Case Brief
B.P.L. Ltd. v. State of A.P.- 2001 (1) SCR 195
Deciding Authority
Supreme Court
Name of the Judges
B.N. Kirpal, Ruma Pal and Brijesh Kumar JJ.
Date of Judgment
9th January 2001
Facts of the Case
The only question which arises for consideration in this case was whether Fully Automatic Washing Machine can be regarded as “electronic goods” so as to attract a lower rate of sales tax.
The undisputed facts are that the appellants are manufacturers and dealers in television, audios, washing machines etc. and are registered dealers with the Sales Tax Department at Hyderabad. Though the appellants deal in both Semi and Fully Automatic Washing Machines, the present controversy is only with regard to Fully Automatic Washing Machines.
Prior to 20th July, 1988, the sales tax leviable on the sale of Automatic Washing Machine was 10 per cent. On 20th July, 1988, by a notification issued in exercise of power contained in Section 9 of the Andhra Pradesh General Sales Tax Act, 1957, the rate of tax payable on the sale of “electronic goods’ as defined in the said notification was reduced to 2 paise in a rupee with effect from 1st July, 1988. This notification also exempted the sale of electronic goods from the levy of additional tax under Section 5(a) and surcharge on sales tax under Section 6(B) of the said Act.
The term “electronic goods” was defined in the said notification as follows:
“2. For the purpose of this notification, the term “Electronic Goods” means electronic systems, instruments, appliances, apparatus, equipment operating on electronic principles and all types of electronic components, parts and materials and include:
(i) Consumer Electronics;
(ii) Electronic test and measuring instruments;
(iii) Medical Electronic Equipment;
(iv) Electronic analytical instruments;
(v) Electronic equipment/instrument for nuclear Geo-Scientific and other special application;
(vi) Electronic process control equipment; (vii) Power Electronic Equipment;
Electronic industrial Automation and Control equipment:
(viii) Electronic data processing systems and electronic office equipment;
(ix) Electronic Broadcasting Equipment;
(x) Electronic Aerospace and Defence equipment.”
The appellants claimed before the Sales Tax Authorities that its Automatic Washing Machines worked on fuzzy Logic Computer Program. In other words, Fully Automatic Washing Machines were micro-computer- controlled washing machines that actually worked on the principle, of auto selection of the various parameters. The entire work of washing the clothes, after the same were loaded into the machine, was carried out automatically, the machines being controlled and operated micro processor technology.
Without accepting the contention of the appellants, the provisional assessment order for the period 1st April, 1994 to 31st March, 1995 was passed raising a demand of Rs. 8,83,143 as differential tax. The appellant filed appeals before the Appellate Assistant Commissioner but without success. The Sales Tax Appellate Tribunal, on a further appeal being filed by the appellants also came to the conclusion that the Automatic Washing Machines would not be regarded as electronic goods. The High Court of Andhra Pradesh also decided the point in issue against the appellants. While disposing of the tax revision case, the High Court came to the conclusion that while the control panel of such machines was certainly electronic in the sense that it involved silicon chips and semi conductors, the washing machines themselves did not operate on principles of electronics. The washing machines, the High Court concluded, operated on the principle of centrifugal force, which is electro-mechanical in nature but not electronic and any amount of sophisticated control of machine installing micro-computer in the control panel could not make the machine electronic in nature. Hence, these appeals.
Judgment
The answer to the question arising in these cases depended upon the interpretation of the definition of the term “electronic goods”. The said term is defined by the aforesaid notification. 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 said definition.
What has to be seen is whether the automatic washing machines are electronic appliances or equipments operating on electronic principle. The court observed that in the Concise Oxford Dictionary, Tenth Edition, “electronic” has been inter alia defined as “having components such as micro chips and transistors that control and direct electronic currents”.
The court observed that the underlying object of the State of Andhra Pradesh issuing such a notification was to give fillip to modem technology as a result of which consumer electronics or electronic appliances or equipment operating on electronic principles was to be charged lesser rate of sales tax.
The Court had no doubt, that the action of washing machines can be regarded as being one which runs on centrifugal force but the operation or the running of these machines is completely controlled by the micro process technology involved in the said machines. It was not in dispute that the running of this machine and its functions are controlled by programmed micro chips. These micro-chips control and direct electric current in a programmed manner so as to enable the washing machine to carry out its functions.
It was submitted by the learned senior counsel for the respondent that washing machine is specifically mentioned in Item No. 38(iv) of the Schedule to the said Act. Therefore, it was contended that notification of 20th July, 1988, cannot apply because in the case of washing machine the rate of duty specified under entry 38(iv) is 10 per cent. The Court was unable to agree with this contention for the simple reason that entry 38(iv) relates to electrical items including electrical washing machine wheras electronic items or products are referred to in entry 38(v), An electronic washing machine would come under entry 38(v) and the notification dated 30th July, 1988 would apply to all electronic goods including automatic washing machines of the appellants.
Decision
For the aforesaid reasons, the appeals were allowed, the judgment of the High Court and all the decisions of the authorities below were set aside. The appellants were held to be entitled to the benefit of the notification dated 20th July, 1988 with the result that subject to other conditions which they may require to be fulfilled, the rate of sales tax payable in respect of the Automatic Washing Machines would be 2 per cent as prescribed by the said notification and thereafter as per notification dated 7th September, 1993 by which rate has been raised to 4 per cent. No order as to costs.
Shubham Shandilya, 4th Year, B.B.A. LL.B., Symbiosis Law School, Pune
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