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J.K. Cotton Spinning and Weaving Mills Company Ltd. Vs. Sales Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Civil
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ Petition No. 2367 of 1962
Judge
Reported in[1964]15STC711(All)
AppellantJ.K. Cotton Spinning and Weaving Mills Company Ltd.
RespondentSales Tax Officer and anr.
Appellant AdvocateC.S.P. Singh and ;J. Swarup, Advs.
Respondent AdvocateStanding Counsel
DispositionPetition dismissed
Excerpt:
.....appropriate state or for any other sufficient reason. if a certificate can be cancelled in whole, it can also be cancelled in part and that has precisely been done in the instant..........goods but is not used in the making or creation of goods. as we have already said above, it is not goods required in connection with the manufacture or in relation thereto but the goods which are used in the manufacture that fall under rule 13 read with section 8 of the act.16. for the reasons mentioned above, we are of the opinion that even machinery has been rightly excluded from the registration certificate.17. the only other submission that requires to be considered is whether the respondents could revise their earlier decision and exclude certain articles which they had earlier included in the certificate of registration. section 7(4) of the central sales tax act reads :a certificate of registration granted under this section may be cancelled by the authority granting it, where it.....
Judgment:

Jagdish Sahai, J.

1. The petitioner, Messrs J.K. Cotton Spinning and Weaving Mills Company Limited (hereinafter referred to as the petitioner) is a public limited liability company having its registered office at Kamla Tower, Kanpur, and carries on the business of manufacture and sale of cotton textiles, tiles etc. On 21st June, 1957, the petitioner made an application to the first respondent, the Sales Tax Officer, Sector II, Kanpur, for registration under Section 7(1)/7(2) of the Central Sales Tax Act, 1956. The petitioner specified the following goods or classes of goods which it ordinarily purchased in the course of inter-State trade-

Cotton staple fibre, yarn, wastes, coal, petrol, machinery, elec-tricals, spares, hardwares, dyes and colours, chemicals, auxiliaries, oils, lubricants, tallows, starches, woollen clothings, gums, clays, salt, beltings, bobbins, shuttles, wooden accessories and other mill stores for manufacturing cloth, yarn, tiles and paints etc.

2. The first respondent granted a certificate of registration No. K.R. 771, dated 8th July, 1957. On 30th July, 1958, the petitioner made another application to the first respondent to amend the aforesaid certificate of registration so as to include the following goods also in the list of goods specified therein, on the ground that the petitioner had omitted to specify the same in its original application :

Industrial gases, drawing instruments, photographic materials, packing materials including wood, paper, straw and cardboards etc. and building materials including iron, steel, cement, lime, fire-bricks and refractories.

3. On 25th September, 1958, the first respondent amended the certificate of registration as prayed by the petitioner. Late in July, 1961, the petitioner received a notice No. Central/57-58/ST-2-598, dated 19th July, 1961, from the first respondent calling upon it to show cause as to why the aforesaid certificate of registration be not amended so as to exclude drawing instruments, photographic materials, building materials including iron, steel, cement and lime, and also sent a detailed list of goods covered under the term 'electricals' which were used in the goods for sale. In the notice it was also stated that coal being a declared commodity, it could not be purchased for any purpose other than for resale and, therefore, the inclusion of coal in the said certificate of registration had been cancelled. By means of the letter dated 24th July, 1961, the petitioner replied to the notice stating that drawing instruments were required to prepare designs which were very necessary in the manufacture of textiles and without which it would not be possible to cater to public preference and that photographic material was also required to prepare the said designs and further that building materials including iron, cement and lime were required for setting up the factory building wherein machinery was installed for manufacturing goods, that these materials were also needed for installation of the said plant and machinery and further that the cement and lime were required for manufacturing tiles sold by the petitioner. In respect of the electrical goods, the petitioner stated that various electrical accessories were always required for proper lighting so necessary during the manufacturing processes. The petitioner also contended that inasmuch as the original certificate of registration was issued after necessary inquiries and that as the amendments had also been effected after due enquiry, there was no reason to exclude any goods from the scope of the certificate of registration. Thereafter nothing more was done in the matter until late in June, 1962, when the letter dated 23rd June, 1962, was received by the petitioner stating therein that the explanation submitted by the petitioner was not found satisfactory and that the certificate of registration should be submitted, failing which it would be cancelled. On 17th July, 1962, which was the date fixed by the Sales Tax Officer in the aforesaid proceedings, the petitioner appeared before the Sales Tax Officer and the latter permitted the petitioner to file a written explanation. On the next date fixed (23rd July, 1962), the petitioner's representative appeared before the Sales Tax Officer and waited there up to 3 p.m. The Sales Tax Officer did not turn up. By its letter dated 27th July, 1962, the petitioner wrote to the Sales Tax Officer informing him that its representative had waited for him on 23rd July, 1962, and that as he was absent, some other date may be fixed in the matter. It is alleged by the petitioner that the officials of the Sales Tax Office refused to take delivery of the letter with the result that it was sent under registered post the same day. On 31st July, 1962, the petitioner submitted a representation to the second respondent, the Assistant Commissioner of Sales Tax, U.P., placing before him all the facts and contending that the certificate of registration was not liable to be amended by the Sales Tax Officer. The same day the second respondent passed the following order :

Office to report and ask the S.T.O. to keep in abeyance deletion of items.

4. On 3rd August, 1962, the second respondent passed an order that as the disputed articles were not directly used in the manufacture of the goods for sale, the action of the Sales Tax Officer was justified and on 9th August, 1962, the first respondent passed an order directing the deletion from the registration certificate of the items:

Drawing materials, photographic materials and other commodities mentioned in the original show cause notice dated 19th July, 1961.

5. The petitioner was directed to surrender the certificate of registration within three days for making the proposed amendments, failing which the said certificate stood in jeopardy of cancellation altogether.

6. The prayer in the petition is for the issue of a writ of certiorari calling for the record of the case and quashing the orders dated 3rd August, 1962, and 9th August, 1962, of the second and the first respondents respectively and in the alternative for a writ of mandamus directing the respondents aforesaid to withdraw the aforesaid orders dated 3rd August, 1962, and 9th August, 1962. In addition, there is the usual prayer for the issue of any writ, order or direction as this Court, in the circumstances of the case, deems it fit and proper to issue.

7. Mr. Jagdish Swarup, learned counsel for the petitioner, has stated that he does not press the case so far as iron, steel and coal are concerned. He has, however, made the following two submissions with regard to rest of the articles excluded by the respondents:

1. The items deleted or sought to be deleted from the certificate of registration are covered within the scope of Rule 13 and for that reason the orders passed by the respondents are illegal, and

2. That inasmuch as the items in question were included in the certificate of registration after due enquiry, as required by the statute and there being no justification for a subsequent revision of the decision, the respondents acted without jurisdiction in seeking the impugned amendment.

No other submission has been made before us.

We will take the submissions seriatim.

8. Rule 13 of the rules framed under the provisions of the Central Sales Tax Act reads :

Prescription of goods for certain purposes.-The goods referred to in Clause (b) of Sub-section (3) of Section 8 which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel, or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power.

9. Section 8 of that Act, so far as relevant for our purposes, reads :

8. Rates of tax on sales in the course of inter-State. trade or commerce. -(1) Every dealer, who in the course of inter-State trade or commerce-

(a) sells to the Government any goods ; or

(b) sells to a registered dealer other than the Government goods of the description referred to in Sub-section (3); shall be liable to pay tax under this Act, which shall be one per cent. of his turnover.

(3) The goods referred to in Clause (b) of Sub-section (1)-

(a) in the case of declared goods are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him;

(b) in the case of goods other than declared goods are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.

10. We will first take the drawing instruments, electricals, colours, chemicals and photographic materials and see whether the same are covered by Rule 13 read with Section 8. It is contended that drawing instruments, colours, chemicals and photographic materials are needed for preparing designs which are very necessary in order to cater to the taste of the consumers and that without preparation of designs it will be difficult for the petitioner to manufacture goods as desired or required by the public. It is true that drawing instruments, colours, chemicals and photographic materials are needed for the preparation of designs. The question for consideration, however, is whether it could be said that those goods are needed in the manufacture of goods. In our judgment, designing is a process separate and earlier than manufacture. It is after the process of designing is over that the process of manufacturing starts. In Bouviers' Dictionary, the words 'manufacture' and 'design' have been given the following meanings:-

Manufacture.-To make or fabricate raw materials by hand, art, or machinery, and work into forms convenient for use; and, (when used as a noun) anything made from raw materials by hand, or by machinery, or by art.

Design.-As a term of art, 'the giving of a visible form to the conceptions of the mind, or in other words to the invention. Plan, scheme or intention carried into effect. A project, an idea.

11. In Shorter Oxford Dictionary, amongst others, the following meanings have been given to the word 'processing' :-

A particular method of operation in any manufacture, or in printing, photography, etc.; often named from the invention.

12. Mr. Jagdish Swarup concedes that the articles in question are not used in ' processing ' but only in the 'manufacture' of goods. With the process of manufacturing starts the process of executing the design. It is true that there must be a design of the goods sought to be manufactured because the labour partaking in the process of manufacture must know what is to be produced. The production itself has to be of a set pattern in which even the least deviation from the design prepared is not permissible. Still the act of designing and that of manufacturing are two distinct and separate operations. We are for this reason of the opinion that the photographic materials and articles required for the preparation of designs including drawing instruments, colours, chemicals etc. cannot be comprehended in the expression ' in the manufacture or processing of goods for sale.

13. With regard to electricals, it has been contended that in order to work the factory efficiently and in order to have better manufacturing yield, it is necessary to have electric lights and fans in the factory and, therefore, electricals are required in the manufacture of goods. We are unable to agree. Even though we do not dispute that certain amount of light is necessary in order to carry on manufacturing operations, and electric fans are required for the convenience and efficiency of the workers, we are unable to see how these articles can be considered to be used in the manufacture of goods. In our judgment, the expression 'in the manufacture of goods' has been used in the limited sense of those articles being used which are directly and actually needed for turning out or making of the goods. It would be noticed that the Legislature instead of using the words ' in connection with' or 'in relation to the manufacture of goods', which would have been the case if the idea was to include all the articles which directly or indirectly help in the manufacture of goods, has used the words ' in the manufacture or processing of goods.

14. Coming to the building materials, cement and lime, it is contended that before manufacture can take place, there must be a building in which manufacturing operations can go on. That is undeniably so, but Rule 13 is not comprehensive enough to include these articles as they are not directly needed in the manufacture or creation of goods or even in the processing of goods. We find support for our view from Bhartia Electric Steel Co. Ltd. v. Commercial Tax Officer and Ors. [1956] 7 S.T.C. 527.

15. The only other item that remains to be considered is machinery. In our judgment, even machinery would not be covered by Rule 13 read with Section 8. It is not used in the manufacturing or processing of goods in the sense of being an ingredient or a commodity which is used in the creation of the goods. Machinery being a substitute of manpower makes or creates goods but is not used in the making or creation of goods. As we have already said above, it is not goods required in connection with the manufacture or in relation thereto but the goods which are used in the manufacture that fall under Rule 13 read with Section 8 of the Act.

16. For the reasons mentioned above, we are of the opinion that even machinery has been rightly excluded from the registration certificate.

17. The only other submission that requires to be considered is whether the respondents could revise their earlier decision and exclude certain articles which they had earlier included in the certificate of registration. Section 7(4) of the Central Sales Tax Act reads :

A certificate of registration granted under this section may be cancelled by the authority granting it, where it is satisfied that the dealer to whom it has been granted has ceased to carry on business or has ceased to exist or, in the case of a dealer registered under Sub-section (2), has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason.

18. The words underlined are wide in their amplitude and a certificate of registration can be cancelled for sufficient reason. If a certificate can be cancelled in whole, it can also be cancelled in part and that has precisely been done in the instant case. The respondent No. 1 deleted the following items from the registration certificate-

Drawing materials, photographic materials, building materials including lime and cement (except cement used in the manufacture of tiles for resale), electricals, iron and steel and coal

19. on the ground that they were not used for manufacture of goods. The reason assigned by respondent No. 2 is that the ' disputed articles are not directly used in the manufacture of goods for sale'. The reasons given by both the respondents are sufficient and relevant for purposes of refusing a registration certificate. It is true that after the original certificate was granted, these items were also added to it by means of a notification at the request of the petitioner. The respondents, however, seem to take the view that their notification was erroneous. In this view, they are correct. Consequently, we are of the opinion that under Section 7(4) of the Central Sales Tax Act respondent No. 1 had the jurisdiction to modify or amend or partly cancel the certificate of registration with regard to the disputed articles. We, therefore, overrule the second submission of the learned counsel also.

20. For the reasons mentioned above, we are of the opinion that there are no merits in this petition. It is accordingly dismissed but there is no order as to costs.


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