Electricity Board sales tax treatment: electricity excluded as goods, but regular coal-ash sales remained taxable.

An Electricity Board engaged in generation, distribution and supply of electrical energy was not a dealer for sales tax purposes because electricity was not goods within the relevant sales tax enactments. Regular and continuous sales of coal-ash, a by-product arising from thermal generation, were treated as a business activity in that commodity and were taxable. By contrast, steam supplied to Nepa Mills on a cost-based arrangement without profit motive was not a taxable sale, and the supply of specification and tender forms was also outside the business of selling goods. Purchase tax on goods bought from unregistered dealers failed because the Board was not a dealer in respect of its electricity operations.

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Issues: (i) Whether the Electricity Board was a dealer in respect of generation, distribution, sale and supply of electrical energy; (ii) whether the sale of coal-ash was liable to sales tax; (iii) whether the supply of steam to Nepa Mills was liable to sales tax; (iv) whether the sale of specification and tender forms was liable to sales tax; and (v) whether purchase tax could be levied on taxable goods purchased from unregistered dealers for use in the Board's activity of generating, supplying and distributing electricity.

Issue (i): Whether the Electricity Board was a dealer in respect of generation, distribution, sale and supply of electrical energy.

Analysis: The definition of dealer required carrying on the business of selling or supplying goods. The statutory scheme of the Electricity (Supply) Act, 1948 showed that the Board's operations were not in the nature of a non-profit public service only; the Act contemplated adjustment of charges, payment of taxes on income and profits, distribution of surplus, and liability to income-tax on income, profits and gains. But electricity itself did not fall within the meaning of goods under the sales tax laws. Electrical energy was neither movable property in the statutory sense nor a commodity that could be treated as goods for purposes of sale under those enactments.

Conclusion: The Electricity Board was not a dealer in respect of its activity of generation, distribution, sale and supply of electrical energy.

Issue (ii): Whether the sale of coal-ash was liable to sales tax.

Analysis: Coal-ash was a regular and continuous subsidiary product arising in the course of the Board's thermal generation activity and was sold from time to time. A person may be treated as carrying on business in a commodity where the volume, frequency, continuity and regularity of sales show an intention to deal in that commodity, even if it is only a by-product. The sales of coal-ash were therefore incidental to the Board's business activity and attracted tax.

Conclusion: The turnover of coal-ash was liable to sales tax.

Issue (iii): Whether the supply of steam to Nepa Mills was liable to sales tax.

Analysis: Steam was goods because it was a tangible, movable, deliverable commodity. However, the arrangement with Nepa Mills showed that steam was supplied on a cost-based arrangement linked to coal consumption and reimbursement of loss, with no profit motive. The contract was for labour and cost involved in supply, not for a commercial sale carried on as a business.

Conclusion: The turnover representing supply of steam was not liable to sales tax.

Issue (iv): Whether the sale of specification and tender forms was liable to sales tax.

Analysis: The forms were supplied at a price only to facilitate tenders for prescribed works. Such supply did not amount to carrying on the business of selling forms as a commercial commodity.

Conclusion: The turnover of specification and tender forms was not liable to sales tax.

Issue (v): Whether purchase tax could be levied on taxable goods purchased from unregistered dealers for use in the Board's activity of generating, supplying and distributing electricity.

Analysis: Purchase tax provisions applied only where taxable goods were purchased by a registered dealer for use in a taxable business activity. Since the Board was not a dealer in respect of its electricity operations, the prerequisite for purchase tax failed.

Conclusion: Purchase tax could not be levied on the Board for such purchases.

Final Conclusion: The references were disposed of by holding that the Board was not a dealer for electricity operations, but the sales of coal-ash were taxable, while the supply of steam, the sale of specification and tender forms, and the purchase-tax demand were not sustainable.

Ratio Decidendi: Electricity was not goods for the purpose of the relevant sales tax enactments, but by-products regularly and commercially sold could be taxable where the surrounding circumstances showed a business activity in that commodity.

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