In a major decision the Kerala High Court ruled that electricity is excluded from ‘Goods’ and assessment order should comply with Section 25(1) of Kerala Value Added Tax Act, 2003 (KVAT Act).
The petitioner, M/s Srinivasa Builders is a partnership firm registered in Hyderabad. Due to fiscal incentives extended by the Government, the petitioner obtained all necessary approvals and registrations for the installation of a windmill in Idukki District in Kerala. Property was also identified and purchased and permission was obtained from the Agency for Non-Conventional Energy and Rural Technology.
The Senior Counsel for the petitioner K Srikumar and Counsel G Biju submitted that ‘electricity’ is not goods as per the definition of ‘goods’ provided in Section 2(xx) of the Kerala Value Added Tax Act, 2003 (‘the KVAT Act’). It is submitted that though the petitioner had obtained registration under the KVAT Act and had installed the windmill in the year 2008-’09, since electricity was not a goods exingible to tax under the KVAT Act, a nil return had been furnished by him and the closing stock inventory was also shown as ‘nil’ since the firm had no other business within the State of Kerala.
The counsels for the petitioner further submitted that since the definition of ‘goods’ specifically excludes electricity, the contention that electrical energy is included under the 1st Schedule to the KVAT Act as exempted goods would not make any difference to the situation.
Advocate T.R Rajan and Government Pleader Resmitha R Chandran countered by emphasising the petitioner’s registered dealer status, arguing that they should have disclosed turnover even for non- taxable goods.
A Single Judge Bench of Justice Anu Sivaraman observed that “The petitioner has produced material to show that what was brought into the State was one windmill in a knocked down condition in three separate vehicles and also to show that the said windmill is still operational and that electrical energy is being generated and supplied to the KSEB.
The Court further noted that the contention appears to be that electrical energy being goods included in the 1st Schedule, for which, no tax is payable, the sale of electrical energy also ought to have been disclosed by the petitioner, who is a registered dealer under the KVAT Act, in his returns as turnover which has not been done in the instant case.
“Therefore, the charge against the petitioner could, at best, be one of filing of an incorrect return and not of suppression of taxable turnover or attempt to evade tax. In the above circumstances, the essential ingredient under Section 25(1) would not be available to sustain an order of assessment on best judgment” the Bench noted.
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