Trade Tax, U.P. Vs. S/S. Parikh Gramodyog Sansthan  INSC 593 (11 August
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 651 OF
2005 The Commissioner of Trade Tax, U.P. .............. Appellant Versus S/S.
Parikh Gramodyog Sansthan ..............Respondent WITH CIVIL APPEAL NO. 652 OF
2005 The Commissioner of Trade Tax, U.P. .............. Appellant Versus S/S.
Parikh Gramodyog Sansthan ..............Respondent WITH CIVIL APPEAL NO. 653 OF
2005 The Commissioner of Trade Tax, U.P. .............. Appellant Versus S/S.
Pushkar Control Pvt. Ltd. ..............Respondent 1 WITH CIVIL APPEAL NO. 654
OF 2005 The Commissioner of Trade Tax, U.P. .............. Appellant Versus
S/S. Pushkar Control Pvt. Ltd. ..............Respondent WITH CIVIL APPEAL NO.
655 OF 2005 The Commissioner of Trade Tax, U.P. .............. Appellant Versus
S/S. Pushkar Control Pvt. Ltd., Noida ..............Respondent WITH CIVIL
APPEAL NO. 656 OF 2005 The Commissioner of Trade Tax, U.P. ..............
Appellant Versus S/S. Pushkar Control Pvt. Ltd., Noida ..............Respondent
The question for determination in these Civil Appeals is whether
the `Voltage Stabilizer' manufactured and sold by the assessee (respondent
herein) ought to be taxed as electrical goods under Entry No. 16 of Schedule to
U.P. Trade Tax Act, 1948 or as electronic goods under Entry No. 74(f) of the
Notification No.1223 dated 31st March, 1992?
The Revenue contends that the voltage stabilizer is an `electrical
goods'. The stand of the assessee is it is `electronic goods'.
The facts and the issues in all these civil appeals are identical
and, therefore, these are all disposed of by this common judgment.
The Respondant/Assessee is in the business of manufacture of
voltage stabilizer and sales thereof. The assessing Officer had passed
Assessment Order dated March 31, 1997 under Section 41(8) of the U.P Trade Tax
Act, 1948, directing S/S. Parikh Gramodyog Sansthan (Respondent) to pay Sales
Tax in a sum of Rs. 1,00,875.55 and 19,3438.00 for the assessment years 1994-95
and 1995-96 3 respectively. This quantification was based on the rate
applicable to electrical goods. The Respondents had stated that they were
liable to pay taxes at the rates applicable to electronic goods under the old
Entry 74(f) and the amended Entry 74(a)(iii) of the Notification, which was 4%
for the assessment years 1994-95 and 1995-96.
The assessment years and the tax demand vary in each of these
Being aggrieved by the order passed by the Assessing Officer dated
March 31, 1997, the assessee had preferred an appeal before the Commissioner of
Trade Tax, which was dismissed vide order dated 29.7.1997. Subsequently, the
Respondents filed second appeal before the Trade Tax Tribunal, Moradabad. The
Tribunal while modifying the order passed by the assessing officer had held
that voltage stabilizers were `electronic' goods and not `electrical' goods,
primarily on the ground that electrical goods involve the consumption of
electricity, whereas an electronic device functions through the creation of an
electron vacuum in the semiconductor material. The Tribunal also referred to a
certificate issued by the Principal Director of Electronic Service and Training
Center of Ram Nagar, Nainital, which is a government society, that voltage
stabilizers are electronic 4 devices. The Tribunal also noted that the Text
Book `Basic Electronic Engineering' by M.L Anumani, categorises voltage
stabilizers as electronic goods. The Tribunal also had taken note of circular
issued by the U.P government dated 31.3.1992 (Notification No. 1223), the
notification issued by the Punjab Government dated 10.11.1987, as well as
Exemption No.12 of Entry No. 23 of the Excise Act, all of which categorizes
voltage stabilizers as electronic goods.
7) Being aggrieved by the aforesaid order, the revenue had filed
Revision Petition in the High Court at Allahabad. Before the High Court, the
revenue had relied on the order passed by the Commissioner of Commercial Taxes
in another assessee's case, wherein it was held that voltage stabilizers are
electrical goods. The High Court has agreed with the reasoning of the Trade Tax
rejecting the stand of the revenue, has observed that the order of Commissioner
of Commercial Taxes, passed under Section 35 of U.P Trade Tax Act does not give
out any reason as to why the automatic voltage stabilizer should be treated as
electrical goods and not as electronic goods and, therefore, the reliance
placed on the order passed by the Commissioner would not come to the aid of the
5 revenue. Accordingly, the High Court dismissed the Revision Petition. That is
how the revenue is before us in these appeals.
The learned counsel Sri Aarohi Bhalla would submit that, the
commodity in question is electrical goods since it works on the principles of
application of electric energy and also facilitates the distribution and
transmission of electrical energy and therefore, it satisfies the twin tests
that are required under Entry 16 of Schedule to the Act. It is further
submitted, that for the goods to be classified as electronic goods, their
functioning or operation must be controlled and guided by Micro Processing
Chips. According to learned counsel, the voltage stabilizers function as step
up or step down transformers and their working is not controlled by Micro Processing
and, therefore, they are outside the ambit of electronic goods. It is also
submitted that the assessee only imported electrical goods as raw materials for
being used in the manufacture of stabilizers and the use of the raw material
clearly establishes the fact that no microchips have been used while
manufacturing the voltage stabilizers.
Per contra, Shri Dhruv Agarwal, learned counsel for the assessee
would submit that the voltage stabilizer is made of electronic components and
since the main component of the stabilizer being a microchip, the 6 commodity
in question requires to be classified as electronic goods and, therefore, falls
under Entry 74 (f) of the Notification No. 1223 dated 31st March, 1992.
The relevant entries that are required to be noticed are, Entry 16
and Entry 74 of the Schedule to UP Trade Tax Act, 1948. They are as under:
"All electrical goods, instruments, apparatus, appliances and all such
articles the use of which cannot be had except with the application of electrical
energy, including fans, fluorescent tubes (including their starters, chokes,
fixtures, fittings and accessories), electrical earthenware and porcelain,
electrical equipments, plant and their accessories required for generation,
distribution and transmission of electrical energy, electric motors and parts
thereof, and all other accessories and components whether sold as a whole or in
parts, but excluding torches, torch cells, dry cell batteries, torch bulbs and
filament lighting bulbs."
"(a) Electronic goods made by such tiny units whose investment in plant,
machinery, equipment and apparatus as certified by a chartered accountant, does
not exceed five lakh rupees and which manufactures and sells electronic goods
notified Development Commissioner, Small Scale Industries, Government of India.
Consumer electronic goods that is to say black and white television, tape
recorders, and public address system.
Office equipment that is to say data processing system, micro processor based
mini/micro computer system, computer peripherals, dot matrix printers, line 7
printers, desk top publishing system, floppy drives, the hard disk drives,
video display terminals, key boards, mouse, plotters, digitizers, monitor,
cartridge tape, steamer drive, calculators, electronic typewriters, data entry
machines, automatic taller machines, cash dispensers.
Electronic components, that is to say all types of passive
components/resisters, capacitors, diodes and other active components,
transistors, integrated circuits, large scale integration/very large scale
integration chips, black and white picture tubes, colour picture tubes, power
semi conductors, audio tapes and video tapes, printed circuit
boards/connectors, relays, upto electronic components, magnetic media,
microwave tube, television components, television glass shell, electronic
transducers, actuators, display devices that is light emitting diodes/liquid
crystal diode, micro meters for video cassette records/video cassette players,
crystals, tape deck mechanism, etched and framed foils, electronic tubes,
deflection yokes, line out put transformers, electro deposited copper foils
printed circuit board laminate, populated printed circuit boards, power supply
other electronic goods, parts and accessories not covered in any of the
Entry 16 of the Schedule to U.P. Trade Tax Act is an inclusive
definition. It speaks of all electrical goods, instruments, apparatus etc., the
use of which cannot be had without the application of electrical energy,
including plant and their accessories required for the generation, distribution
and transmission of electrical energy.
Entry 74 of the Notification No.1223 dated 31 st March, 1992 and
the subsequent Notification No. 3420 dated 1st October, 1994 speaks of
electronic goods. There is no material change in these two Notifications,
except change in the rate of tax on certain electronic items. The relevant
entry for the purpose of the present case is Entry 74(f) of the earlier
Notification and 74(a)(iii) of the subsequent Notification. The said entry
speaks of all the other electronic goods not specified anywhere else in the
Schedule or in any other Notification. The rate of tax during the relevant assessment
years was 4%.
Before we consider the specific case of the revenue, it is
desirable to know the meaning of the expression `electrical goods' and
Lexicon (Justice T.P. Mukherjee 4th Ed, 1989 pg.574) defines Electrical Goods
as `such articles the use of which cannot be had except with the application of
electrical energy.' It must be kept in mind that an electronic device can be an
electrical device but an electrical device cannot be an electronic device.
Sri 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.
Now we will deal with the specific goods which we are concerned in
these appeals. At the outset, we intend to notice what is a voltage stabilizer,
its purpose, components and functions? Voltage Stabilizer :
stabilizer is a device which is able to deliver relatively constant output
voltage while input voltage and load current changes over time. The voltage
stabilizer is the shunt regulator such as a Zener diode or avalanche diode.
Each of these devices begins conducting at a specified voltage and will conduct
as much current as required to hold its terminal voltage to that specified
voltage. Hence, the shunt regulator can be viewed as the limited power parallel
10 stabilizer. The shunt regulator output is used as a voltage reference. A
Zener diode is a type of diode that permits current not only in the forward
direction like a normal diode, but also in the reverse direction if the voltage
is larger than the breakdown voltage known as "Zener knee voltage" or
"Zener voltage". The device was named after Clarence Zener, who
discovered this electrical property. An avalanche diode is a diode (usually
made from silicon, but can be made from another semiconductor) that is designed
to go through avalanche breakdown at a specified reverse bias voltage and
conduct as a type of voltage reference. (see Wikipedia)
The voltage stabilizer is an instrument which can be used by
application of electrical energy and not an instrument for generation,
distribution or transmission of electrical energy, but are used for regulating
the inflow of electrical energy for variety of appliances.
stabilizers serve the purpose of producing a constant output voltage from a
variable input voltage. As a rule, voltage stabilizers operate with an in-phase
regulated transistor, which has a control input driven by a stabilized control
voltage. It is possible, given a constant control voltage to largely stabilize
the output. Voltage in a defined operating range, by way of the characteristic
response of the 11 transistor acting as the actuator. The stabilized output
voltage serves, as a rule, to supply voltage to electronic circuits which are
connected downstream and often have a dedicated voltage regulator for voltage
Purpose of Voltage Stabilizers :
stabilizers provide a steady amount of electrical current to electronic devices
when power fluctuates in the house or business where the devices are located.
Power surges and sudden power drops can cause serious damage to computers and
other sensitive electronics. Voltage stabilizers store power and provide power
from its reserve to attached devices, which bypasses power fluctuations. Some
voltage stabilizers are also incorporated into a universal power supply (UPS),
which is a backup battery system that allows devices such as computers to
continue operating for a limited period of time in the event of a power
Voltage Stabilizer Operation :
specifics of how a voltage stabilizer operates varies from one type to another,
but the basics remain the same. A voltage stabilizer is plugged into an outlet,
which charges a series of capacitors or battery units in the stabilizer. These
capacitors maintain 12 their charge even if the amount of power from the outlet
device plugged into the stabilizer will draw its power from the capacitors or
battery instead of directly from the outlet. The voltage stabilizer is wired so
that the outlet and the devices are on separate circuits. As a device drains
power from the capacitors, the power coming in from the outlet will continue to
recharge them. Due to resistance in the stabilizer's circuitry, its power to
devices is lower than the ideal voltage from the outlet. This means devices may
function slightly slower when connected to a voltage stabilizer.
capacitor (formerly known as condenser) is a passive electronic component
consisting of a pair of conductors separated by a dielectric (insulator). When
there is a potential difference (voltage) across the conductors a static
electric field develops in the dielectric that stores energy and produces a
mechanical force between the conductors. An ideal capacitor is characterized by
a single constant value, capacitance, measured in farads. This is the ratio of
the electric charge on each conductor to the potential difference between them.
are widely used in electronic circuits for blocking direct current while
allowing alternating current to pass.
It is evident from the facts of the case that an automatic voltage
stabilizer involves the operation of a number of electronic components.
stabilizer might have many components some of which use electricity. This
cannot be the sole reason for classifying it as an electrical good. As noticed
earlier, an electrical device can be an electronic device, but an electronic
device cannot be an electrical device.
Tribunal which is the last fact finding authority after taking into
consideration the components of voltage stabilizer, the purpose for which it is
used and the principles on which it works has come to the conclusion that the
voltage stabilizer is electronic goods, for the purpose of taxation under U.P.
Trade Tax Act, we are in agreement with the reasoning and conclusion reached by
The learned counsel for the appellant has placed reliance on the
observations made by Madras High Court in the case of Williams Taks and Co.
Ltd., Madras v. The State of Madras, [AIR 1955 Madras 656 (V.42, C.N.208 Nov.)]
and B.P.L. v. State of Andhra Pradesh, [2001 (127) E.L.T. 655 (S.C.)].
In the case of Williams Taks and Co. Ltd., Madras v. The State of
Madras, [AIR 1955 Madras 656 (V.42, C.N.208 Nov.)], the question that came up
for the determination before the Court was whether the articles 14 specified
within the list mentioned thereby under General Sales Tax Act, 1939 were
electrical goods. The Court observed that :
is neither possible nor desirable for this Court to embark on a preparation of
an exhaustive list of what constitute `electrical goods' within the meaning of
section 3(2) (viii) of the Act nor even is it possible to device a formula of
In the case of B.P.L. v. State of Andhra Pradesh, [2001 (127)
E.L.T. 655 (S.C.)], the question that was to be decided by this Court was
"whether Fully Automatic Washing Machine can be regarded as `electronic
goods' so as to attract a lower rate of sales tax." It was observed that
the answer to the question arising in the case depends upon the interpretation
of the definition of the term `electronic goods'.
also pointed out that "on a plain reading thereof, it means that systems,
instructions, appliances, apparatus and equipments, which are electronic and
operate on electronic principle, would be electronic goods. All types of
electronic components, parts or materials are also electronic goods as per the
to be seen is whether the automatic washing machines are electronic appliances
or equipments operating on electronic principle."
In our considered view, these decisions would not assist the
appellants. We, therefore, do not find any infirmity in the impugned judgment.
Accordingly, we dismiss these appeals. In the circumstances of the case, there
will be no order as to costs.
.......................................J. [ D.K. JAIN ]
.......................................J. [ H.L. DATTU ]
August 11, 2010.