1. This is a reference under section 34(3) of the Bombay Sales Tax Act, 1953 (hereinafter referred to as 'the said Act'), made at the instance of the Commissioner of Sales Tax.
2. The facts giving rise to this reference are as follows : In respect of the assessment period from 1st April, 1954, to 31st March, 1955, the assessees (respondents) claimed a set-off in respect of an amount of Rs. 2,761-4-9, which included, inter alia, an amount of Rs. 437-8-6, being the amount of general sales tax paid by the assessees on the purchase of certain electric meters, which were given by the assessees on rent to the consumers to whom the electricity produced by the assessees was supplied. It may be mentioned that the assessees were registered dealers under the said Act and were engaged in the generation and distribution of electricity. The claim of the assessees for set-off in respect of the said amount of Rs. 437-8-6 (hereinafter referred to as 'the said amount') was disallowed by the sales tax authorities on the ground that such a set-off was not admissible under rule 11(2)(c) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954 (hereinafter referred to as 'the said Rules'). The assessee then approached the Sales Tax Tribunal. The Tribunal took the view that electric meters were undoubtedly machinery or tools or equipment and that the electrical energy generated or sold by the assessees could not have been supplied to the consumers without such meters. The Tribunal held that the phraseology of clause (c) of sub-rule (2) of rule 11 of the said Rules was wide enough to include within its scope electric meters purchased by the assessees and used as aforesaid in respect of which a set-off was claimed by the assessees. On the basis of these conclusions, the Tribunal set aside the orders passed by the sales tax authorities and allowed the set-off as claimed by the assessees. The applicant, the Commissioner of Sales Tax, filed an application under section 34(1) of the said Act before the Tribunal to state a case and refer certain questions of law as arising from the judgment and order of the Tribunal. The Tribunal by its order dated 29th April, 1966, held that no question of law arose out of their order and declined to state a case and refer any question of law to this court. The applicant then made a reference application, being Sales Tax Application No. 16 of 1966, in this court under section 34(2) of the said Act for directing the Tribunal to state a case and refer to this court certain questions of law, which, according to the applicant, arose from the judgment and order of the Tribunal. A Division Bench of this Court consisting of Kotval, C.J., and V. S. Desai, J., by an order dated 31st August, 1967, directed the Tribunal to draw up a statement of the case and raise and refer to this court for its determination three questions of law, which are as follows :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the meters were used by the respondents in the manufacture or processing of electrical energy for sale
(2) Whether, on a true and proper construction of the provisions contained in clause (c) of sub-rule (2) of rule 11 of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954, and, on the facts and in the circumstances of the case, the Tribunal has erred in holding that electric meters are machinery or equipment or tool used in the manufacture or processing of electrical energy for sale
(3) Whether the Tribunal erred in holding that the respondents are entitled under rule 11(2)(c) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954, to set-off of general sales tax paid on purchases of meters given on hire to the consumers ?'
3. Pursuant to this order, a statement of case was prepared and submitted by the Tribunal but no questions were framed or referred to this court. The Commissioner, therefore, made an application to the Tribunal to incorporate in the statement of case the questions framed by this court as aforesaid and refer the same to this court. This application along with certain other similar applications came up for hearing before a Bench of the Tribunal consisting of Shri K. R. Gohokar and Shri. S. R. Deshpande, Members. The course adopted by this Bench of the Tribunal appears to us to be nothing short of astounding. After setting out the facts and after referring to the order passed by this court on 31st August, 1967, the Tribunal went on to say that they were of the view that it was not at all necessary to resubmit the statement of case in this case, and in certain other cases incorporating therein the three questions of law that were formulated by this court. The Tribunal observed that as these questions were framed by this court, these questions would be easily available to this court when the references would come before it for hearing. In this connection, we may point out that the provisions of section 34(3) of the said Act clearly provide that if the High Court is not satisfied that the refusal of the Tribunal to refer a question of law was justified, it may require the Tribunal to state a case and refer it to the High Court and on receipt of such requisition the Tribunal shall state and refer the case accordingly. A plain reading of this provision should have enabled the members of the Tribunal to realise that once this court had directed them to state a case and to refer certain questions of law to this court, the Tribunal was bound to do so, and the refusal of the Tribunal to do this is nothing other than judicial indiscipline, and we are all the more surprised that such a course was adopted by a Bench of the Tribunal, one of whose members, we are informed, was a District Judge. In fact, we were considering whether to keep back this reference and direct the Tribunal to incorporate in the statement of case the questions of law as directed by this court, but we have refrained from doing so, because adopting this course would have led to delay and inconvenience for the parties, who appear to be blameless in this matter. We, therefore, proceed with the consideration of the aforesaid questions as having been referred to us in this reference.
4. As the arguments in this reference turn to a large extent on the provisions of clause (c) of sub-rule (2) of rule 11 of the said Rules, it may be useful to note at this stage the relevant portions of the said rule, as it stood at the material time. The relevant portions of the said rule read thus :
'11. (2) In assessing the general sales tax payable by a registered dealer in respect of any period, the Collector shall grant him a drawback, set-off or refund, as the case may be, for an amount equal to the aggregate of the sums recovered from him by registered dealers by way of general sales tax on the purchases made by him on or after the 1st April, 1954, if -
(c) such goods being other than those specified in entries 1 to 18 (both inclusive) of Schedule B to the Act have been used by him as raw materials, processing materials, machinery, tools, plant, equipment, fuel, lubricants, containers or packing materials in the manufacture or processing of any goods for sale.'
5. It is common ground that the electric meters, which are the goods in question, are not such goods as would be covered by entries 1 to 18 of Schedule B to the said Act. There can be little doubt, and it is in fact not disputed before us, that electric meters must certainly be considered as machinery or tools or equipment. It is common ground that electricity must be considered to be goods for the purposes of the sales tax legislation in view of the decision of the Supreme Court in Commissioner of Sales Tax v. Madhya Pradesh Electricity Board : 2SCR939 , where it has been held that merely because electrical energy is not tangible or cannot be moved or touched like, e.g., a piece of wood or a book, it cannot cease to be a movable property when it has also the attributes of such property. The question, therefore, is whether it can be said that these electric meters were used in the manufacture or processing of electrical energy for sale.
6. We propose first to consider the question raised before us on a plain construction of clause (c), referred to above. What has mainly to be considered in this regard is, when can it be said that electrical energy can be regarded as goods for sale Considering the nature of the goods in question, viz., electrical energy, we feel that it would not be possible to sell electrical energy or supply the same for payment except after measurement. Electrical energy, it may be pointed out, is quite different from such tangible goods like potatoes, onions or watches which can be both seen and felt and exist in distinct units. Considering the peculiar nature of the goods in question, viz., electrical energy, it appears to us that it cannot be sold unless and until it is measured. If this be so, equipment used for measuring electricity for the purpose of selling it to consumers must be regarded as having been used in the manufacture or processing of the goods, viz., electrical energy, for sale. On a plain construction of the said sub-rule, therefore, we feel that the Tribunal was right in the conclusion to which it has arrived.
7. We find that some support for the view which we are taking can be derived from the decision of the Supreme Court in Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes : AIR1965SC891 . The assessees in that case mined copper and iron ore from its own mines, transported the ore to its factory and manufactured finished products from the ore for sale. The question was whether certain goods including locomotives and motor-vehicles should be specified under section 8(3)(b) of the Central Sales Tax Act, 1956. Rule 13 of the Rules framed under section 13 of the Central Sales Tax Act reads as follows :
'The goods referred to in clause (b) of sub-section (3) of section 8, which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power.'
8. In discussing the aforesaid question, the Supreme Court held that the expression 'goods intended for use in the manufacture or processing of goods for sale' may ordinarily include such vehicles as are intended to be used for removal of processed goods from the factory to the place of storage. This conclusion could not have been arrived at by the Supreme Court had the view been taken that once the goods were fully manufactured at the factory and left the factory gate, the goods must always be considered as 'goods for sale'. It was contended by Mr. Cooper, the learned counsel for the Commissioner, that no reasons have been given by their Lordships of the Supreme Court for having arrived at this conclusion and that the correct view was that once the goods were fully manufactured or could be said to be finished goods, they must be regarded as 'goods for sale'. We find ourselves unable to accept this argument. In our view, such a contention runs contrary to the actual decision arrived at by the Supreme Court, in the sense that had that view been correct, their Lordships of the Supreme Court could never have come to the conclusion to which they have in fact come. In any event, as far as the goods in question before us are concerned, viz., electrical energy, it is quite clear that these goods could not be said to be a completely finished product in the sense of being ready for sale until measured, as we have already pointed out earlier. In view of this conclusion, it must necessarily follow that the Tribunal was right in coming to the conclusion that the assessees were entitled to the set-off claimed in respect of the said amount under rule 11(2)(c) of the said Rules.
In the result, we answer the questions referred to us as follows :
(1) In the negative.
(2) In the negative.
(3) In the negative.
9. The applicant to pay to the assessees the costs of this reference fixed at Rs. 250.
Reference answered in the negative.