Measurement equipment used for sale of electricity can qualify as processing machinery under sales tax set-off rules.

Electric meters used to measure electricity supplied to consumers were treated as equipment used in the processing of goods for sale under the relevant sales tax set-off rule. The rule covered goods used as raw materials, processing materials, machinery, tools, plant, equipment and related items in the manufacture or processing of goods for sale. Because electricity is goods for sales tax purposes and cannot be commercially supplied without measurement, the meters were regarded as integral to processing before sale. The construction was supported by the broader approach taken under the Central Sales Tax framework, and the meters accordingly qualified for set-off.

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Issues: Whether electric meters purchased by the assessee and used for measuring electricity supplied to consumers were machinery, tools or equipment used in the manufacture or processing of electrical energy for sale so as to qualify for set-off under the relevant sales tax rule.

Analysis: The relevant rule allowed drawback, set-off or refund where goods, other than excluded scheduled goods, were used as raw materials, processing materials, machinery, tools, plant, equipment, fuel, lubricants, containers or packing materials in the manufacture or processing of goods for sale. Electricity was treated as goods for sales tax purposes, and the Court held that electrical energy cannot be sold or supplied for payment unless it is measured. On that basis, equipment used for measuring electricity before sale was regarded as having been used in the processing of the goods for sale. The Court also drew support from the broader construction of similar language in the Central Sales Tax framework.

Conclusion: The meters were covered by the rule, and the assessee was entitled to the claimed set-off; the questions referred were answered in the negative, against the Revenue and in favour of the assessee.

Ratio Decidendi: Where measurement is indispensable to the commercial sale of a commodity, equipment used for that measurement forms part of the processing of the goods for sale for purposes of a set-off provision of this kind.

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