REPORTABLE

IN THE 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

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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

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J U D G M E N T

H.L. Dattu, J.

1)           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?  

2)         The Revenue contends that the voltage stabilizer is an ‘electrical  

goods’. The stand of the assessee is it is ‘electronic goods’.

3)          The facts and the issues in all these civil appeals are identical  

and, therefore, these are all disposed of by this common judgment.

4)          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  

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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.  

5)          The assessment years and the tax demand vary in each of these  

appeals.  

6)         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  

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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 Tribunal.  

While 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  

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revenue.   Accordingly,  the  High  Court  dismissed  the  Revision  

Petition.  That is how the revenue is before us in these appeals.  

8) 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.      

9)          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  

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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.   

10)           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:

16. “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.”

74 “(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.

(b) Consumer electronic goods that is to say black and  white  television,  tape  recorders,  and  public  address  system.

(c) Office  equipment  that  is  to  say  data  processing  system,  micro  processor  based  mini/micro  computer  system,  computer  peripherals,  dot  matrix  printers,  line  

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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.

(d) Photo copiers.

(e) 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 devices,  cabinet.

(f) All  other  electronic  goods,  parts  and accessories  not covered in any of the aforementioned categories.”

11)         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.   

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12)         Entry 74 of the Notification No.1223 dated 31st 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 any where  

else in the Schedule or in any other Notification. The rate of tax during  

the relevant assessment years was 4%.  

13)            Before we consider the specific case of the revenue, it is desirable  

to know the meaning of the expression `electrical goods’ and `electronic  

goods’.   

ELECTRICAL GOODS :

The Law 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.  

ELECTRONIC GOODS :

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14) 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.  

15) 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 :  

A  voltage  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  

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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)

16)          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.  

Voltage 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  

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transistor acting as the actuator.  The stabilized output voltage serves,  

as a rule, to supply voltage to electronic circuits which are connected  

down stream and often have a dedicated voltage regulator for voltage  

supply.  

17)    Purpose of Voltage Stabilizers :

                  Voltage 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 failure.  

         Standard Voltage Stabilizer Operation :

                     The 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  

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their charge even if the amount of power from the outlet fluctuates.  

Any 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 :

           A 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.

        Capacitors  are  widely  used  in  electronic  circuits  for  

blocking direct current while allowing alternating current to pass.

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18)         It is evident from the facts of the case that an automatic voltage  

stabilizer involves the operation of a number of electronic components.  

A voltage 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.  

The 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 Tribunal.  

19)         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.)].

20)            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  

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specified within the list mentioned thereby under General Sales Tax Act,  

1939 were electrical goods. The Court observed that :

“it  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 universal application.”

21) 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’.  

The Court 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 said definition………….

What has to be seen is whether the automatic washing machines are  

electronic  appliances  or  equipments  operating  on  electronic  

principle.”  

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22) 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 ]

New Delhi, August  11, 2010.

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