1. The petitioner in this case is Messrs. Bhartia Electric Steel Co., Ltd. It carries on the business of manufacturing steel casting, ingots, bars, rounds, flats and squares and selling the same after such manufacture. The petitioner is a registered dealer under Section 7 of the Bengal Finance (Sales Tax) Act 1941 (Bengal Act VI of 1941) hereinafter referred to as the 'Act').
Under Section 7 of the Act, no dealer, while being liable to pay tax under Section 4 of the Act, can carry on business unless he has been registered under the Act, and possesses a registration certificate. That is to say, a dealer whose turnover exceeds the taxable quantum and who had thus become liable to pay tax under the Act, must get himself registered and possess a registration certificate.
The turnover of this particular company admittedly exceeds the taxable quantum and therefore it had to get itself registered. The petitioner company made application in the prescribed form. The application for registration 'for the year ending 31-12-1940 was made on 4-9-1941.
The application was made by Nandalal Bhartia, one of the directors of the company, stating that the business was mainly wholesale manufacturing and partly retail. It was mentioned that the gross turnover during the year ending December 31, 1940 was Rs. 22,00,000/-. It was then stated as follows:
'Following classes of goods are ordinarily purchased by us.
(a) For purposes of manufacture, Iron and steel, scrap, boring, hardware, metals, stationery, mill stores, ingots and billets, mill stores, oils, tools, machinery accessories spare parts, chemicals, bricks, building materials, sand, coal'.
2. It was further stated that the company did not purchase anything for resale. Finally, it was stated that the company manufactured for sale the following class of goods: 'Steel castings, ingots, bars, rounds, flats, squares etc'. This application was produced at the hearing and hasbeen marked as Ex. 1. The certificate was granted by the Commercial Tax Officer, Beadon Street, on 27-9-1941 in form IIB as prescribed by the Rules. This certificate has been produced at the hearing and has been marked Ex. A. The certificate inter alia contains the following statement:
'Sales of the following goods to this dealer will be free of tax--
(a) For purposes of manufacture. Iron, steel scrap, borings, hardware, metals, stationery; mill stores, ingots and billets, oils, tools, sand and coal, and
(1)any other raw materials.Certified by the purchasing dealer to be required for usein any process in the manufacture ofsteel castings, ingots, bars, rounds, flats,squares.'
(2)Plant, machinery, spareparts, accessories and consumable stores.
(3)Building or plumbing materialsor fixtures required forconstruction, fitting out or repair of any building.
3. So far as goods for resale are concerned, the certificate was originally endorsed as 'Nil' but subsequently it was amended by adding piece goods. Similar certificates continued to be issued for succeeding years. The certificates dated 14-10-1941 & 19-5-1954 have been produced. These certificates have been collectiveiy marked as Ex. A.
On 13-12-1954 the petitioner made an application to the Commercial Tax Officer, Beadon Street District II Calcutta for inserting tea, ghee spices fuel, utensils and cutlery in the said certificates for exemption of sales tax, alleging that they were used for manufacture of sweetmeat, tea, foodstuffs and meals in the canteen of the factory.
On the same day the respondent Commercial Tax Officer wrote to the petitioner asking it to send its registered certificate by 16-12-1954. On 18-12-1954 the petitioner replied by saying that the registration certificate had already been sent. On 23-12-1954 the respondent Commercial Tax Officer sent a Memorandum to the petitioner a copy whereof is annexed to the petition at page 13. It is in the following terms:
'Re : Scrutinisation of the registered certificate. It is proposed to delete some of the items from, your registration certificate. You are therefore requested to appear before the undersigned on 30th December 1954 at 11.30 a. m. to produce or cause to be produced any objection to such deletion. Specific items will be mentioned at the time of hearing'.
4. On 30-12-1954 the petitioner wrote back to the Commercial Tax Officer a letter copy whereof is set out at page 15 of annexure B to the petitioner. The letter stated that it was not possible to show cause against the deletion of items from the registration certificate unless particulars of the specific items proposed to be deleted were stated. On 4-1-1955 the Commercial Tax Officer replied to this letter (page 17) inter alia stating as follows:
With reference to your Advocate's letter dated 30th December 1954 I beg to inform you that the scope of exemption under Section 5 (2) (a) (ii) of the B. P. (S. T.) Act in the case of manufactures has been restricted by the Government to admit only those goods which are actually used in the manufacture of goods for sale. It has accordingly been decided to extend exemptionunder Section 5 (2) (a) (ii) in the case ofmanufactures the following classes of goods whichshould be specified in the Certificate of Registration as being intended for use in the manufacture of goods for sales.
(a) Raw materials, and articles which are components or constituents of the finished product;
(b) Consumable scores which are used in the process of manufacture, e. g., fuel, lubricating oil, chemicals, provided that they are actually used in the process of manufacture, or are required for use in machines employed in a manufacturing process.
(c) Plant and Machinery used in turning out the finished product.
(d) Spare parts and replacement for the plant and machinery indicated in (c) above.
In accordance with the above decision, your Registration Certificate is proposed to be amended to show as under:
'1. Raw materials.
2. Plant, machinery, spare parts & accessories,
3. Consumable stores viz., Sand, Coal, Tea, Ghee.
Provided that all goods for which exemption from payment of sales tax is claimed are intended for use in the actual process of manufacture of the goods named below:
(i) Steel castings, Ingots, Bars, Round Flats, Squares;
(ii) Sweetmeats, tea for canteen at the Factory.
Hoping your confirmation in respect of the above matter by 10-1-55'.
5. In reply to the said letter the petitioner objected to such deletion on the ground that it was without authority of law and not authorised under the Act or Rules. Without prejudice to such contention, the petitioner wished to know as to when Government had decided to reduce the exemptions, and asked to be furnished with details of such order.
On 18-1-1955 the respondent Commercial Tax Officer wrote back to say that the details of the Government order could not be given, but reference was made to Section 5 (2) (a) (ii) which exempted only those goods which are actually used in the manufacture of goods for sale etc. It was stated that the entries made previously were effected under a wrong notion of Section 5 (2) (a) (ii) and there is no embargo under the Act to correct that notion and to amend the certificate accordingly'.
The certificates have accordingly been amended. The amendment shows that while sweetmeats, tea for canteen at the factory for sale has been, allowed, the previous item No. 3 namely, 'building or plumbing materials or fixtures required for construction, fitting out or repair of any building' has been omitted. In fact, it is this item which Mr. Kar on behalf of the petitioner has agitated before me. According to him, this deletion is illegal and unauthorised.
6. This Rule was issued on 22-2-1955 upon the respondents to show cause why order should not be made directing the said respondents not to give effect to the order dated February 7, mentioned in the petition so far as it purported to delete the various items of exempted goods therein mentioned and why an order in the nature of a writ of certiorari should not be made quashing the said order in so far as it purported to delete the various items of exempted goods therein mentioned and also why a writ of mandamus should not be made directing, the respondents toforbear from giving effect to the said orders of deletion or not to give effect to the same, and to give effect to the registration certificates as they originally stood prior to the amendment of February 1955.
7. The learned Advocate General appearing on behalf of the respondents has taken a preliminary point namely, that under Section 20(3) of the Act, the petitioner had an adequate alternative remedy. Under that provision, the Commissioner may upon application made to him or of his own motion revise any order passed under the Act or the Rules made thereunder and subject to the same, the Board of Revenue may in like manner revise any assessment or order made by the Commissioner. I think that this point is well founded.
However, although Mr. Kar has not argued it, it may be said that the Commercial Tax Officer had passed an order not of his own initiative, but under directives made by Government and consequently any revision before the Commissioner would be ineffective inasmuch as it was unlikely that the Commissioner would go against such a directive. I shall therefore proceed to deal with this application on its merits.
8. The matter really depends on a construction of Section 5 (2) (a) (ii) of the Act. I set out below the relevant provisions:
'5 (1). Tax payable by a dealer under this Act shall be levied at the rate of three quarters of an anna in the rupee on his taxable turnover.
(2) In this Act the expression 'taxable turnover, means that part of a dealer's gross turnover during any period which remains after deducting therefrom
(a) his turnover during that period on
(ii) sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer as being intended for resale by him, or for use by him in the manufacture of goods for sale or for use by him in the execution of any contract'.
9. It will be noted that in the application for registration, bricks building materials, sand and coal, were stated to be goods ordinarily purchased by the petitioner company for purposes of manufacture. The registration certificate which was issued however, gave exemption in respect of building or plumbing materials or fixtures for construction, fitting out or repair of any 'building'.
Since it is the amendments of the certificate which are questioned in this application, I am only concerned with the question as to whether the exemption so given has been rightly deleted. The question therefore reduces itself to a narrow compass.
The question is whether building or plumbing materials or fixtures for construction, fitting out or repair of any building are goods intended for use by the dealer in manufacture of goods. That this is a more restricted question than it might otherwise have been, is apparent. The petitioner company admittedly carries on business in the manufactures of steel castings, ingots, bars, round flats and squares.
For purposes of manufacturing these goods the petitioner undoubtedly requires raw materials as also other goods. Bricks, building materials or plumbing materials may be required in two ways. Firstly, it may be required for the construction or repair of the factory premises wherein the processof manufacture is carried out or its adjuncts e. g. staff quarters, warehouses etc. or, it may be required in a more intimate way.
For example, a special kind of brick may be necessary for the building of ovens or blast-furnaces or plumbing materials may be required for constructing pump to force superheated steam into them and these goods may be said to be directly required in the process of manufacture.
We are however not concerned in this case with the latter kind of goods. All we are concerned with is building or plumbing materials or fixtures for constructions, fitting out or repair of any building, such as, a factory building or any other kind of building which a company of this description requires to have, e. g. quarters for the staff or labourers, store house, warehouse etc.
The question is whether the materials required for the construction of such buildings can be called goods intended by the dealer for use by him in the manufacture of his goods.
10. Mr. Kar appearing on behalf of the petitioner formulated his arguments thus. Firstly, he says that the order for amendment of the registration was not authorised by law. According to him, the matter does not come under the scope of Section 7 (4) of the Act. Under that provision the Commissioner may from time to time amend any certificate of registration in accordance with information furnished under Section 18 or 'otherwise received'.
Mr. Kar's first objection is that the Commissioner has not done the amendment in this case but that the order has been made by the Commercial Tax Officer. Under Section 15, the Commissioner can delegate such a power in writing to any person appointed under Section 3 to assist him. Under Rule 71 made under the rule making powers conferred by the Act, the Commissioner can delegate the power of amending a certificate of registration to the Commercial Tax Officer.
It has never been stated in the petition that there has not been any delegation and the learned Advocate General stated in Court that the power has been delegated in writing and he offered to produce in Court, if necessary, the instrument of delegation. Mr. Kar thereupon did not press the point. He, however, argued that the only instance in which the Commissioner can amend the certificate is in accordance with information furnished under Section 16.
This however entirely ignores the remaining part of Section 7 (4) whereby the Commissioner can amend in accordance with information 'otherwise received'. Mr. Kar argues that in this case the Commissioner did not receive any information but he has really been ordered by the Government to do something and in any event, an error is being corrected.
This in my view, is too narrow an interpretation of the words 'otherwise received'. Hitherto, a certain construction was put upon the provisions of Section 5 (2) (a) (ii) of the Act. It was interpreted to include building materials and fixtures required for any building in connection with the manufacture of goods. The Commissioner has now received information through Government that such an interpretation was not correct.
11. The learned Advocate General does not argue that it was open to Govt. to supplement the provisions of Section 7 in any way or to add to the provisions thereof. What he says is that some one on behalf of Government looked into the matter and discovered that the exemptionswere not being granted strictly in accordance with the provisions of Section 5 (2) (a) (ii).
This information was conveyed to the Commissioner, and there is nothing to show that he did not agree with it. In my opinion, the provisions of Section 7 (4) have been complied with, and the Commissioner had the right of amending the certificate of registration. I think that the learned Advocate General rightly argued that in case the Court finds that the new construction placed on Section 5 (2) (a) (ii), is the correct one, it can never, under an equitable jurisdiction, direct that the petitioner should continue to get an exemption which is not warranted.
He points out that if such an application is conceded, then in future, any dealer to whom such an amenity was refused, might come up before this Court and challenge the order on the ground of discrimination. In my opinion, it would be difficult for the petitioner to contend that this Court should be instrumental in perpetuating an incorrect construction of a provision of the Act. It is unthinkable of doing any such thing by means of a high prerogative writ.
12. With regard to the construction of the section, the learned Advocate General has pointed out the difficulties that lie in the way of the Court in 'deciding the question. He says that whether a particular class or classes of goods is or are intended for use by the manufacturer in the manufacture of the goods, is a question of technical detail and it would be impossible for the Court to arrive at any decision without the taking of evidence, particularly of experts.
Suppose, that the question was whether a particular kind of brick is or is not required for the purposes of manufacture of a particular kind of iron or steel, it would be impossible for the Court to decide the question without expert evidence. I think that on the whole the argument is a sound one. On the other hand, I think that the question as to whether the factory building or buildings or its adjuncts, in a normal or ordinary case, come within the mischief of the section, is a general one, upon which expert evidence' is scarcely necessary.
As I have already stated, the exemption had been given for building or plumbing materials or fixtures required for construction, fitting out of repair of any building. In the form in which the exemption had been given, it included not only the factory premises but included all adjuncts, namely, quarters for staff, godowns, warehouses etc.
I think that it would be impossible to substantiate that bricks required for the construction of quarters for the Manager are goods intended for use by the manufacturer in the manufacture of Iron ingots or bars. Mr Kar has persistently argued, that manufacture of goods means the process of manufacture. He has referred to -- 'Forster v. Llanelley Steel Co., Ltd.', (1907), (1941) 1 All ER 1 (A).
There, it was held that the work which was being done may amount to process within the meaning of that word although it was not the direct object of the operation but merely Incidental to the main purpose which was being served. The question was whether 'crushing' was included within the word 'breaking'.
The lower Court held that it did, but this was reversed in the Court of Appeal. The house of Lords, however, reversed the decision of the Court of Appeal and pointed out that in questions of this type the findings of the original Court were peculiarly important.
13. Starting with the proposition that the goods which were intended to be exempted should be required by the manufacturer for use by him in the process of manufacture, I cannot persuade myself to hold that bricks used for the construction of the factory building or for quarters for staff etc. constitute a part of the manufacturing process or Iron ingots or steel bars.
It is true that a process is by no means a simple operation; it may, and does involve a variety of operations, 'some direct and some indirect. But if we are to include bricks required for the building of the factory as goods required in the manufacturing process, then there is no limit at which we should stop.
In that case, a car required for the transport of the Manager from his residence to the factory may equally be said to be required for the use in the manufacturing process. It may be argued that without such a car, the Manager could not arrive in time at his office and therefore the manufacturing process could not be carried on properly.
In that event, the words 'in the manufacture of goods' would not be used, but the words would be 'in connection with, or in relation to the manufacture of goods'. In my opinion, the construction placed by the authorities is the correct view. I have already mentioned that I cannot possibly decide as to whether bricks or other plumbing materials or fixtures other than what is required for building or buildings simpliciter, are or are not intended for use in the actual process of manufacture or not.
The only thing that I am deciding is that in my opinion, the ingredients of buildings in which a manufactory is housed, cannot ordinarily be said to be goods intended for use by the manufacturer in the process of the manufacture of his goods. I have already mentioned the example of bricks required for staff quarters or the instance of a motor car required for the Manager. We might multiply such instances. The line must be drawn somewhere.
It is obvious that in a process of manufacture there must be a factory building. It must require land upon which the building is built. But these cannot ordinarily be said to be part of the 'process' of manufacture. It is certainly something which is required in connection with the manufacture or in relation thereto or in respect thereof. The process of manufacture relates to the conversion from the raw material to the finished goods.
When we speak of goods being required in the manufacturing process, we talk of goods which have gone to the making of it. Such goods may not be directly contained in the finished goods but it must be actually required, to transform the raw material into the finished goods by that particular process.
This is the construction which has now been put, and appears to me to be the right construction. A building which merely contains the machinery and in which the whole process is housed or which contains the staff or offices etc. cannot be said to form a part of the manufacturing process, but may be necessary so that the manufacturing process can be achieved.
Supposing a patent was issued to protect the manufacturing process, that will not necessarily extend to the factory building. I do not say that a building or a fixture therein can never be partof the manufacturing process. I have instanced the case of a particular kind of oven made put of a special kind of brick to make a special kind of iron.
That is a different matter. But I have no evidence of any such construction in this case and in any event, that would be a matter which I cannot decide in this application. Before me, the matter has not been argued on the footing that the buildings for which exemption is required are any such special constructions.
I am told that the exemptions are required for building and repairs of the factory building and other adjuncts thereto. If, again, there is to be any controversy upon this point, that is to say, if Mr. Kar had argued that there was something special in the buildings which made them a part of the manufacturing process, then it would be a matter upon which opinions differ.
The petitioner in that event, is in this difficulty that I am not in a position to decide that Question in the absence of expert evidence. Therefore adjudication on that point also becomes impossible in an application under Article 226. For such an adjudication the petitioner will have to institute proceedings where evidence can be taken.
The learned Advocate General has stated that if in future a particular thing is required to be installed or repaired which is actually required in the manufacturing process and not already exempted, the petitioner can make an application for exemption and it will be dealt with upon its own merits. If however there is a dispute as to whether it does constitute a part of the manufacturing process, or not, the difficulty cannot be resolved by an application under Article 226. I might also point out that in so far as fixtures etc. are part of the Plant or machinery, exemption has already been granted.
14. Reference has also been made in the arguments before me to Rule 27A. The very same question is involved there, and it does not require any further elucidation. Mr. Kar has lastly argued that the certificates were issued after the Commercial Tax Officer had satisfied himself that the provisions of Section 5 (2) (a) (ii) had been satisfied.
He says that this is final, and once that is done, it cannot be changed. In my opinion, that argument cannot be upheld. It is with the object that a certificate once given should not be immutable, that the Act and the Rules contemplate an amendment in respect thereof.
Contingencies in Section 16 are of course easily understandable but there might arise many other situations, one of which has arisen in this, case, when such amendment would be necessary. The petitioner firm has enjoyed exemptions for a number of years although it was not contemplated by the Statute. I do not think that it is equitable that it should continue to do so any further. In any event, it is not possible for this Court to come to its assistance.
15. For these reasons this application fails and must be dismissed. The Rule is discharged. All interim orders vacated. There will be no order as to costs. This is however without prejudice to any other legal proceedings that the petitioner may be entitled to institute for the establishment of his rights.