2010 (12) TMI 1101 - HC - VAT and Sales Tax

Construction materials for non-power-related facilities ineligible for tax exemption under Central Sales Tax Act

Coastal Andhra Power Limited Versus State of Andhra Pradesh

The court held that goods for constructing a labour colony, administrative building, and boundary wall were not eligible for inclusion in the certificate ... Whether the goods, which the petitioner seeks inclusion in their certificate of registration, are required to be included therein or not? Held that:- The mere fact that a statutory obligation is cast on the petitioner, to construct a labour colony or a compound wall or an administrative building, would not supply a connection between the goods used in such construction and the generation or distribution of electricity or any other form of power so as to make them goods intended for use in those operations. Refusal by the registering authority to include such building material in the certificate of registration cannot be faulted. The order of the Sales Tax Appellate Tribunal in T.A. No. 344 of 2009 dated March 25, 2010 does not, therefore, necessitate interference in. Appeal dismissed. Issues Involved:1. Inclusion of goods for construction of labour colony, administrative building, and boundary wall in the certificate of registration under the Central Sales Tax Act, 1956.Detailed Analysis:1. Inclusion of Goods for Construction of Labour Colony:The petitioner sought inclusion of goods for constructing a labour colony, arguing that it was necessary for the operation and maintenance of the power plant. The Commercial Tax Officer and the Appellate Deputy Commissioner disallowed this, stating that such goods were not directly related to power generation and distribution. The STAT upheld this decision, noting that the labour colony was not integrally connected with the plant's activity and its construction was not commercially expedient for running the plant. The court referenced the Supreme Court's decision in *Commercial Taxes Officer, Circle D, Jaipur v. Rajasthan Electricity Board* and *J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer*, emphasizing that goods must be intended for use in the actual activity of generation or distribution of electricity, not merely facilitate the business.2. Inclusion of Goods for Construction of Administrative Building:The petitioner argued that the administrative building was an integral part of the power plant. The STAT rejected this, stating that the petitioner did not specify the activities to be conducted in the building and that it was not part of the apparatus for power generation and distribution. The court reiterated that goods must be used in the actual activity of generation or distribution of electricity, as established in *J.K. Cotton Spinning & Weaving Mills Co. Ltd.* and *Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar*. The administrative building did not meet this criterion.3. Inclusion of Goods for Construction of Boundary Wall:The petitioner contended that the boundary wall was necessary for the plant's security and operation. The STAT dismissed this, noting the lack of material evidence such as approved plans or cost estimates. The court supported this decision, referencing *Indra Singh & Sons (P.) Ltd. v. Sales Tax Officer*, which clarified that goods must be intended for use in the actual activity of generation or distribution of electricity. The boundary wall did not qualify under this definition.Conclusion:The court concluded that the goods for constructing the labour colony, administrative building, and boundary wall did not qualify for inclusion in the certificate of registration under section 8(3)(b) of the Central Sales Tax Act, 1956, and rule 13 of the CST (Registration and Turnover) Rules, 1957. The petitioner failed to establish that these facilities were directly related to the actual activities of generation and distribution of power. The revision petition was dismissed, upholding the decisions of the Commercial Tax Officer, Appellate Deputy Commissioner, and STAT.