IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA STR No.: 2 of 2002 Reserved on: 07.08.2008 Date of decision: 27.08.2008 S.E.Hydel Circle, HPSEB, Shimla Petitioner. Versus Addl. Excise & Taxation Commissioner, (SZ) Shimla, H.P. Respondent Coram The Hon’ble Mr.Justice Deepak Gupta, J. The Hon’ble Mr. Justice V.K.Ahuja, J. Whether approved for reporting?1 Yes. For the petitioner: Mr. Bhupender Gupta, Sr. Advocate with Mr. Neeraj Gupta, Advocate. For the respondent. Mr. Ram Murti Bisht, and Mr. Rajesh Mandhotra, Dy. Advocate Generals. Per Deepak Gupta, J. This Sales Tax Reference has been referred to this Court under the provisions of the Himachal Pradesh General Sales Tax Act, 1968 (here-in-after referred to as the Act) for determination of the following substantial question of law:- “Whether the supply of electric meter by the appellant-Board to the consumer on payment of periodical hire charges to the Appellant-Board under a duly executed agreement for such supply of meter amounts to “sale” within the meaning of section 2(j)(iv) of the H.P. General Sales Tax Act, 1968 read with other relevant provisions thereof”, is allowed to be referred to the Hon’ble High Court as it is arising from the order of this Tribunal.” 1 Whether the reporters of the local papers may be allowed to see the Judgment? yes . 2 Brief facts of the case are that the assessee is the H.P. State Electricity Board (here-in-after referred to as the Board). The assessee is dealing in generation and distribution of electricity. The assessee supplies electricity to the consumers. To measure the electricity supplied to the consumers, meters are installed at the site/premises of the consumer. The Board retains a security for the supply of the meter and charges hire charges from the consumers for supply of the meters. The Assessing Authority held that this hire agreement amounted to a sale within Section 2 (j) (iv) of the H.P. General Sales Tax Act, 1968 and therefore, assessed the hire charges received by the Board to sales tax. Appeals were filed to the Appellate Authority, which dismissed the appeals. Thereafter, appeals were filed under Section 30 of the Act to the H.P.Sales Tax Tribunal. The learned Tribunal on an analysis of the law came to the conclusion that the renting out of the meter did not amount to a sale and accepted the appeal of the assessee. On the request of the revenue reference aforesaid has been made. To appreciate the rival contention of the parties, it would be relevant to quote Section 2 (j) (iv) of the Act. “2. Definitions.- In this Act, unless there is anything repugnant in the subject or context,- xx.. xx.. xx.. xx.. xx.. xx.. xx.. xx.. (j) “sale” means any transfer of property in goods for cash or for deferred payment or for any other valuable consideration other than a mortgage, hypothecation, charge or pledge, and includes- (i), (ii) (iii)…… 3 (iv) the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;” We have heard Shri Ram Murti Bisht, learned Deputy Advocate General for the revenue and Shri Bhupender Gupta, learned Senior counsel for the assessee. On behalf of the revenue, it has been contended that by fiction of law sale has been defined to include the transfer of the right to use any goods for cash, deferred payment or other valuable consideration. It is, therefore, contended that when the assessee rents out the meter to the consumer to be used by him this amounts to a sale and thereby the assessee becomes liable to pay tax on the same. On the other hand, Shri Bhupender Gupta, learned Senior counsel on behalf of the assessee has urged that the electricity meter is fixed by the Board for its own purpose, i.e. to measure the electricity supply to the consumer. He further contends that the consumer has no right to in any manner interfere in the meter and therefore, there is no transfer of any right of the meter to the consumer. The only question to be decided in the present case is whether right to use the meter has been transferred by the Board in favour of the consumer. Section 26 of the Indian Electricity Act, 1910 deals with meters. It provides that in the absence of an agreement to the contrary the amount of energy supplied to the consumer shall be measured by means of a correct meter. The consumer can ask the assessee to supply a meter. This section also 4 provides that the licensee can require the consumer to give security for the cost of the meter and also to enter into an agreement for the hire thereof. The choice is with the consumer either to purchase a meter or to hire the meter from the licensee. Sub-section (2) of Section 26 provides that it is the duty of the licensee to ensure that the meter is kept in correct order. Sub-section (4) provides that the licensee or any person authorized by him shall have the right, within reasonable hours, to access the meter and to inspect and test the same. The licensee can remove the meter. The consumer has no right to connect the meter with any electricity supply line except the one fixed by the licensee. It is common knowledge that the consumer has no right to even break the seals of the meter. The seals are affixed by the licensee. All that can be said in favour of the revenue is that the meter is fixed at the site provide by the consumer and it is used to measure the supply of electricity made to the consumer. This, in our opinion, does not amount to transfer of any right in the meter to the consumer. The consumer has no right to change the meter. He has no right to remove the electricity supply wire. He has no right to remove or replace the supply line to the meter. He cannot break the seals of the meter. The meter is installed more for the benefit of the licensee than for the consumer. The licensee can ascertain and measure the electricity supply only through the use of a meter. It is only then that he can bill the consumer. There is no transfer of interest in the meter. What the Electricity Board is doing is that it is charging for the supply of 5 electricity. The meter is hired out only for the purpose of measuring the electricity supply. This is done under the statutory provisions. Unless the meter is connected with the electricity supply wire and electricity is supplied, the meter is of no use. No doubt, rent is being charged for the meter but this has to be read in the context of the Section 26 of the Indian Electricity Act, 1910. As we have already held above, no right in the meter has been transferred to the consumer. We, therefore, hold that the hiring of the meter does not amount to a sale. While taking this view, we are fortified by the view taken by the Punjab and Haryana High Court in Union of India vs. State of Haryana, (2001) 17 PHT 499 (P&H), wherein it was held as follows:- “13. We respectfully agree with the views expressed by the Andhra Pradesh and Allahabad High Courts and add that what the petitioners are charging is the rent for connecting instrument placed in the premises of the subscriber with the telephone Exchange by way of telegraphic lines. Till the instrument is connected with the telegraph lines to the telephone exchange , the instrument placed in the premises of the subscriber is useless. Through the telegraph lines, the apparatus receives the telegraphic or other communication by means of electricity. So the petitioners are charging the rent for telegraphic lines including the instrument. Therefore, mere charge of the rent or fee as per “measured rate system” or “message rate system” cannot be equated with sale of goods or deemed sale of goods within the meaning of the 1973 Act. As a logical corollary to the aforementioned conclusion, we hold that the orders of assessment passed by respondent No.2 and the demand notices issued by him are without jurisdiction and the same are liable to be quashed as such.” 6 In view of the above discussion, we find no merit in the petition. The substantial question of law is answered against the revenue and in favour of the assessee. ( Deepak Gupta ), J. 27th August, 2008 ( V.K.Ahuja ), J. ™