Business disposal of condemned machinery can attract dealer liability, but electrically powered machines are not always electrical goods for tax entry purposes.

Sale of condemned machinery used in the business and periodically replaced when unserviceable was incidental to the business, so the turnover could be treated as that of a dealer and taxed accordingly. However, cone winding machines fitted with electrical motors were not intrinsically electrical goods merely because they operated with electricity. Item 41 of the First Schedule applied only to goods that were essentially electrical in nature, and these machines did not satisfy that test. The turnover was therefore taxable as business turnover but not at the single-point rate applicable to electrical goods; only the general rate applied.

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Issues: (i) whether the sale of condemned cone winding machines fitted with electrical motors was incidental to the assessees' business so as to bring the assessees within the definition of dealer; (ii) whether such machines fell within item 41 of the First Schedule as electrical goods liable to single-point tax at 9 per cent.

Issue (i): whether the sale of condemned cone winding machines fitted with electrical motors was incidental to the assessees' business so as to bring the assessees within the definition of dealer.

Analysis: The turnover arose from sale of machinery used in the business and periodically replaced when condemned. Sales of discarded or unserviceable business assets can form part of the business activity where such disposals are incidental to the main business. On that principle, the assessees could be treated as dealers in the articles sold, read with the statutory definition of business and dealer.

Conclusion: The issue was answered against the assessees and in favour of the Revenue.

Issue (ii): whether such machines fell within item 41 of the First Schedule as electrical goods liable to single-point tax at 9 per cent.

Analysis: Item 41, as substituted by Madras Act 15 of 1964, applied to electrical goods, machinery, instruments, apparatus, appliances, accessories and component parts. The controlling test was that the goods must be intrinsically electrical goods and that their use could not be had without electrical energy; mere use of electricity by itself was not enough. Cone winding machines, though fitted with electrical motors, did not satisfy that test and therefore did not answer the description of electrical goods under item 41.

Conclusion: The issue was answered in favour of the assessees and against single-point taxation at 9 per cent.

Final Conclusion: The turnover was taxable as part of the assessees' business, but it did not fall within item 41 and was liable only at the general rate applicable to other goods.

Ratio Decidendi: For a commodity to fall within an entry for electrical goods, it must be intrinsically electrical in nature and not merely capable of operation with electricity; a business disposal of condemned assets may still be incidental to the business for dealer liability.

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