Holding

Fully automatic washing machines are electronic goods and are liable to the concessional sales tax rate prescribed in the notification.

Summary

The appellants, manufacturers and dealers of fully automatic washing machines, claimed that their products qualified as "electronic goods" under a 1988 notification issued under Section 9 of the Andhra Pradesh General Sales Tax Act, 1957, and therefore were liable to a concessional tax rate of 2% (later 4%). The State argued that washing machines were covered by Entry 38(iv) of the First Schedule, which prescribed a 10% rate, and that the notification did not apply. The Supreme Court examined the definition of "electronic goods" and held that the key requirement is that the appliance’s functions are performed or controlled electronically by micro‑processors. Expert testimony confirmed that the machines use micro‑processor chips for wash, rinse and spin cycles. Consequently, the Court concluded that fully automatic washing machines fall under Entry 38(v) for electronic items and are entitled to the reduced tax rate. The appeals were allowed, setting aside the lower authorities' decisions.

Issues considered

Whether a fully automatic washing machine qualifies as an "electronic good" under the 1988 notification.
Whether Entry 38(iv) of the First Schedule precludes the application of the notification to washing machines.
Interpretation of the phrase "operating on electronic principles" in the definition of electronic goods.

Legislation cited

Andhra Pradesh General Sales Tax Act, 1957s. 6(B), s. 9

Subjects

sales taxelectronic goodstax concessionwashing machinemicro‑processorinterpretation of statutesconsumer electronicsAndhra Pradesh

Judgment

MIS. B.P.L. LTD. 'A
v.
STATE OF A.P.

JANUARY 9, 2001

[B.N. KIRPAL, MRS. RUMA PAL AND BRIJESJ-1 KUMAR. JJ.] B

Sales Tax:

.4ndhra Pradesh Generel Sales Tax Ac/, 19j7-Firsr Schedule-Enll:r
38(iv): 38M-No11fica1ion le1~·ing concessional ra/e oflm on Elecrronic Goods'._ C
A1110111a1ic Washing Machines-E111ir/ement to-Held, a11to111a1ic lt'ashing
machines are electronic goods and /here/ore enlitled lo benefit of rhe
1101ifica1io11.

Appellants are manufacturers and dealers in semi and fully automatic
washing machines. Sales tax rate leviable on washing machines was 10% D
prior to 20-7-1988 under the Andhra Pradesh General Sales Tax Act. 1957.
A notification, issued under Section 9 of the Act, reduced the rate of sales
tax to 2% on sale of'electronic goods' with effect from 1-7-1988. the term
'electronic goods' is defined in the said notification. The appellants treated
the fully automatic washing machines as 'electronic goods' and paid sales tax E
at the rate of 2°1.•. Revenue rejected the benefit of the notification for fully
automatic washing machines and raised a demand after making provisional
assessments levying a rate of sales tax at 10%. Appellate Assistant
Commissioner, Sales Tax Tribunal and High Court concurred with the
Revenue. Hence the appeals.
F
The appellants contended that fully automatic washing machines are
electronic goods and therefore entitled to benefit of the notification; that such
machines work on "Fuzzy Logic Computer Program"; •hat the machines
were micro-computer-controlled which actually work on the principal of auto
selection of the various parameters.
G
+ The respondent State contended that there is a specific entry for washing
machines under Entry 38 (iv) of the First Schedule to the Act; and that the
notification is not applicable for automatic. washing machines.

Allowing the appeals, the Court
H
195
196 SUPREME COURT REPORTS (200 I] I S.C.R.

A HELD : I. I. The key words which appear in the definition of 'electronic
goods' in the notification are "operating on electronic principles". The
underlying object for issuing such a notification was to give fillip to modern
technology as a result of which consumer electronics or electronic appliances
or equipment operating on electronic principles were to be charged a lesser
B rate of sales tax. The action of the automatic washing machines can be regarded
as being one which runs on centrifugal force but the operation or the running
of the machines is completely controlled by the micro process technology
involved in such machines. The running of the machine and its functions are
controlled by programmed micro chips. These micro-chips control and direct
electric current in a programmed manner so as to enable the washing machine
C to carry out its functions. The operations which are automatically c·ontrolled
in the working of the machines are that of (a) wash cycle, (b) rinse cycle and
(c) spin/dry. It has been certified by the Indian Institute of Technology that
the automatic washing machine of the appellants has the facility of water level
control delay program. It has various programs which are controlled through
micro-processor chips. The notification requires that an item can be regarded
D as an electronic goods if all its functions which are required to be performed
by the equipment or appliance are performed or controlled electronically by
micro-processor. Admittedly, the entire functioning of the washing machine
is automatic. Data is fed into the machine and thereupon it is the micro
processors which control and direct the carrying out of the various functions
E of the machine which results in the clothes being washed in the desired
manner. (200-E-F-G-H; 201-AI

1.2. On 1-6-1989, the State Government issued a memorandum whereby
the attention of the Commissioner of Commercial Taxes was drawn to the list
of electronic items prepared by the Electronics Corporation and it was stated
F in this memorandum that the State Government had decided that the list may
be followed for the purpose of concessional rate of tax on the electronic goods
as envisaged by the earlier notification dated 20-7-1988. Under the heading
"consumer electronics'', radio receivers, cassette tape-recorders, record
changers etc. are mentioned and entry 1.65 reads as follows: "Other consumer
G electronic aids/products". The reading of the list clearly shows that even
though some of these equipments or appliances performed different functions
like reproducing sound, as in the case of radio receivers or tape-recorders,
all of them are controlled or work with the help of chips or micro processors.
Even though washing machine is not specifically mentioned as one of the
items, it would fall under the category of "Consumer Electronic Product".
H Like a record player or radio, it works with the aid of micro processor and
B.P.L. LTD. v. STATE [KIRPAL, J.] 197
falls within the definition of"electronic goods" as contained in the notification A
dated 20-7-1988. (201-B-C-D-E]

1.3. Entry 38(iv) of the First Schedule to the Andhra Pradesh General
Sales Tax Act, 1957 relates to electrical items which includes electrical
washing machine whereas electronic items or products are referred to in
Entry 38(v). An electronic washing machine would come under Entry 38(v) of B
the Schedule and the notification dated 20-7-1988 would apply to all electronic
·--( goods including automatic washing machines of the appellants. The appellants
are entitled to the benefit of the notification dated 20-7-1988 with the result
that subject to other conditions which may be required to be fulfilled, the rate
of sales tax payable in respect of the automatic washing machines would be C
2% as prescribed by the said notification and thereafter as per notification
dated 7-9-1993 the rate has been raised to 4%. (201-F-G]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 444-445
of 2001.
D
From the Judgment and Order dated 01.4.1999 in TRC 47 & 48/96 of the
High Court of A.P. at Hyderabad.

With

C.A. Nos. 446-447 of2001.
E
With

C.A. Nos. 448 to 454 of2001.

Kapil Sibal, M.N. Rao, Ms. K. Amareswari Roy Abraham, Ms. Baby F
Kri.;hnan, G. Sreedhar, Ajith, Y. Raja Gopala Rao, G. Venkatesh, T. Anil Kumar
and K. Ram Kumar for the appearing parties.

The Judgment of the Court was delivered by

KIRPAL, J. Special leave granted. G
The only question which arises for consideration in this case is whether
Fully Automatic Washing Machine can be regarded as "electronic goods"
so as to attract a lower rate of sales tax.

The undisputed facts are that the appellants are manufacturers and H
198 SUPREME COURT REPORTS (2001] 1 S.C.R.

A dealers in television, audios, washing machines etc. and are registered dealers
with the Sales Tax Department at Hyderabad. Though the appellants deal in
both Semi and Fully Automatic Washing Machines, the present controversy
is only with regard to Fully Automatic Washing Machines.

Prior to 20th July, 1988, the rate of sales tax leviable on the sale of
B Automatic Washing Machine was 10 per cent. On 20th July, 1988, by a
notification issued in exercise of power contained in Section 9 of the Andhra
Pradesh General Sales Tax Act, 1957, the rate of tax payable on the sale of
'electronic goods' as defined in the said notification was reduced to 2 paise
in a rupee with effect from Ist July, 1988. This notification also exempted the
C sale of electronic goods from the levy of additional tax under Section S(a) and
surcharge on sales tax under Section 6(B) of the said Act.

The term "electronic goods" was defined in the said notification as
follows:

"2. For the purpose of this notification, the term "Electro~!c Goods"
D means electronic systems, instruments, appliances, apparatus,
equipment operating on electronic principles and all types of
electronic components, parts and materials and include:
(i) Consumer Electronics;
E (ii) Electronic test and measuring instruments;
(iii) Medical Electronic Equipment;

(iv) Electronic analytical instruments;
(v) Electronic equipment/instrument for nuclear Geo-Scientific and
F other special application;
(vi) Electronic process control equipment;
(vii) Power Electronic Equipment;
Electronic industrial Automation and Control equipment:
G (viii)Electronic data processing systems and electronic office
equipment;
(ix) Electronic Broadcasting Equipment;

(x) Electronic Aerospace and Defence equipment."
H The appellants claimed before the Sales Tax Authorities that its
B.P.L. LTD. v. STATE [KIRPAL, J.] 199
Automatic Washing Machines worked 'on Fuzzy Logic Computer Program. A
In other words, Fully Automatic Washing Machines were micro-computer-
controlled washing machines that actually worked on the principle of auto
selection of the various parameters. The entire work of washing the clothes,
after the same were loaded into the machine, was carried out automatically,
the machines being controlled and operated micro processor technology ..
B
Without accepting the contention of the appellants, the provisional
assessment order for the period I st April, 1994 to 31st March, 1995 was
passed raising a demand of Rs. 8.83, 143 as differential tax. For subsequent
period also tax was demanded, but it is not necessary to go into any further
details in respect thereof. c
The appellant filed appeals before the Appellate Assistant Commissioner
but without success. The Sales Tax Appellate Tribunal, on a further appeal
being filed by the appellants also came to the conclusion that the Automatic
Washing Machines would not be regarded as electronic goods.
D
The High Court of Andhra Pradesh also decided the point in issue
against the appellants. While disposing of the tax revision case, the High
Court came to the conclusion that while the control panel of such machines
was certainly electronic in the sense that it involved silicon chips and semi
conductors, the washing machines themselves did not operate on principles E
of electronics.The washing machines, the High Court concluded, operated on
the principle of centrifugal force, which is electro-mechanical in nature but not
electronic and any amount of sophisticated control of machine installing
micro-computer in the control panel could not make the machine electronic in
nature. Hence, these appeals.
F
The answer to the question arising in these cases depends upon the
interpretation of the definition of the term "electronic goods". The said term
is defined by the aforesaid notification. On a plain reading thereof, it means
that systems, instructions appliances, apparatus and equipments which are
electronic and operate on electronic principle would be electronic goods. All G
types of electronic components, parts or materials are also electronic goods
+ as per the said definition. In addition thereto, sub-clause (i) of para 2 of the
notifications specifically provides that in the definition of the term "electronic
goods" consumer electronics are also included. What has to be seen is
whether the automatic washing machines are electronic appliances or
equipments operating on electronic principle. H
200 SUPREME COURT REPORTS [200 I) I S.C.R.

A Mr. Kapil Sibal, the learned senior counsel appearing for the appellants
contended that it should be·,,s·o regarded. Mr. M.N. Rao, the learned senior
counsel submitted that in addition thereto, the automatic washing machine
was in any case an item which should be regarded as consumer electronics
and therefore would be entitled to the benefit of the said notification.

B The key words to our mind which appear in the said definition contained
in the notification are "operating on electronic principles". In the Concise
Oxford Dictionary, Tenth Edition , "electronic" has been inter alia defined as
"having components such as micro chips and transistors that control and
direct electronic currents". In McGraw-Hill Encyclopedia of Science and
C Technology (Sixth Edition), Volume VI at page 235 under the heading
"Electronics" it is stated thus: "The branch of science and technology relating
to the conduction and control of electricity flowing through semi-conductor
materials or though vacuum or gases." Under the heading "Consumer ).
Electronics " at page 237 of the said Encyclopedia, it is it is stated that:
"Aside from the communications services of telephone, radio and television
D the consumer has available a wide variety of electronic devices and equipment
which employ the detailed technology of the computer industry."

It appears to us that the underliving object of the State of Andhra
Pradesh issuing such a notification was to give fillip to modern technology
E as a result of which consumer electronics or electronic appliances or equipment
operating on electronic principles were to be charged lesser rate of sales tax.
It is, no doubt, true that the action of washing machines can be regarded as
being one which runs on centrifugal force but the operation or the running
of these machines is completely controlled by the micro process technology
involved in the said machines. It is not in dispute that the running of this
F machine and its functions are controlled by programmed micro chips. These
micro-chips control and direct electric current in a programmed manner so as
to enable the washing machine to carry out its functions. The operations
which are automatically controlled in the working of the machines are that
of (a) wash cycle, (b) rinse cycle and (c) spin/dry. It has been certified by
G the Indian Institute of Technology in the present case that the Automatic
Washing Machine of the appellants has the facility of water level controlled
delay program. It has various programs which are controlled through micro-
processor chips. In other words what the said notification requires is that on
item can be regarded as an electronic goods if its all functions which are
required to be performed by that equipment or appliance are perfonned or
H controlled electronically by micro-processor. Admittedly, in the present case
B.P.L. LTD. v. STATE [KI RP AL, J.) 201

• the entire functioning of the washing machine is automatic. Data is fed ilito A
~ the machine and thereupon it is the micro processors which control and direct
the carrying out of the various functions of the machine which results in the
clothes being washed\ in the desired manner.

We may here notice that on I st June, I 989 the Government of Andhra
Pradesh has issued a memorandum ~vhereby the attention of the Commissioner B
___( ... of Commercial Taxes was drawn to the list of electronic items prepared by the
Electronics Corporation and it was stated in this memorandum that the
Government had decided that the State List may be followed for the purpose
of concessional rate of tax on the electronic goods as envisaged by the earlier
notification dated 20th July, 1988. A copy of the said list has been filed in
Court which mentions various type of electronic equipments falling under
c
different heads. Under the heading of"consumer electronics", radio receivers,
cassette tape-recorders, record changers etc. are mentioned and entry 1.65
reads as follows: "Other consumer electronic aids/products". The reading of
this list clearly shows that even though some of these equipments or appliances
performed different functions like reproducing sound, as in the case of radio D
receivers or tape-recorders, all of them are controlled or work with the help
of chips or micro processors. Even though washing machine is not specifically
mentioned as one of the items, it would fall under the category of "Consumer
;.-.... Electronic Product". Like a record player or radio, it works with the aid or
.....
micro processor and falls within the definition of "electronic goods" as
contained in the said notification dated 20th July, 1988.
E

It was submitted by the learned senior counsel for the respondent that
washing machine is specifically meritioned in Item No. 38(iv) of the Schedule
to the said Act. Therefore, it was contended that notification of 20th July,

• 1988, cannot apply because in the case of washing machine the rate of duty
specified under entry 38(iv) is 10 per cent. We are unable to agree with this
contention for the simple reason that entry 38(iv) relates to electrical items
F

including electrical washing machine wheras electronic items or products are
referred to in entry 38(v). An electronic washing machine would come under
entry 38(v) and the notification dated 30th July. 1988 would apply to all
electronic goods including automatic washing machines of the appellants. G
For the aforesaid reasons, the appeals are allowed, the judgment of the
High Court and all the decision of the authorities below are set aside. The
appellants are held to be entitled to the benefit of the notification dated 20th
July, 1988 with the result that subject to other conditions which they may
require to be fulfilled, the rate of sales tax payable in respect of the Automatic H
202 SUPREME COURT REPORTS [2001] I S.C.R.

A Washing Machines would be 2 per cent as prescribed by the said notification '
and thereafter as per notification dated 7th September, 1993 by which rate -f'
has been raised to 4 per cent.

No order as to costs.

B B.S. Appeals allowed.

•

+