TMI Blog1992 (5) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... es situated at Belur in West Bengal, Belgaum in Karnataka and Alupuram in Kerala, where the finished aluminium products like aluminium sheets, aluminium foils are produced and finally sold in the market. The present dispute centres round the transfer of ingots from the factory at Hirakud to other factories of the petitioner at Belur, Belgaum, etc., for production of aluminium foils, sheets, etc. The sales tax authority in Orissa issued certificate of registration in favour of the petitioner initially in the year 1957 which was later on amended in the year 1982. The certificate of registration had been issued under the Central Sales Tax (Registration and Turnover) Rules, 1957. The certificate clearly indicates against the column "for use in the manufacture or processing of goods for sale", "raw materials used in manufacture of aluminium". The petitioner has been registered as a dealer under section 7(1)/7(2) of the Central Sales Tax Act. The petitioner purchases raw materials on the strength of "C" declaration forms and then produces aluminium ingots and those ingots are further processed in different factories in other States belonging to the petitioner for manufacture of finishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated that in the event the petitioner succeeds in the writ application, then the amount paid shall be refunded within a period of 3 months from the date of the order with interest. While the matter was listed for hearing in January, 1992, before a Bench of this Court, as the order of the Sales Tax Officer levying penalty was revisable, the court permitted the petitioner to file a revision application before the Commissioner of Sales Tax and the Commissioner was directed to dispose of the revision application on or before February 21, 1992. The petitioner did move the Commissioner in revision and the Commissioner disposed of the revision by his order dated February 26, 1992, annexed as annexure 8. The Commissioner came to hold that since ingots and electrode paste manufactured by the petitioner's factory at Hirakud are distinct commercial products and the petitioner-company by utilising "C" declaration forms has purchased raw materials at concessional rates for manufacture of goods for sale, the company was bound to sell the ingots manufactured by it. The further transfer of the ingots to other places for manufacture of finished products is not covered by section 8(3)(b) of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as that of the Commissioner contends that if the goods covered by the certificate of registration of the dealer are purchased for use by the dealer in the manufacture or processing of goods for sale, then the provisions of section 8(3)(b) of the Central Sales Tax Act are complied with and there is no contravention of section 10(d) of the said Act. In view of the certificate of registration of the petitioner in the present case, the raw materials purchased by the petitioner having been utilised in the manufacture of ingots at Hirakud and the same having been further processed for manufacture of finished products like aluminium sheets, coils, foils, etc., which are produced for sale, the provisions of section 8(3)(b) of the Act would apply and, therefore, the penalty imposed under section 10A on a finding that there has been contravention of section 10(d) of the Act is illegal, invalid and inoperative. Dr. Pal further contends that section 8(3)(b) of the Act is not susceptible of a construction that the goods must be manufactured within the State of Orissa or must be sold in the State of Orissa and, therefore, the sales tax authorities committed gross error in putting certain restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate for which the registration certificate is granted and since the finished products admittedly are not manufactured within the State of Orissa, which is the place of business of the dealer, as is apparent from the certificate of registration granted in his favour and only ingots are produced within the State of Orissa, such manufacture of finished goods will not be covered under section 8(3)(b) of the Act and despatch of ingots for such manufacture of finished goods would constitute offence under section 10(d) of the Act for which penalty could be levied under section 10A of the Act. The learned Standing Counsel for the department further contends that the intendment of the provisions contained in section 8(3)(b) is that the cost of manufacture of processed goods for a consumer should not be unduly enhanced by reason of higher rate of tax on the goods used in manufacture or processing of goods sold and the real purpose is not expansion of inter-State trade or industrial growth in the country and in that view of the matter, there is no justification to hold that the object of section 8(3)(b) would be frustrated by interpreting the provision in the manner as has been interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of further elucidation, their Lordships observed: "..........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.........." Ultimately, it was observed: "..........The Legislature has contemplated that the goods to qualify under section 8(3)(b) must be intended for use as raw materials or as plant, or as equipment in the manufacture or processing of goods.........." In the second case [1981] 48 STC 239 (SC) (Assessing Authority-cum-Excise and Taxation Officer v. East India Cotton Mfg. Co. Ltd.) section 8(3)(b) as well as rule 13 of the Central Sales Tax (Registration and Turnover) Rules and form "C" came up for consideration. In that case, a registered dealer under the Central Sales Tax Act was carrying on the business of manufacturing and processing of textiles at Faridabad and on the basis of certificate of registration by furnishing "C" declaration forms, it. had purchased the raw materials in the course of interState tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture or processing of the goods sold, it is obvious that if this intendment is to be fully effectuated, the benefit of the statutory provision should be available irrespective of whether the manufactured or processed goods are sold to the consumer by the registered dealer or by some one else who has got the same manufactured by the registered dealer. It was for this reason that the Legislature deliberately omitted to add the words 'by him' after the words 'for sale' so as to make it clear that this sub-clause of section 8(3)(b) would apply even if the goods manufactured or processed by the registered dealer were intended for sale by someone else.........." The aforesaid interpretation of section 8(3)(b), in our considered opinion, should apply to the facts and circumstances of the present case. The certificate of registration issued in favour of the petitioner clearly indicated "raw materials used in manufacture of aluminium". The additional places of business of the dealer were indicated to be in "Bombay, Calcutta, Delhi, Madras, Belgaum, Mysore and Maharashtra" and the amendment that was effected from September 1, 1971, in the registration certificate indicated that the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the effect of rules 13 and 12 as well as form "C". It is, therefore, incorrect, as contended by Mr. Patnaik appearing for the department that the Supreme Court cases were prior to the amended provision. Even in the J.K. Cotton Spinning Weaving Mills Co. Ltd. [1965] 16 STC 563 (SC), the provision of section 8(3)(b) which was considered contained the expression "subject to any rules made by the Central Government in this behalf", as engrafted in section 8(3)(b) of the Act. The contention of the learned Standing Counsel, therefore, cannot be accepted. 6.. The learned Standing Counsel in the course of his arguments though contended at great length that the use of the expression "subject to any rules made by the Central Government in this behalf' makes the legislative intent clear that the manufacture of goods in question must be within the State of Orissa and must be made by the registered dealer, but no rule was pressed into service in support of his stand. He, therefore, took us through the prescribed application form, namely, form 1 and the different columns of that form in support of his contention that those prescribed forms would be the "Rules" for the purposes of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tus of manufacture of aluminium. In the aforesaid premises, we accept the first submission of Dr. Pal appearing for the petitioner and reject the submission of the learned Standing Counsel for the department on that score and hold that the Sales Tax Officer as well as the Commissioner committed gross error in concluding that the goods are being used for the purposes other than for which the certificate of registration authorises and the despatch of ingots to the factory premises in other States for manufacture of aluminium products constitutes an offence under section 10(d) of the Act, thereby attracting the penalty provision contained in section 10A of the Act. The first submission of Dr. Pal must, therefore, succeed. 7.. Coming to the question of applicability of section 10A of the Act, the contention of Dr. Pal is that if a person is found guilty of an offence under clause (b), (c) or (d) of section 10, then the authority who granted the certificate of registration can impose upon the said person by way of penalty a sum not exceeding one and half times the tax which would have been levied under subsection (2) of section 8 after giving an opportunity of hearing to the person co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the burden was on the dealer to establish that there was reasonable excuse for making use of the ingots into finished products and since the petitioner has failed to establish that excuse, the provision of section 10(d) would be attracted and consequently, there has been no error in levying penalty under section 10A. Reliance is placed on the decision of the Mysore High Court in the case of Shivananda Electric Co. v. State of Mysore [1974] 33 STC 348. Having examined the facts and circumstances of the present case, we are persuaded to agree with the submission of Dr. Pal appearing for the petitioner to hold that the petitioner could reasonably believe that despatch of the ingots to different factory sites in different States for manufacture of the finished products like aluminium sheets, foils, coils, etc., is permissible in law. Not only the petitioner itself bona fide believed that it is authorised to do so in view of section 8(3)(b) of the Act as well as the certificate of registration issued in its favour, but also the departmental authorities have been accepting the stand of the petitioner ever since the inception of the factory as well as the "F" forms submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by section 8(3)(b) of the Act. This reasoning of the Commissioner can hardly be sustained and in our considered opinion, the conclusion is based on a thorough misconception of the provision of section 8(3)(b) of the Act. Further the Commissioner having accepted the petitioner's plea that ever since 1957 the ingots manufactured from the factory site at Hirakud are being despatched to different other factories under "F" forms for being subjected to further manufacturing processes for production of finished products, committed serious error in holding that there did not exist reasonable excuse for such use within the ambit of section 10(d) of the Act and, therefore, the ultimate conclusion of the Commissioner is vitiated on account of erroneous interpretation of the provision of section 8(3)(b) as well as section 10(d) of the Act. Since the Commissioner has confirmed the order of the Sales Tax Officer we need not examine the order of the Sales Tax Officer again to find out the illegalities of the same, more so, in view of our conclusion already made with regard to interpretation of section 8(3)(b), section 10(d) as well as section 10A of the Act. 9.. It would not be out of place to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
