TMI Blog2004 (8) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... are exempt under entry 57 of the Fifth Schedule to the Act. The assessing authority has concluded the best judgment assessment by giving deductions to the turnovers relating to wind mills (blades and generators); wind mills (parts i.e. baskets and studs, towers bolts and nuts and other accessories); transformers, boob transformers; sub-contract of labour (Drawing, survey, soil investigation and drainage); labour involved in sub-contract and has disallowed the exemptions claimed on a turnover of ₹ 2,13, 78,032/- out of total contract receipt of ₹ 19,67,50,000- on the ground that the foundation work, electrical work of ₹ 58,22,476/-, ₹ 37,11,024/- and ₹ 35,89,014/- relating to sale of wind mills are turnovers of work contract and therefore, the said turnovers cannot be exempted under entry 57 of Fifth Schedule to the Act and consequently, has levied a tax of ₹ 28,86,034.00 on a turnover of ₹ 2,13,78,032.00. 3. The petitioner company aggrieved by the quantification of liability for payment of tax under the Act by the assessing authority had filed the first appeal before the appellate authority interalia contending that the entire turnover i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l work, are eligible for exemption as they form part and parcel of the wind mills. Thirdly, it is contended that the definition of 'sale' given in the Act includes works contract under Section 5B of the Act and that therefore, works contract of wind mills is also eligible for exemption. 7. The Tribunal, while rejecting the claim of the petitioner on the turnovers relating to electrical works, transformers and foundation work in its order has observed that the work of the transformers is only to store and supply the energy received by it and since the usage of the transformers and the wind mills is different, the transformers do not form part of the wind mills. The Tribunals has adopted more or less the same reasoning for rejecting the claim for exemption relating to electrical work. In so far as the foundation work is concerned, the Tribunal in its order has observed: Similarly, the foundation work for installation of the wind mill cannot be held to a part of the wind mill even though foundation is necessarily required for installing the wind mill. The commissioning or the installation of the wind mill is not exempted as per entry 57 of the Fifth Schedule and what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition available in the market parlance, it is the scientific definition which requires to be adopted. 10. Section 8 of the Act envisages that tax is not payable under the Act on the sale of goods specified in the Fifth Schedule subject to the conditions and exceptions, if any, set out therein. Under Rule 6(4)(d) of the Rules, for the purpose of calculating the taxable turnover of a dealer, all amounts, for which the goods specified in the Fifth Schedule to the Act are sold, are to be deducted from the total turnover of the dealer. 11. The goods, which are exempt from payment of tax under Section 8 of the Act are mentioned in the Fifth Schedule of the Act. Alternatively, goods, which are mentioned under Fifth Schedule to the Act, are exempt from payment of tax under the Act. Entry 57 of the Fifth Schedule is relevant for the purpose of this case. The said entry reads as under: Entry 57: Wind Mills and any specially designed devices which run exclusively on wind power including electric generators and pumps running on wind energy. 12. What are exempted under Entry 57 of the Fifth Schedule to the Act, are firstly wind mills, and secondly specially designed devices wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sm) * Yaw system ( yaw motors, spur and pinion gears and wind sensors) * Tower ( tubular, latticed or concrete structures to support the rotor and nacelle assemblies) and internal accessories. * Foundation and its materials like steel reinforcements, cement, gravel, earthling materials, etc. * Grid synchronization assembly ( transformer unit for delivering the power to the grid net work). The wind mill drawing duly certified is attached herewith as an annexure a clear understanding of the parts of a wind mill. This is to facilitate the beneficiary to avail the entry and sales tax exemption benefits from the Government of Karnataka. I request you to kindly allow the sales and entry tax exemption to all the above items which are a standard part of 'wind mills'. 15. In the opinion of the expert body, 'wind mill' includes among others, the electrical work, transformer and foundation and they form as part and parcel of the wind mill. 16. M/s. Jindal Aluminium Limited, a company registered under the provisions of the Companies Act, has entered into contract with the petitioner company on 12th July 1997 for supply and installation of wind energy converters and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consideration received by the petitioner company was for supply, erection and commissioning of the 'wind mill'. 18. Section 8 of the Karnataka Sales Tax Act deals with exemption of tax under the Act and provides that no tax shall be payable under the said Act on the sale of goods specified in the Fifth Schedule to the Act. In A.V. FERNANDEZ v. STATE OF KERALA, (1957) 8 STC 561 the Supreme Court has observed that 'there is a broad distinction between the provisions contained in the statute in regard to the non-liability to tax and exemptions from payment of tax. In the former case, but for the provisions as regards the exemption of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of gross turnover as well as the net turnover on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Limited, which is a Corporation created by the Government of Karnataka to deal with renewable energy development in Karnataka. It is true that the tower of the wind mill requires to be fixed on a concrete foundation and that without such foundation, the wind mill cannot be used for the purpose of generating electrical energy by using the high velocity of wind but at the same time, once the wind mill is imbedded in the earth with concrete foundation, it becomes an immovable property, which may not be entitled to exemption under Section 8 of the Act. Therefore, in our opinion, the expression 'wind mill' in Fifth Schedule to the Act requires to be understood as those part of the wind mill which are movable property and therefore, it would include rotor consisting of blades, the hub assembly, nacelle, yaw system; tower; and grid synchronization assembly including transformer unit for delivering the power to the grid net work. To arrive at this finding, we have kept in our view, the settled principles of law, that simply because a certain article falls within the Schedule, it would not be entitled for exemption if the article is not 'goods' as defined under the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opinion that the turnover represented execution of works contract by the petitioner company which were taxable after the 5th September, 1996 , when entry 55 of the Fifth Schedule was deleted and Entry 43 was inserted in the Sixth Schedule to the Act. This reasoning of the assessing authority was rejected by this Court and this Court expressed the view as follows: What is exempted from the levy of tax is not only a plant as a composite unit but also parts and accessories thereof. The plant may comprise steel items, HDPE pipes, burners, walls, chips, fringes, iron bars and other hardware items in addition to a tank, which may be a cement tank or even a tank made out of iron sheets. Entry 51 does not make any distinction between a Gobar Gas Plant, which makes the use of steel tank and sold as a composite unit to the customer on the one hand and a plant, which requires the constructing of an underground cement tank. In either situations, what is sold by the dealer is a plant. If the sale involves or requires the construction of a cement tank at the site provided by the customer, the same would not change the character of the transaction between the seller and the purchaser. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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