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Hindustan Steel Limited Vs. the Additional Commissioner of Sales Tax and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtOrissa High Court
Decided On
Case NumberO.J.C. No. 182 of 1965
Judge
Reported in[1971]27STC233(Orissa)
AppellantHindustan Steel Limited
RespondentThe Additional Commissioner of Sales Tax and anr.
Appellant AdvocateRanjit Mohanty, Adv.
Respondent AdvocateThe Standing Counsel
DispositionApplication allowed
Cases ReferredJ.K. Cotton Spinning & Weaving Mills Co. Ltd. v. The Sales Tax Officer
Excerpt:
- state financial corporations act, 1951 [63/1951]. section 29; [p.k. tripathy, a.k. parichha & n.prusty, jj] discharge of loan orissa forest act (14 of 1972), section 56 confiscation of vehicle - held, the authorities under section 56 of the orissa forest act, 1972 are not obliged to release the vehicle from the confiscation proceeding or to pay the sale proceeds of the vehicle after the order of confiscation in favour of orissa state financial corporation when such vehicles were purchased on being financed by the orissa state financial corporation and the loan had not been liquidated by the date of the seizure/confiscation of the vehicle. concept of first charge or second charge has no applicability when the vehicle is not otherwise disposed of to determine the liabilities of the..........typewriters, duplicators, accounting machines and calculators, office furniture and equipment.the sales tax officer allowed items 1 to 3 and 6 to be included in the certificate of registration and refused the prayer in respect of the residual five items. the matter was concluded so far as items 1 to 3 and 6 are concerned. a revision was carried to the commissioner of sales tax against the order of refusal in respect of the residual five items. before the commissioner of sales tax item no. 9 was not pressed. result is that only four items, namely, items 4, 5, 7 and 8 came up for consideration by the commissioner. the commissioner affirmed the order of the sales tax officer and against that order this writ application has been filed under articles 226 and 227 of the constitution.2. the.....
Judgment:

G.K. Misra, C.J.

1. The petitioner is M/s. Hindustan Steel Limited, Rourkela. It is a registered dealer under the Central Sales Tax Act. It filed an application to include the following items in its certificate of registration so as to purchase those articles on payment of tax at concessional rate. The application covered nine items as stated hereunder :

1. Mechanical and electrical plant, machinery and equipment with accessories including spares.

2. Steel structures and fabricated parts.

3. Refractories and fireclay.

4. Construction equipment and tools and tackles including spares.

5. Locomotive, vehicles, rolling-stock and track materials.

6. Paints, varnishes, chemicals and explosives.

7. Construction materials such as, but not limited to, cement, steel, pipes and pipe fittings, asbestos sheets, G.I. sheets, wire ropes.

8. Erection materials such as, but not limited to, cables, welding materials, electrical bulb, petrol, diesel oil, lubricants, grease, hardware materials, bolts and nuts and washers, gases, timber, glass, cotton waste, metals, grinding stones, drill sets, small tools, rubber belts etc.

9. Paper and stationery items, survey and measuring instruments, drawing materials, typewriters, duplicators, accounting machines and calculators, office furniture and equipment.

The Sales Tax Officer allowed items 1 to 3 and 6 to be included in the certificate of registration and refused the prayer in respect of the residual five items. The matter was concluded so far as items 1 to 3 and 6 are concerned. A revision was carried to the Commissioner of Sales Tax against the order of refusal in respect of the residual five items. Before the Commissioner of Sales Tax item No. 9 was not pressed. Result is that only four items, namely, items 4, 5, 7 and 8 came up for consideration by the Commissioner. The Commissioner affirmed the order of the Sales Tax Officer and against that order this writ application has been filed under articles 226 and 227 of the Constitution.

2. The sole point for consideration is whether the application in respect of these four items should have been allowed. The relevant provisions are Sections 8(1)(b) and 8(3)(b) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act) and Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957. Section 8(1)(b) and Section 8(3)(b) of the Act run thus:

8 (1) Every dealer, who in the course of inter-State trade or commerce--

(a) ...

(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 three per cent. of his turnover.

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

(b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale 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.

Rule 13 of the Rules is as follows:

13. 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.

3. An analysis of the aforesaid provisions would show that a dealer in the course of inter-State trade or commerce shall be liable to pay tax under the Act which shall be three per cent. of his turnover if he sells to a registered dealer other than the Government, goods of the description referred to in Sub-section (3). The goods referred to in Sub-section (3) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing goods as being intended subject to any rules made by the Central Government in this behalf for use by him in the manufacture or processing for sale or in mining so far as the petitioner is concerned. Rule 13 makes the position further clear and prescribes 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.

4. It was the duty of the taxing authorities to examine items 4, 5, 7 and 8 in the light of the enumeration made in Rule 13. They must come to a conclusion whether such goods were intended to be used by the petitioner in any of the manner prescribed therein.

5. The law on the point was not very clear when the matter was considered by the taxing authorities. In the meantime the position has been clarified by a decision of the Supreme Court in J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur, and Anr. [1965] 16 S.T.C. 563 (S.C.). Their Lordships analysed the provisions in that case and came to the conclusion that a restrictive construction cannot be placed on the expression 'in the manufacture'. They indicated how anomalies would arise if a restrictive construction takes place. It will be profitable to refer to the relevant observations :

The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression 'in the manufacture of goods'.

6. The Sales Tax Officer would accordingly keep in view the analysis in the aforesaid Supreme Court decision and examine if items 4, 5, 7 and 8 are used either in the manufacture or processing of the steel industry or mining operation taken up by the petitioner. To do so, full opportunity will be given to the dealer to explain as to how those items are used in the manufacture or processing of the steel industry or the mining operation. The learned Advocates on either side state that the Sales Tax Officer is the appropriate authority where this matter can be properly investigated into in the light of the decision of the Supreme Court.

7. It may be noted that the Central Government have issued a circular enumerating classes of goods which may be specified in the registration certificate of dealers manufacturing particular classes of goods. This is to be found at page 367 of Chaturvedi's Central Sales Tax Laws, Vol. I. We do not express any view on the legality of such a circular. We merely bring it to the notice of the Sales Tax Officer for consideration at the time of re-examination.

8. In the result, the writ application is allowed. The orders passed by the Sales Tax Officer and the Commissioner of Sales Tax relating to items 4, 5, 7 and 8 are quashed. The case is remanded to the Sales Tax Officer for reconsideration in the light of our observations made above. There will be no order as to costs.

S. Acharya, J.

I agree.


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