TMI Blog1979 (4) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Central Sales Tax Act. But the Sales Tax Officer objected to the purchase of tyres and tubes of motor vehicles, battery cells, varnish and paints, soaps, raincoats and iron safes against C forms by the Electricity Board and held that the aforesaid goods were not used for the generation and distribution of electricity and, as such, tax to the full extent payable under the Central Act should have been paid by the Electricity Board and as he was of the opinion that the Electricity Board misused the C forms in the purchase of the aforesaid articles, he held that the Electricity Board was liable to payment of penalty under section 10A of the Central Sales Tax Act. The Electricity Board preferred an appeal to the Deputy Commissioner, Excise and Taxation (Appeals), Ajmer and Kota Division, Jaipur, who was of the opinion that the import of soaps to the extent of half of the quantity may be considered as of utility in the maintenance, etc., of the machines and half may be considered as irregular import on C forms, while the purchase of varnish and paints was considered to be for the generation of electricity as the same were required for the cleaning and painting of the machines and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity Board felt that the Central registration certificate issued under the Central Sales Tax Act, 1956, was ambiguous and confusing and was not clear in respect of the goods which the Electricity Board could purchase against C forms. The Electricity Board, therefore, filed an application dated 3rd November, 1962, before the Sales Tax Officer, B Circle, Jaipur, for an amendment of the Central registration certificate by making the following additions: "Tools and plants including vehicles and other transportable goods including their spare parts, tubes and tyres, used/employed for the purpose of construction, operation and maintenance of the power system (generation, transmission and distribution)." The Sales Tax Officer rejected the application by his order dated 5th November, 1962. But, on appeal, the Deputy Commissioner, Excise and Taxation (Appeals), Ajmer and Kota Division, Jaipur, by his order dated 21st November, 1962, held that the goods desired to be purchased by the Board on concessional rates on C forms obviously helped the generation or distribution of electricity and he, therefore, allowed the appeal and accepted the application of the Electricity Board for amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , distributing and supplying of electricity. On the other hand, Mr. B.K. Pathak, appearing for the department, argued that the specified goods are not intended for use directly in the generation, distribution and transmission of electricity and, as such, they could not be exempted from payment of normal rate of sales tax nor the desired addition could be made in the Central registration certificate of the Electricity Board. In order to appreciate the real controversy between the parties, it is necessary briefly to consider the scheme of the Central Sales Tax Act, 1956 (hereinafter referred to as the "Central Act"), and the relevant provisions thereof. The Central Act provides for the levy, collection and distribution of tax on sale of goods in the course of inter-State trade or commerce and declares certain goods to be of special importance in inter-State trade or commerce and specifies the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subjected. Under clause (b) of section 2 of the Central Act, a "dealer" has been defined as a person who carries on the business of buying, selling, supplying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State from which the movement of the goods commenced and the authorities who would assess and collect the tax under the Act are the authorities under the sales tax law of that State. Section 13 confers power upon the Central Government to make rules on several matters including enumeration of goods or class of goods used in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power, as specified in clause (e) of sub-section (1) of section 13 of the Act. In exercise of the powers conferred by section 13(1)(e) of the Central Act, the Central Government has made rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957, which runs as under: "13. Prescription of goods for certain purposes.-The goods referred to in clause (b) of sub-section (3) of section 8 which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel, or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kly conceded that iron safes purchased by the Electricity Board could not be brought within the goods enumerated in the registration certificate. As regards soaps, varnishes and paints, it has been held by the learned Member of the Board of Revenue that the soaps used for cleaning boilers and other machinery and paints used for painting machinery and boilers can be said to be intended for use in relation to the generation and distribution of electricity. Similarly, for battery cells, it has been held by the learned Member of the Board of Revenue that so far as the purchase of battery cells is required for use by the linesmen to work at night on the transmission towers and to correct electrical faults, it could be justified as of goods or equipments or tools or accessories intended for use in the distribution of electricity, which is made through the transmission lines. But the learned Member of the Board of Revenue rejected the claim of the Electricity Board in respect of tyres and tubes and raincoats and held that they cannot be considered as directly intended for use in generation or distribution of electricity and, as such, their purchases on concessional rates of tax on C forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the ore for sale. It was held by their Lordships of the Supreme Court in the aforesaid case that: "Where a dealer is engaged both in mining operations and in the manufacturing process-the two processes being interdependent-it would be impossible to exclude vehicles which are used for removing from the place where the mining operations are concluded to the factory where the manufacturing process starts ..... The expression 'goods intended for use in the manufacturing or processing of goods for sale' may ordinarily include such vehicles as are intended to be used for removal of processed goods from the factory to the place of storage." Thus, it was held in the aforesaid case that locomotives and motor vehicles and also accessories with their spare parts and tyres and tubes were goods in respect of which the Indian Copper Corporation Ltd. could claim specification in the certificate of registration and which could be imported by the corporation at concessional rate of tax. But it was also observed by their Lordships in the aforesaid case that the expression "goods intended to be used" cannot be equated with "likely to facilitate" the conduct of the business of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the aforesaid case[1965] 16 S.T.C. 563 (S.C.)., to emphasise the point that the goods permissible under rule 13 read with section 8(3)(b) of the Act need not be directly or actually needed for the manufacturing or processing of goods and observed that vehicles used by the Indian Copper Corporation fell within rule 13, as such vehicles were used merely for removing ore from the mines to the factory and finished goods from the factory to the place of storage. Spare parts and accessories required for the effective operation of these vehicles were also held to be within rule 13. It was also held in the J.K. Cotton Spinning Weaving Mills' case[1965] 16 S.T.C. 563 (S.C.). that in a factory manufacturing cotton and other textiles, certain electrical equipments, in the present stage of development, would be commercially necessary. For instance, without electric lighting it would be very difficult to carry on the business. Again electrical humidifiers, exhaust fans and similar electrical equipments would, in the modern conditions of technological development, normally, be regarded as equipments necessary to effectually carry on the manufacturing process. Then, in Indra Singh S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1976] 37 S.T.C. 587., the assessees, Kolhapur Electric Supply Co., were registered dealers and were engaged in the generation and distribution of electricity. The question which was raised before their Lordships of the Bombay High Court, in the aforesaid case, was as to whether electric meters used by the company could be said to be used in the manufacture or processing of electrical energy for sale. It was held by their Lordships of the Bombay High Court that electrical energy is "goods for sale or supply" for payment and the equipments used for measuring electricity for the purpose of selling it to the consumers, must be regarded as having been used in the manufacture or processing of goods, namely, electrical energy. In Travancore Tea Estates Co. Ltd. v. State of Kerala[1977] 39 S.T.C. 1 (S.C.)., the assessee carried on the business of tea planting, owned tea estates and maintained separate tea factories in each of those estates for the manufacture of tea grown in those estates. It was held by their Lordships of the Supreme Court, after considering the two earlier decisions in the Indian Copper Corporation's case[1965] 16 S.T.C. 259 (S.C.). and the J.K. Cotton Spinning Weavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory where the manufacturing process starts and also the vehicles used for removing the processed goods from the factory to the place of storage. But in the Indra Singh's case[1966] 17 S.T.C. 510 (S.C.)., the assessee carried on only mining operations and, as such, it was held that motor vehicles, their accessories, spare parts, tyres and tubes could not be included in the registration certificate as the mining operations were concluded as soon as the coal was raised and stored in heaps or in warehouses and the said process did not include the carrying of coal from the godowns to the siding at the railway station. The Electricity Board, as mentioned earlier, carries on the business not only of manufacturing and generating electrical energy but it also discharges the function of supply, distribution and transmission of such electrical energy and it is common knowledge that electrical energy is transmitted along insulated copper wires and for the purpose of distribution and transmission and supply of electrical energy to the consumers, the Electricity Board has to construct and maintain transmission lines and equipments, and materials such as cables, pipes, poles, wires and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the Electricity Board is also entitled to get an insertion made in its registration certificate issued under the Central Act of "tools and plants including vehicles and other transportable goods including their spare parts, tubes and tyres ". So far as soaps, paints and varnishes are concerned, they have been permitted by the Board of Revenue only as may be intended to be used for the purpose of cleaning boilers and machinery and other equipments and for the purpose of painting machinery and electrical goods. Raincoats may also be permissible to be purchased at the concessional rate of tax, as may be necessary for the use of linesmen working on the transmission lines, during the rainy season and in the extreme winter. Similarly, the battery cells may also be permitted to be purchased by the Electricity Board on C forms, but only to the extent that they are necessary to be used by the linesmen to work on transmission lines during night. The Electricity Board may use C forms for the purposes of buying tyres, tubes, battery cells, raincoats and soaps to the limited extent indicated above. We also hold that the Electricity Board rightly used the C forms for the purchase of the ..... 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