Electricity not being goods as per KVAT is not taxable

Srinivasa Builders Vs Commercial Tax Officer (Kerala High Court)

Kerala High Court held that ‘electricity’ is not goods as per definition of goods u/s 2(xx) of the Kerala Value Added Tax Act, 2003 (KVAT) accordingly not exingible to tax under KVAT.

Facts- The petitioner 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. Supply agreement was entered into with M/s. Vestas Technology India Limited for the supply of Wind Electrical Generator having a capacity of 750 KW for a total consideration of Rs.4,09,01,000/-.

The petitioner submits 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.

However a notice u/s. 25(1) of the KVAT Act was issued to the petitioner stating that the goods which were brought into the State, that is, the parts of the windmill and the tower were sold during the year in question, which is exigible to tax at 4% under Entry No.107(17) of the IIIrd Schedule to the KVAT Act as ‘Windmills and any special designated devices which runs on wind mills’. Hence, a best judgment assessment was proposed reckoning a total and taxable turnover of Rs.12,88,39,410/- and tax at 4% of the sale was proposed to be assessed.

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