1976 (4) TMI 189 - SC - VAT and Sales Tax

Whether the appellant is exempt from inter-State tax on the sales of poles and cables to the Delhi Electric Supply Undertaking by reason of the provisions contained in section 5(2)(a)(iv) of the Punjab Sales Tax Act hereinafter referred to as the State Act? Held that - Appeal dismissed. The High Court was correct in holding that the sales to the undertaking supplying electrical energy were not exempt from tax generally within the meaning of section 8(2A) of the Central Act read with section 5(2)(a)(iv) of the State Act.

Summary

Issues:
Interpretation of exemption under section 5(2)(a)(iv) of the State Act for inter-State tax on sales of poles and cables to a specific undertaking supplying electrical energy.

Analysis:
The judgment revolves around the interpretation of the exemption provided under section 5(2)(a)(iv) of the State Act concerning the inter-State tax on sales of poles and cables to a particular undertaking supplying electrical energy. The appellant argued that the exemption is general, applying to all goods for use in the generation or distribution of electrical energy, thus exempting them from taxation and should not be included in the turnover. Conversely, the State contended that the exemption is in specified circumstances and under specified conditions, limited to sales to an undertaking supplying electrical energy under specific conditions for the generation or distribution of energy.

The appellant relied on legal precedents, such as the Madhya Pradesh High Court case and the Allahabad High Court case, to support the interpretation of "exempt from tax generally" and the application of exemptions under specified circumstances or conditions. The Madhya Pradesh case highlighted that exemptions granted without restrictions or limitations to a class of dealers are considered general exemptions, while the Allahabad case emphasized that goods exempt from tax generally are not liable for Central sales tax unless falling under specific categories.

The court analyzed the provisions of the State Act, particularly sections 5, 6, and 8(2A) of the Central Act, to determine the nature of the exemption. It clarified that the exemption under section 5(2)(a)(iv) of the State Act is subject to specified circumstances and conditions, requiring sales to specific undertakings for designated purposes, unlike a general exemption that applies universally to all goods. The court rejected the appellant's argument that the descriptive nature of goods exempts them from taxation, emphasizing that the exemption is contingent upon the intended use of the goods in energy generation or distribution.

Ultimately, the court upheld the High Court's decision that the sales to the electrical energy undertaking were not exempt from tax generally under the Central Act, as per the interpretation of section 5(2)(a)(iv) of the State Act. The appeal was dismissed, and each party was directed to bear their own costs, similar to the previous order by the High Court.

In conclusion, the judgment clarifies the distinction between general exemptions and those under specified circumstances or conditions, emphasizing the specific requirements for exemption under section 5(2)(a)(iv) of the State Act in the context of inter-State sales of goods for energy generation and distribution.