M/s B.P.L. Ltd. Vs. State of Andhra Pradesh
EmailAppeal: Civil Appeal Nos. 444-445 of 2001
(Arising out of SLP (C) Nos. 6971-6972/1999)
(Arising out of SLP (C) Nos. 6971-6972/1999)
Petitioner: M/s B.P.L. Ltd.
Respondent: State of Andhra Pradesh
Apeal: Civil Appeal Nos. 444-445 of 2001
(Arising out of SLP (C) Nos. 6971-6972/1999)
(Arising out of SLP (C) Nos. 6971-6972/1999)
Judges: B.N.KIRPAL, RUMA PAL & BRIJESH KUMAR, JJ.
Date of Judgment: Sep 01, 2001
Appearances:
Mr. Kapil Sibal, Mr. M.N. Rao, Ms. K. Amareswari, Senior Advo-cates, Mr. Roy Abraham, Ms. Baby Krishnan, Mr. G. Sreedhar, Mr. Ajith, Mr. Y. Raja Gopala Rao, Mr. G. Venkatesh, Mr. T. Anil Kumar, Mr. K. Ram Kumar, Advocates, for the appearing parties.
Head Note:
SALES TAX
Andhra Pradesh General Sales Tax Act, 1957
Sections 5(A), 6(B) and 9 – Sales Tax – Rate of tax on electronic goods – Meaning of ‘electronic goods’ – Automatic washing ma-chines – Whether fall within the definition of ‘electronic goods’ – Notification issued on 20.7.1988 under Section 9 reducing sales tax from 10 per cent to 2 per cent on the sale of electronic goods – Notification also exempting such goods from additional tax and surcharge – Appellant claiming that its fully automatic washing machines are ‘electronic goods’ and hence, would attract only the reduced rate of tax – Sales-tax Department not accepting the claim – Tribunal as well as High Court also holding automatic washing machines to be not falling within the ambit of ‘electron-ic goods’ – Whether denial of reduced rate of tax on automatic washing machines, correct – Whether in view of the fact that washing machines appeared at entry 38(iv) of the Schedule to the Act attracting a duty tax of 10 per cent, notification dated 20.7.1988 would be inapplicable. Held, functioning of fully au-tomatic washing machine being automatic and controlled by micro-processor chips, they would fall within the description of ‘elec-tronic goods’ under entry 38(v) of the Schedule to the Act and therefore, the notification dated 20.7.1988 would apply to all electronic goods including automatic washing machines.
Held:
What that said notification requires is that an item can be regarded as an electronic goods if its all functions which are required to be performed by that equipment or appliance are performed or controlled electronically by micro-processor. Admit-tedly, in the present case the entire functioning of the washing machine is automatic. Data is fed into the machine and thereupon it is the micro processors which control and direct the carrying out of the various functions of the machines which results in the clothes being washed in the desired manner. (Para 13)
Like a record player or radio, it works with the aid of micro processor and falls within the definition of “electronic goods” as contained in the said notification dated 20th July, 1988. (Para 14)
It was submitted that washing machine is specifically mentioned it Item No 38(iv) of the Schedule to the said Act and therefore, the 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. We are unable to agree with this conten-tion for the simple reason that entry 38(iv) relates to electri-cal items including electrical washing machine whereas electronic item or products are referred to in entry 38(v). An electronic washing machine would come under 38(v) and the notification dated 20th July, 1988 would apply to all electronic goods including automatic washing machines of the appellants. (Para 15)
JUDGEMENT:
KIRPAL, J.
1. Special leave granted.
2. The only question which arises for consideration in this case is whether fully automatic washing machine can be regarded as “electronic goods” so as to attract a lower rate of sales tax.
3. The undisputed facts are that the appellants are manufacturers and dealers in televisions, 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.
4. Prior to 20th July, 1988, the rate of sales tax leviable on the sale of automatic washing machines was 10 per cent. On 20th July, 1988 by a notification issued in exercise of power con-tained 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.
5. The term “electronic goods” was defined in the said notifica-tion as follows:
“2. For the purpose of this notification, the term “electronic goods” means electronic systems, instruments, appliances, appara-tus, 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.”
6. 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 ware loaded into the machine, was carried out automatically, the machines being controlled and operated by micro processor technology.
7. Without accepting the contention of the appellants, the provi-sional 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. For subsequent period also tax was demanded, but it is not necessary to go into any further detail in respect thereof.
8. The appellants filed appeals before the Appellate Assistant Commissioner but without success. The Sales Tax Appellate Tribun-al, 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.
9. 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 sophis-ticated control of machine by installing micro-computer in the control panel could not make the machine electronic in nature. Hence, these appeals.
10. The answer to the question arising in these cases depends 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 system, instructions, appliances, apparatus and equipment 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. In addition thereto, Sub-clause (i) of para 2 of the notification specifically provides that in the definition of the term “electronic goods” consumer electronics are also included. What has to be seen is whether the automatic washing machines are electronic appliances or equipment operating on electronic principle.
11. Mr. Kapil Sibal, the learned senior Counsel appearing for the appellants contended that it should be so regarded. Mr. M.N. Rao, the learned senior Counsel submitted that in addition thereto, the automatic washing machines was in any case an item which should be regarded as consumer electronics and therefore, would be entitled to the benefit of the said notification.
12. The key words to our mind which appear in the said definition contained in the notification are “operating on electronic prin-ciples”. In the Concise Oxford Dictionary, Tenth Edition, “elec-tronic” has been inter alia defined as ” having components such as micro chips and transistors that control and direct electronic currents”. In McGraw-Hill Encyclopedia of Science and Technology (Sixth Edition), Volume VI at page 235 under the heading “Elec-tronics”, it is stated thus: “The branch of science and technolo-gy relating to the conduction and control of electricity flowing through semi-conductor materials or through vacuum or gases.” Under the heading “Consumer Electronics” at page 237 of the said Encyclopedia. It is stated that: “Aside from the communication services of telephone, radio and television, the consumer has available a wide variety of electronic devices and equipment which employ the detailed technology of the computer industry.”
13. It appears to us that the underlying object of the State of Andhra Pradesh issuing such a notification was to give fillip to modern technology as a result of which consumer electronics or electronic appliances or equipment operating on electronic prin-ciples were to be charged lesser rate of sales tax. It is, no doubt true that 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 is 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. The opera-tions which are automatically controlled in the working of the machines are that of (a) wash cycle, (b) rinse cycle and (c) spin/dry. It has been certified by the Indian Institute of Tech-nology in the present case that the automatic washing machine of the appellants has the facility of water level control delay program. It has various programs which are controlled through micro-processor chips. In other words, what that said notifica-tion requires is that an item can be regarded as an electronic goods if its all functions which are required to be performed by that equipment or appliance are performed or controlled electron-ically by micro-processor. Admittedly, in the present case the entire functioning of the washing machine is automatic. Data is fed into the machine and thereupon it is the micro processors which control and direct the carrying out of the various func-tions of the machines which results in the clothes being washed in the desired manner.
14. We may here notice that on 1st June, 1989, the Government of Andhra Pradesh had issued a memorandum whereby the attention of the Commissioner of commercial taxes was drawn to the list of electronic items prepared by the electronics corporation and it was stated in this memorandum that the Government had decided that the State List may be followed for the purpose of conces-sional rate of tax on the electronic goods as envisaged by the earlier notification dated 20th July, 1988. A copy of the said list has been filed in Court which mentions various types of electronic equipment falling under different heads. Under the heading of “consumer electronics”, radio receivers, cassette tape-recorders, record changers etc. are mentioned and entry 1.65 reads as follows: “Other consumer electronic aids/products”. The reading of this list clearly shows that even though some of these equipment or appliances performed different function like repro-ducing sound, as in the case of radio receivers or tape-recorders, all of them are controlled or work with the help of chips or micro processors. Even though washing machine is not specifically mentioned as one of the items, it would fall under the category of “Consumer Electronic Product”. Like a record player or radio, it works with the aid of micro processor and falls within the definition of “electronic goods” as contained in the said notification dated 20th July, 1988.
15. It was submitted by the learned senior Counsel for the re-spondent that washing machine is specifically mentioned it Item No 38(iv) of the Schedule to the said Act and therefore, it was contended that the 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. We are unable to agree with this contention for the simple reason that entry 38(iv) relates to electrical items including electrical washing machine whereas electronic items or products are referred to in entry 38(v). An electronic washing machine would come under 38(v) and the notification dated 20th July, 1988 would apply to all electronic goods including automat-ic washing machines of the appellants.
16. For the aforesaid reasons, the appeals are allowed, the judgment of the High Court and all the decisions of the authori-ties below are set aside. The appellants are held to be entitled to the benefit of the notification dated 20th July, 1988 with 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.
17. No order as to costs.
1. Special leave granted.
2. The only question which arises for consideration in this case is whether fully automatic washing machine can be regarded as “electronic goods” so as to attract a lower rate of sales tax.
3. The undisputed facts are that the appellants are manufacturers and dealers in televisions, 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.
4. Prior to 20th July, 1988, the rate of sales tax leviable on the sale of automatic washing machines was 10 per cent. On 20th July, 1988 by a notification issued in exercise of power con-tained 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.
5. The term “electronic goods” was defined in the said notifica-tion as follows:
“2. For the purpose of this notification, the term “electronic goods” means electronic systems, instruments, appliances, appara-tus, 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.”
6. 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 ware loaded into the machine, was carried out automatically, the machines being controlled and operated by micro processor technology.
7. Without accepting the contention of the appellants, the provi-sional 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. For subsequent period also tax was demanded, but it is not necessary to go into any further detail in respect thereof.
8. The appellants filed appeals before the Appellate Assistant Commissioner but without success. The Sales Tax Appellate Tribun-al, 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.
9. 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 sophis-ticated control of machine by installing micro-computer in the control panel could not make the machine electronic in nature. Hence, these appeals.
10. The answer to the question arising in these cases depends 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 system, instructions, appliances, apparatus and equipment 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. In addition thereto, Sub-clause (i) of para 2 of the notification specifically provides that in the definition of the term “electronic goods” consumer electronics are also included. What has to be seen is whether the automatic washing machines are electronic appliances or equipment operating on electronic principle.
11. Mr. Kapil Sibal, the learned senior Counsel appearing for the appellants contended that it should be so regarded. Mr. M.N. Rao, the learned senior Counsel submitted that in addition thereto, the automatic washing machines was in any case an item which should be regarded as consumer electronics and therefore, would be entitled to the benefit of the said notification.
12. The key words to our mind which appear in the said definition contained in the notification are “operating on electronic prin-ciples”. In the Concise Oxford Dictionary, Tenth Edition, “elec-tronic” has been inter alia defined as ” having components such as micro chips and transistors that control and direct electronic currents”. In McGraw-Hill Encyclopedia of Science and Technology (Sixth Edition), Volume VI at page 235 under the heading “Elec-tronics”, it is stated thus: “The branch of science and technolo-gy relating to the conduction and control of electricity flowing through semi-conductor materials or through vacuum or gases.” Under the heading “Consumer Electronics” at page 237 of the said Encyclopedia. It is stated that: “Aside from the communication services of telephone, radio and television, the consumer has available a wide variety of electronic devices and equipment which employ the detailed technology of the computer industry.”
13. It appears to us that the underlying object of the State of Andhra Pradesh issuing such a notification was to give fillip to modern technology as a result of which consumer electronics or electronic appliances or equipment operating on electronic prin-ciples were to be charged lesser rate of sales tax. It is, no doubt true that 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 is 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. The opera-tions which are automatically controlled in the working of the machines are that of (a) wash cycle, (b) rinse cycle and (c) spin/dry. It has been certified by the Indian Institute of Tech-nology in the present case that the automatic washing machine of the appellants has the facility of water level control delay program. It has various programs which are controlled through micro-processor chips. In other words, what that said notifica-tion requires is that an item can be regarded as an electronic goods if its all functions which are required to be performed by that equipment or appliance are performed or controlled electron-ically by micro-processor. Admittedly, in the present case the entire functioning of the washing machine is automatic. Data is fed into the machine and thereupon it is the micro processors which control and direct the carrying out of the various func-tions of the machines which results in the clothes being washed in the desired manner.
14. We may here notice that on 1st June, 1989, the Government of Andhra Pradesh had issued a memorandum whereby the attention of the Commissioner of commercial taxes was drawn to the list of electronic items prepared by the electronics corporation and it was stated in this memorandum that the Government had decided that the State List may be followed for the purpose of conces-sional rate of tax on the electronic goods as envisaged by the earlier notification dated 20th July, 1988. A copy of the said list has been filed in Court which mentions various types of electronic equipment falling under different heads. Under the heading of “consumer electronics”, radio receivers, cassette tape-recorders, record changers etc. are mentioned and entry 1.65 reads as follows: “Other consumer electronic aids/products”. The reading of this list clearly shows that even though some of these equipment or appliances performed different function like repro-ducing sound, as in the case of radio receivers or tape-recorders, all of them are controlled or work with the help of chips or micro processors. Even though washing machine is not specifically mentioned as one of the items, it would fall under the category of “Consumer Electronic Product”. Like a record player or radio, it works with the aid of micro processor and falls within the definition of “electronic goods” as contained in the said notification dated 20th July, 1988.
15. It was submitted by the learned senior Counsel for the re-spondent that washing machine is specifically mentioned it Item No 38(iv) of the Schedule to the said Act and therefore, it was contended that the 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. We are unable to agree with this contention for the simple reason that entry 38(iv) relates to electrical items including electrical washing machine whereas electronic items or products are referred to in entry 38(v). An electronic washing machine would come under 38(v) and the notification dated 20th July, 1988 would apply to all electronic goods including automat-ic washing machines of the appellants.
16. For the aforesaid reasons, the appeals are allowed, the judgment of the High Court and all the decisions of the authori-ties below are set aside. The appellants are held to be entitled to the benefit of the notification dated 20th July, 1988 with 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.
17. No order as to costs.
