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Delhi High court Rejects Strict Interpretation for Requirement of license/ certificate under Electricity Act

Author- Neha Agarwal [Banasthali Vidyapith, Rajasthan]

The Delhi High Court on 22nd May 2019 in the case of Commissioner of Trade and Taxes v. Schneider Electric India Pvt. Ltd. Rejects the strict interpretation for Requirement of license/ certificate under Electricity Act and allowed exemption of supply of electrical equipments to buyers.

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In the instant case, the assessee(I.e. Schneider Electric India Pvt. Ltd), a registered dealer is engaged in the business of selling various electrical equipment which are used in the generation and distribution of electricity. Asseessee for 2003-04 and 2004-05 sold electrical equipment to various undertakings which are engaged in generation and distribution of electricity. The undertakings or the recipients of equipment provide certificates to the asseessee by stating that the supplies made by assessee need not to include in the taxable turnover being a valid deduction under the Electricity Act read with rule 11 of the Delhi Sales Tax Act, 1975(DST Act, 1975). For year 2003-04 the assessing authority denied the exemption to the assessee in assessment order.

The order made by special commissioner were impugned before the VAT Tribunal under section 76 of the Delhi Value Added tax Act, 2004. The VAT Tribunal by partly allowing and partly dismissing granted the benefit of claim under section 4 of the DST Act, 1975 up to the period of dated 10.03.2004, after that revenue challenged the order of tribunal before the present court.

The issue before the court in the present matter was whether the VAT Tribunal is making error by upholding the refusal of revenue’s claim for exemption under rule 11 of the DST Act, 1975 for sale made to the undertakings which are engaged in distribution of electricity for the prior period dated 11.03.2004.

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The assessee relied upon the section 8 of General Clauses Act, 1897 which state that where this Act or any other Act made after the commencement of this Act repeal or re-enacts any provision of enactment, then reference to repealed provision must be construed to be reference to the provision of so re-enacted and submit before the court that they are entitled to the exemption even after the introduction of 2003 Act.

The counsel on behalf of other side contended that rule 11 of DST Act, 1975 in itself is self-contained code and it mentions about the requirement of license. Since according to the provision, the distribution companies are not eligible then the selling dealers were not eligible to claim the deduction as well.

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The Delhi High Court, comprising of Justice S. Ravindra Bhat and Prateek Jalan after taking into consideration of all the arguments made by both the parties and material upon by the parties held that “unlike and exemption granted through a notification, the effect of the rule is to calculate a species of transaction from calculation of taxable turnover”

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