump, a component of an air-cooler can be termed as an electrical appliance and attract tax at the first stage of sale under section 18 read with entry 16 ? (ii) Whether the cooler pump is mono-block pump and is excluded from the levy of tax at the first stage of sale under entry 16 ? (iii) Whether interest under section 25(5) is justified even when the honourable Supreme Court in a judgment dated May 13, 1994 in the case of Frick India Limited v. State of Haryana read with judgment reported as [1994] 95 STC 188 has held that in these circumstances the interest under section 25(5) is not leviable ?" Brief facts of the case necessary for disposal of the controversy are that the dealer is engaged in manufacturing of cooler pumps as per ISI specifications in its factory at Faridabad (Haryana). During the assessment years 1989-90, 1990-91 and 1991-92, the dealer manufactured cooler pumps, which are fitted in the air-coolers/desert coolers to spread water on the cooling floor in the steel frame on all the four sides of the air-coolers/desert coolers. The water lifting power of the cooler pump is only four to six feet, which is equivalent to the height of the air-cooler/desert cooler. It requires cooling atmosphere around it which is available only in the air-cooler/desert cooler to work properly for the longer period. Even the ISI specification of the cooler pump is "pump for use in the desert cooler", which has been brought on record as annexure "A". The diagrams of cooler-pump and of air-cooler are attached as annexures "B" and "C". The petitioner - company sold cooler pumps in Haryana to registered dealers against declaration forms ST 15 and did not charge any tax from its customers. The diagrams of cooler-pump and of air-cooler are attached as annexures "B" and "C". The petitioner - company sold cooler pumps in Haryana to registered dealers against declaration forms ST 15 and did not charge any tax from its customers. During these assessment years, the petitioner - company claimed the sales to registered dealers in its returns filed before the assessing authority. The assessing authority while framing the assessment under the Act did not allow the claim of sale made to certain registered dealers and held that the cooler pumps were taxable at the first stage of sale under section 18 of the Act as it is an item covered under entry 16 of the notification dated March 18, 1988 read with notification dated December 30, 1987. The assessing authority further held that the petitioner - company being first dealer in Haryana was liable to pay tax on the sale of cooler pumps and charged tax. The assessing authority also saddled the petitioner - company with interest under section 25(5) of the Act on the ground that it did not pay tax along with returns on the sale of such cooler pumps. Copies of the assessment orders for all the three years dated October 30, 1992, March 10, 1993 and September 30, 1993 have been placed on record as annexures D/1 to D/3, respectively. The first appellate authority confirmed the view taken by the assessing authority in its orders dated November 19, 1993 and January 14, 1994 (annexures E/1 to E/3). The second appeals preferred by the petitioner - company dealer were also dismissed by the Tribunal vide its common order dated July 14, 1994 (annexure "F") upholding the orders of the lower authorities. Dissatisfied with the view taken by the revenue authorities as well as the Tribunal, the dealer filed an application under section 42 of the Act seeking reference of the aforementioned questions of law for adjudication of this court. Mr. Sanjay Bansal, learned senior counsel for the dealer, has submitted that the pivotal question before this court is as to whether the cooler pump which is a component of an air-cooler/desert cooler could be termed as an electrical appliance attracting tax at the first stage of sale under section 18 of the Act read with entry 16 as per the view taken by the Tribunal and other revenue authorities. According to the learned counsel such a view is not sustainable because the cooler pump is only a component of air-cooler/desert cooler although an air-cooler/desert cooler is an electrical appliance and cooler pump is only a part thereof and, therefore, it cannot be held to be an electric appliance covered under entry 16 of the notification dated March 18, 1988. In that regard, he has placed reliance on a Division Bench judgment of this court rendered in the case of State of Haryana v. Rajindra Electric Store [1996] 102 STC 394 (P&H) he has further substantiated his argument by submitting that an appliance is distinct from the material from which it is made. According to the learned counsel, appliance is a complete apparatus, device or an instrument and is distinct from the materials of which it is made. The cooler pump is merely a part of the air-cooler/desert cooler as is clear from the ISI specification (annexure "A") whereby it establishes that it is specified for "pumpset for desert coolers" and it falls within the scope of the item specified as "pumpset for use in desert coolers". Therefore, he has claimed that it is not an electric appliance covered by entry 16 of the notification dated March 18, 1988. Mr. Bansal, learned counsel has further argued that when notification dated March 18, 1988 is compared with the earlier notification dated December 30, 1987 it emerges clearly that the Legislature intended to exclude the parts and accessories of the electrical appliances. Indeed, the cooler pump, which is a part of desert cooler and is not an electrical appliance, inasmuch as, in the earlier notification it is specifically mentioned that electrical appliance would include their parts whereas in the contradistinction to the later notification the expression "their parts" does not find mention. He has submitted that on proper interpretation it deserves to be held that electrical appliance like desert cooler does not include cooler pump. He has also submitted that cooler pump on its own does not have any utility and it acquires its utility and starts functioning along with all other items attached with the air-cooler/desert cooler. Thus, he claims that air-cooler/desert cooler is an electric appliance but cooler pump is not an electric appliance. Ms. He has also submitted that cooler pump on its own does not have any utility and it acquires its utility and starts functioning along with all other items attached with the air-cooler/desert cooler. Thus, he claims that air-cooler/desert cooler is an electric appliance but cooler pump is not an electric appliance. Ms. Ritu Bahri, learned Deputy Advocate - General, Haryana, has opposed the submissions made by the learned counsel for the dealer and has argued that cooler pump is an independent item and it is not possible to conclude that it cannot be used anywhere else except the air-cooler/desert cooler. She has further submitted that the levy would not be attracted by mere use or non-use of the cooler pump because cooler pump is not required to be used for spreading water on all the four walls of the air-cooler/desert cooler during sultry and humid season in summer. She has, thus, maintained that the orders passed by the revenue authorities as well as that of the Tribunal deserve to be upheld. After hearing learned counsel for the parties and perusing the paper book with their able assistance we find that it would be necessary to read entry 16 as it stood on December 30, 1987 and March 18, 1988 in juxtaposition, which reads thus : --------------------------------------------------------------------------------- Notification dated December 30, 1987 Notification dated March 18, 1988 --------------------------------------------------------------------------------- "16. Electrical appliances including "16. Electrical appliances excluding fluorescent tubes, their parts and electric motor, motor starters and accessories but excluding electric mono-block pumping sets but bulbs (incandescent lamp), electric including fluorescent tubes, bulbs motors, motor starters and mono-block of all types and kinds." pumping sets;" --------------------------------------------------------------------------------- A perusal of entry 16 of the notification dated December 30, 1987 shows that electrical appliances include fluorescent tubes, their parts and accessories. However, in the notification issued on March 18, 1988, entry 16 describes the electrical appliances excluding electric motor, motor starters and mono-block pumping sets but including fluorescent tubes, bulbs of all types and kinds. The omission of the words "their parts" in the later notification would indicate the intention of the Legislature that "electrical appliances" alone would attract the levy of tax and not "their parts". It is, therefore, necessary to find out whether the cooler pumps could be regarded as an "electrical appliance" within the meaning of notification dated March 18, 1988. The omission of the words "their parts" in the later notification would indicate the intention of the Legislature that "electrical appliances" alone would attract the levy of tax and not "their parts". It is, therefore, necessary to find out whether the cooler pumps could be regarded as an "electrical appliance" within the meaning of notification dated March 18, 1988. In that regard, the argument of learned counsel for the dealer deserves to be accepted because the cooler pump alone would not be an item of any utility but it would become functional when it is fitted in an air-cooler/desert cooler. We do not feel persuaded to accept the argument of the learned counsel for the Revenue that the cooler pump sometimes also not used in the air-cooler/desert cooler when humidity is high because non-use of cooler pump for a limited period would be inconsequential. Moreover, the ISI specification (annexure "A") itself shows that it is a pumpset for desert coolers. We are further of the view that the Division Bench of this court in the case of Rajindra Electric Store [1996] 102 STC 394 has already opined that the fluorescent tubes, starters, chokes and other items would not be electrical appliances within the meaning of entry 18 of Schedule A of the Act and, therefore, would not attract the levy of tax. The Division Bench of this court has also followed the judgment of the Gujarat High Court rendered in the case of Star Radio Electric Co. v. Commissioner of Sales Tax [1971] 27 STC 367, and also on various definitions of expression "electrical appliances" and "appliances". The view of the Division Bench is discernible from the following para, which reads thus : "Chokes, phatties and starters do not serve any purpose by themselves and are meant to an end and not the end itself. These items do not by themselves produce light whereas fluorescent tubes with the help of these items can produce light. Fluorescent tube, therefore, would be electrical appliance when sold along with these component parts. Chokes, phatties and starters are the accessories/component parts of electrical appliances. Electrical appliances are chargeable to tax at the rate of 10 per cent under entry 18 of Schedule 'A' of the Act and not the component parts/accessories to the electrical appliance. Fluorescent tube, therefore, would be electrical appliance when sold along with these component parts. Chokes, phatties and starters are the accessories/component parts of electrical appliances. Electrical appliances are chargeable to tax at the rate of 10 per cent under entry 18 of Schedule 'A' of the Act and not the component parts/accessories to the electrical appliance. If the component parts/accessories are sold as a composite part of the electrical appliance then it can be termed as an electrical appliance and chargeable to tax as a whole but if the component parts/accessories are sold separately, they cannot be termed as electrical appliances so as to fall within entry 18 to Schedule 'A' of the Act. Wherever the Legislature intended to charge component parts under Schedule 'A' it specifically mentioned the same against the relevant entry. For example, entry 3 of Schedule 'A' reads 'refrigerators and air-conditioning plants and component parts thereof'. Against entry 18 of Schedule 'A' it has not been mentioned that component parts of an electrical appliance are included in Schedule 'A'." When the facts of the present case are examined in the light of the principle laid down in Rajindra Electric Store's case [1996] 102 STC 394 (P&H) no doubt is left that a cooler pump in itself cannot be of any use and it is incapable of cooling the air in the absence of air-cooler/desert cooler fitted with various other items. If the cooler pump independent of any other item is capable of rendering service to the buyer then it might be regarded as an electrical appliance which indeed is not the situation. Therefore, we are of the view that the first question of law deserves to be answered in favour of the dealer and against the Revenue. As far as second question is concerned, it is also bound to be answered in favour of the dealer and against the Revenue because mono-block pumps are entirely different as has been conceded by the learned counsel for the parties. The third question regarding payment of interest would not arise once the first question has been answered in favour of the dealer because if the dealer is not liable to pay any tax at the first stage of sale under section 18 of the Act read with entry 16 then the question of payment of interest under section 25(5) of the Act would not arise. As a sequel to the above discussion, the reference is answered accordingly.