2010 (3) TMI 1031 - HC - VAT and Sales Tax

Court rules UPS-EB taxable at 4% under Punjab VAT Act, emphasizes expert opinions.

The court ruled in favor of the appellant, determining that UPS-EB falls under sub-entry (27) of entry 60 of Schedule B of the Punjab VAT Act, making it ... Whether the uninterrupted power supply (UPS) sold by the appellant does not fall in entry 60 of Schedule B and hence the same would be chargeable at 12.5 per cent and not four per cent which is applicable to the items given in Schedule B? Held that:- The goods in question sold by the appellant fulfil all the conditions of an UPS and hence they are taxable at the rate of four per cent. The Tribunal fell in error in brushing aside the reports of the technical experts of the Engineering Department of IIT and the Punjab Engineering College who categorically opined that the goods in question were UPS. Decided in favour of the assessee and against the Revenue. Issues Involved:1. Classification of UPS-EB under sub-entry (27) of entry 60 of Schedule B of the Punjab VAT Act, 2005.2. Justification of the Tribunal in disregarding technical expert reports.3. Appropriateness of placing UPS-EB in the residual entry despite a specific classification.Issue-wise Detailed Analysis:1. Classification of UPS-EB under sub-entry (27) of entry 60 of Schedule B of the Punjab VAT Act, 2005:The court examined whether the UPS-EB sold by the appellant falls under sub-entry (27) of entry 60 of Schedule B, making it taxable at 4% instead of 12.5%. The appellant argued that UPS-EB should be classified under sub-entry (27) of entry 60, which lists 'uninterrupted power supply' as taxable at 4%. The court found that the product in question, UPS-EB, is an electronic power source that stores energy and converts it to AC power during an AC source failure, fulfilling the conditions of an uninterrupted power supply (UPS). Reports from IIT Delhi and Punjab Engineering College confirmed that the product met the criteria of a UPS. Consequently, the court held that UPS-EB falls within sub-entry (27) of entry 60 of Schedule B and is taxable at 4%.2. Justification of the Tribunal in disregarding technical expert reports:The appellant contended that the Tribunal erred in ignoring expert opinions from IIT Delhi and Punjab Engineering College, which identified the product as a UPS. The court agreed, stating that technical expert opinions should not be dismissed unless contradicted by equally credible expert reports. The Tribunal's failure to consider these expert reports was deemed a mistake. The court emphasized that expert opinions play a crucial role in determining the nature of the product for tax purposes and should be given due weight.3. Appropriateness of placing UPS-EB in the residual entry despite a specific classification:The appellant argued that if a product can reasonably fit within a specified entry, it should not be classified under the residual entry, which is reserved for items not covered by any specified entry. The court referenced several judgments, including Hindustan Poles Corporation and Bharat Forge & Press Industries (P) Ltd., supporting the principle that the residual entry should only apply to goods clearly outside specified entries. The court concluded that UPS-EB, being classified as a UPS by technical experts and fitting sub-entry (27) of entry 60, should not be placed in the residual entry. Therefore, the Tribunal's classification of UPS-EB under the residual entry was incorrect.Conclusion:The court answered all three questions in favor of the appellant. It held that UPS-EB falls under sub-entry (27) of entry 60 of Schedule B and is taxable at 4%. The Tribunal erred in disregarding technical expert reports and misclassified UPS-EB under the residual entry. The court restored the order of the Deputy Excise and Taxation Commissioner (Appeals), Faridkot Division, and set aside the VAT Tribunal's order.