TMI Blog1996 (5) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5-C was inserted in the Act with effect from March 2, 1963. Letters dated August 1, 1963 and September 24, 1963 (annexures A and B) were written to the assessing authority for incorporating the said raw materials in the registration certificate. The matter was referred to the higher authorities. The Additional Commissioner, Commercial Taxes, Jaipur, instructed the assessing authority to consider the matter in the light of the provisions of section 5C of the Act. Vide order dated January 15, 1965, the Commercial Taxes Officer, Special Circle-I, Jaipur, ordered for the amendment of the registration certificate and incorporated the cardboard sheets, wood, timber and wirenails as raw materials for manufacturing packing boxes, cases and bags in it with effect from August 1, 1963. Thereafter, the petitioner started purchasing said raw materials at the concessional rates of tax as provided under section 5-C of the Act. The Commercial Taxes Officer, Special Circle-I, Jaipur, issued notice stating that the aforesaid materials were not raw materials within the meaning of section 2(mm) of the Act for manufacturing ball-bearings and axles and showing cause as to why they should not be delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner to produce certain documents and to furnish certain information. The petitioner filed its reply stating that all required documents had been produced before the assessing authority at the time of assessment and the honourable High Court has stayed the passing of the final order vide order dated August 16, 1979 (annexure O). By his order dated March 25, 1980 (annexure S), the Commercial Taxes Officer ordered for amending the registration certificate by way of deleting the said entry regarding raw materials, appeal against this order was filed and it was dismissed by order dated January 31, 1985 (annexure T). Thereafter, second appeal was filed and it was dismissed by order dated August 6, 1993 (annexure U). 3.. At the commencement of the arguments, the learned counsel for the petitioner did not press the question regarding jurisdiction of the concerned Commercial Taxes Officer. He contended that the said raw materials, i.e., cardboard sheets, wood, timber and wirenails were and are used for manufacturing packing boxes, packing cases and packing bags for keeping and transporting the ball-bearings and axles, these materials were/are not used as raw materials for manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and multiple. Pro formas of valuations, papers Nos. 132 to 148 and 148 to 175, show that separate price of the packing material was not shown in the bills. The said goods supplied included their price. It is stated in the notice dated April 19, 1971 (annexure E) that false declaration was submitted by the petitioner. Admittedly, this declaration has not been filed. In its absence, it cannot be said as to what kind of declaration was filed by the petitioner. It is well proved from the material on record that the petitioner manufactures packing boxes, packing cases and packing bags besides ball-bearings and axles for their storage and transportation. It is not disputed that cardboard sheets, timber, wood and wire nails were/are raw materials for manufacturing packing boxes, packing cases and packing bags. In the reply dated May 10/13, 1971 (annexure H), the petitioner has stated "(3) That all the materials purchased by us with effect from August 1, 1963, have been properly used for the manufacture of packing cases for packing our finished (manufactured) products under section 5-C of the Rajasthan Sales Tax Act and there is no contravention at all.....(5) That we are paying tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itially issued a certificate of recognition to the Parle Products in which the item of packing lables was included in the list appended. The Assistant Commissioner of Sales Tax commenced proceedings for suo motu revision and in those proceedings the said item has been retained after hearing the Parle Products, while some other items were directed to be deleted. If it was felt that the decision of the Assistant Commissioner to retain this item was incorrect, this decision could have been revised by an appropriate authority. It does, however, appear to us that once the recognition certificate was granted, it was not open to the Sales Tax Officer assessing the applicants, a third party, who had sold the goods to the Parle Products, a registered dealer holding a recognition certificate, to dispute the inclusion of any particular item in the recognition certificate and to come to a conclusion that to that extent the recognition certificate was incorrectly granted. If this were permitted, it would lead to confusion and chaos, because different Sales Tax Officers assessing different third parties who had sold goods to such a dealer holding a recognition certificate might come to different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples; one is, it is an imperative duty of a subordinate court or an authority to implicitly give effect to a remand order of a superior court or an authority and the other is that it is not open to any court or authority to examine the validity of a remand order that has become final in any other legal proceedings and in this connection it was also observed that refusal to carry out the directions of a superior Tribunal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts. It was further observed that if the subordinate Tribunal refuses to carry out the direction given to it by a superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice." Reference of N.K. Woollen Silk Mills v. Collector of Central Excise (1989) 43 ELT 686 (Tribunal) and Commissioner of Sales Tax v. Babu Lal Parmanand [1982] 49 STC 181 (All.), may also be made here. 8.. The provisions of section 16(1)(k) of the Act were not at all attracted as cardboard sheets, wood, timber and wirenails were used in manufacturing pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition that the petitioner-company which is an existing company within the meaning of the Companies Act, 1956, has been carrying on its business of manufacture and sale of various engineering items including ball bearings and axle boxes under the name and title of National Engineering Industries Ltd. It runs its factory at Jaipur. It is duly registered under the Rajasthan Sales Tax Act, 1954, (Act No. 29 of 1954) (hereinafter called, "the RST Act"). On March 2, 1963, there came to be inserted a new section 5C in the RST Act which provided for the levy of concessional rate of tax on the raw material which was used by the petitioner-company in the manufacture of its finished goods. The petitioner-company had been purchasing raw material for the manufacture not only of its finished products such as ball-bearings, axle boxes and various other engineering items but also of packing boxes, cases and bags which were used to pack its finished products sold in the market. On August 1, 1963, the petitioner-company addressed a letter to the Commercial Taxes Officer, Circle-B, Jaipur, requesting him to order the amendment of its sales tax registration certificate for the purchase of raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember 18, 1976, on behalf of the petitioner-company. The petitionercompany also pressed for the supply of the certified copy of the inspection report which Assistant Commercial Taxes Officer, Shri H.C. Sinha, had submitted to the department after inspecting the record of the petitioner-company on July 28, 1970. The Commercial Taxes Officer, Special Circle-I, Jaipur, on October 22, 1970, informed the petitioner-company of the decision not to supply the copy of the inspection report for the reason that the report being an administrative report its copy could not be supplied to it. On April 19, 1971, another notice was issued to the petitioner-company wherein it was required to furnish detailed information with regard to the matters detailed therein. The petitioner-company was required to show cause as to why action under section 16(1)(k) should not be taken against it for the reason that it had given a wrong declaration with regard to the raw material in question. A statement showing the sale of packing material was also required to be produced. Separate statement regarding the purchase and sale of raw material in question was required to be produced. Did the petitioner-company have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a Special Appeal No. 147/75 against this order of March 31, 1975, before the Division Bench of the Board of Revenue which on June 27, 1978, dismissed it. Undaunted by this adverse judgment, the petitioner-company applied to the Board of Revenue for making a reference of the legal questions involved in the matter to the High Court. The legal matters, inter alia, were: whether the earlier order of January 15, 1965, concerning registration certificate could be modified and deletion of the raw material in question be ordered; whether the penalty proceedings could be initiated against the petitioner-company; and, whether the order of March 31, 1975, whereby the matter was remanded to Commercial Taxes Officer, Circle-I, Jaipur, was proper and legal. This reference application was dismissed by Division Bench of the Board of Revenue, Ajmer, on April 16, 1979. The petitioner-company filed before the High Court a petition requesting that the Board of Revenue be directed to make a reference to it as prayed for. On August 16, 1979, the High Court directed the Commercial Taxes Officer, Special Circle-I, Jaipur, not to make a final order in the matter pending before him. The officer could, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 6 of the RST Act; whether penalty proceedings could be initiated against the petitioner-company. (2) That the order dated March 25, 1980, whereby the registration certificate was modified and the raw material in question deleted therefrom and the order dated August 6, 1993, whereby the Tax Board dismissed the second appeal and confirmed the order of the assessing authority dated March 25, 1980, may be quashed. 16.. The petitioner-company had filed a separate Writ Petition No. 8 of 1981 before the High Court alleging therein that the order of respondent No. 2 dated March 25, 1980, was illegal and inoperative. It was prayed that the order be quashed. I need not repeat the facts which are the same as those detailed in the revision petition. The learned counsel for the petitioner-company did not press for a separate judgment on this writ petition which also stands transferred onto the file of this Tribunal. 17.. Both the revision petition and writ petition shall be disposed of by this common judgment. It may be mentioned here that the learned counsel for the petitioner-company has not advanced any argument with regard to the writ petition. He also does not make a reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany is that the entries with regard to the raw material in question could not be deleted from the registration certificate. There was nothing on the record which justified the deletion of these entries from the registration certificate. Even the report of the enquiry officer was not supplied to the petitioner-company on the ground of its being an administrative report. As against this the case of the department is that the deletion of the entries with regard to the raw material in question from the registration certificate was necessitated because the petitioner-company had submitted a false/wrong declaration with regard to the use of the raw material in question. The petitioner-company is engaged in the business of manufacture and sale of ball-bearings, axle boxes and other engineering items. The raw material in question cannot by any stretch of imagination be said to be ingredient of the foregoing finished products the petitioner-company deals in. 20.. Before I deal with the question with regard to the deletion of the entries concerning the raw material in question, I think it proper to dispose of the allegation concerning the submission to the department of the alleged fals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power vested in him is to be exercised in accordance with the principles of natural justice. There is a well-known dictum of law that one who takes the procedural sword shall perish by that sword. It means that the due procedure must be followed. It must be just, fair and reasonable and not unjust, arbitrary and fanciful. Anything which is unreasonable is to be frowned upon and excluded. It is on this litmus test that the validity of the order of May 17, 1971, whereby the deletion of the entries with regard to the goods in question was made is to be judged. When I do so I find that this order cannot stand judicial scrutiny. In the first place, there is no justifiable cause for the deletion of the entries with regard to the material in question from the registration certificate. The insertion of the entries with regard to the raw material in question was made by the departmental authorities after due consideration of the material placed before them. There was nothing secret or surreptitious about it. It was done on January 15, 1965. The department did not swing into action until August 6, 1970, when the notice was given to the petitioner-company. All the facts were within the knowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purpose. The fourth condition is that the failure on his part must be without reasonable cause. All these conditions are not satisfied in the present case. The petitioner-company did purchase the raw material in question with regard to which it made clear that the goods, namely, the raw material in question would be used for manufacturing the packing material. The declared purpose in this case was the manufacture of the packing material. Thus the penalty proceedings could not be initiated in the present case against the petitioner-company. The learned counsel for the respondents, Shri N.K. Baid, has placed his reliance on the decision in J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563, wherein it was laid down by the apex Court that Sales Tax Officer was competent to amend, modify or cancel the certificate of registration if certain items which did not meet the legal requirements were erroneously included therein. It was a case where a certificate of registration was granted under section 7(1) of the Central Sales Tax Act, 1956. It was cancelled by the Sales Tax Officer in exercise of the power vested in him under section 7(4) of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Chief Commissioner, Delhi [1968] 22 STC 264 (Delhi) concerned the request made on behalf of the petitioner, a manufacturer of, and dealer in, vegetable oil products, to the sales tax authorities for amendment of his registration certificate as also for insertion of "tin plates" or "tin sheets" therein on the ground that those were used by him for packing its vegetable products for sale, under section 8(3) of the Central Sales Tax Act, 1956. It was held by their Lordships of the Delhi High Court that such an amendment must have been ordered. The expression "containers or materials intended for being used for the packing of goods for sale" in clause (c) of section 8(3) of the Central Sales Tax Act is couched in a language which brings within its sweep all kinds of ready-made receptacles which are used for the purpose of storage of goods or for transportation of the goods contained therein for sale. The conversion of raw material into ready-made receptacles did not make any change in the situation. Containers could be used for packing not only solid goods but also goods in the liquid or the semi-liquid form. In the present case the raw material in question was used for manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture in the State of goods other than exempted goods for sale by him within the State or in the course of inter-State trade or commerce or in the course of export outside the territory of India shall be at a concessional rate of 3 per cent of the sale or purchase price of such raw material. Explanation.-For the purpose of this sub-section 'exempted goods' means: (i) goods exempted under sub-section (1) of section 4, and (ii) goods liable to additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Central Act 58 of 1957) and which are exempt from the payment of tax by or under the provisions of this Act. (2) Where any raw material purchased by a registered dealer under subsection (1) is utilised by him for any purpose other than a purpose specified therein, such dealer shall be liable to pay as penalty, such amount not less than the difference between the amount of tax on the sale of such raw material at the full rate applicable thereto under section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5C of the RST Act. 28.. It is not in dispute before us that the petitioner-company has been using packing material for the storage and/or transportation of its finished products contained therein for sale. The sale price of the finished products is inclusive of the sale price of the packing material. This all-inclusive sale price is exigible to tax. The petitioner-company has been paying tax on this all-inclusive price all along. Fifth proviso to section 5(1) of the RST Act clinches the issue before us. It is as hereunder: "Provided also that when any goods are sold, packed in any material, the tax shall be leviable on the sale of such packing material, whether charged separately or not, at the same rate as is applicable to the sale of the goods themselves; and if the goods are exempted from tax under section 4 or have already been subjected to tax under the Act, then at the rate notified for such packing material from time to time." 29.. It provides that where the goods are sold, packed in any material, the sale of such packing material shall be exigible to tax at the same rate as is applicable to the sale of goods themselves. Where the goods sold are exempted goods the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. It was held that sales tax was leviable on the price of gunny bags. It may be mentioned here that the sale value of the wheat products was taxable at 2 per cent whereas the sale value of the gunny bags was taxable at 4 per cent. This situation has not arisen in the case before us because the tax is leviable at the same rate on all-inclusive value of finished products and packing material in view of the proviso to section 5(1) of the RST Act. A brief reference may be made to the decision in State of Tamil Nadu v. Balu Chettiar [1996] 100 STC 120 (Mad.), wherein the sales tax was held leviable on the sale value of the packing materials which were sold along with the oil. It was further held that where the sale value of the packing material is included in the sale value of the content then the sale value of the packing material is taxable even though the sale value of oil was not taxable because of the oil being the subject-matter of second sale. In this case reliance was placed on the decisions in A.R. Manickam Chettiar Sons v. State of Tamil Nadu [1992] 87 STC 134 (Mad.) and State of Tamil Nadu v. V.V. Vanniaperumal Co. [1990] 76 STC 203. The later decision was a Full Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operative portion quoted above has not been happily worded and that is why it has given rise to conflicting interpretations. When I subject it to scrutiny I find that the assessing authority was directed to find out whether the petitioner-company filed a wrong declaration at the time when it applied for the amendment of the registration certificate with a view to availing itself of the benefit of concessional rate of tax under section 5C of the RST Act and also avoiding the payment of due tax on the purchase price of the raw material in question. Thus the assessing authority was to make an enquiry into the matter concerning the filing by the petitioner-company of a wrong declaration at the time when it sought amendment of the registration certificate by including therein the entries with regard to the raw material in question. It was a matter central to the enquiry to be made by the assessing authority. Pursuant to this order of remand respondent No. 2 made the enquiry and in the course of the enquiry called upon the petitionercompany to furnish information necessary for the purpose. He has mentioned in his order of March 25, 1980, that the petitioner-company failed to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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