TMI Blog2008 (2) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... al test. Petitioner is fully justified in claiming inclusion of items such as road materials like chips, tars, road rollers, concrete mixer and vibrator, manure, water treatment plant, filtration plants and associated materials, etc., canal materials like gates, stones, earth-moving and cutting machineries, etc. - - - - - Dated:- 14-2-2008 - GANGULY A.K. C.J. AND MAHANTY I. , JJ. I. MAHANTY J. The petitioner is a Government of Orissa undertaking incorporated under the Companies Act, 1956 and is engaged, inter alia, in the business of generation of power and for such purpose, it has established thermal power plants for operation and maintenance of the same within the State of Orissa. The petitioner-company applied for registration as a dealer both under the Orissa Sales Tax Act, 1947 and the Central Sales Tax Act, 1956 to the Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar and was granted with CST registration certificate on March 17, 1987 under section 7(2) of the CST Act and the following endorsement was made on the registration certificate granted to the petitioner under the CST Act and all machineries and equipment associated with construction, operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner-company filed O.J.C. Nos. 2875 and 2876 of 1992 before this honourable court and the same came to be disposed of by order dated October 26, 1992 passed by this court holding that the impugned order dated March 2, 1991 passed by the Commissioner, Commercial Taxes was quashed on the finding that the Commissioner has failed to apply his mind to the relevant matters and therefore the order was quashed and the matter was remanded to the Commissioner of Sales Tax, Orissa to re-examine the matter by giving opportunity of hearing to the petitioner. That as a consequence of the direction issued by this court in the abovementioned writ applications, the Commissioner, Commercial Taxes, issued notice to the petitioner and after affording the opportunity of hearing, the Additional Commissioner of Commercial Tax as (O.P. 2.) passed an order on June 10, 1993 and partially allowed inclusion of certain items into the registration certificate of the petitioner-company and rejected most of other items which had been sought for inclusion in the registration certificate. This order dated June 10, 1993 is now sought to be challenged in the present writ application. On perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Hydrogen generation plant, start-up boiler, turbine oil purification system (1/unit, 1 Central) 6000 liters/hr. H.P. and L.P. chemical dozing (phosphate and hydrazine) pumps, tanks, valves piping and instruments boiler elevators. These materials are required to cool the generator of turbine (c) Passenger elevators, passenger cum goods elevators (in transform tower for CHP), chimney elevator, diesel generator set for emergency power supply, dozers, scraper, dumpers, chemical laboratory, service water piping, valves generator. These materials are required in operation of power house (d) Generator phase bus duct, main bus duct, tap-off bus duct, bends, generator neutral bus duct, unit auxiliary phase bus duct, bus duct, bends, seal-off brushing. To evacuate generated power to the switchyard (e) L.T. transformer power control center, 415V local distribution board, manual starter station, unit battery 220V., 1400 AH, switchyard battery 200 V, 400 AH, + 24V battery for C and I, unit battery charger, unit distribution board, switchyard distribution board, CW pump house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in effect has rejected all the claims for inclusion of items referred to in serial Nos. 1, 2, 3 and 4 as well as serial Nos. 5(f) and 5(g) and only allowed inclusion of items under serial Nos. 5(a), 5(b), 5(c), 5(d) and 5(e). Mr. Das, learned Senior Counsel for the petitioner-company, inter alia, contended that the petitioner-company having been formed/constituted for the purpose of establishing, operating and maintaining the thermal power plant for generation and distribution of electricity is entitled under section 8(3)(b) of the CST Act, for registration of goods of the class or classes required for use in the generation or distribution of electricity. He further submitted that on a review of all the items sought for inclusion whereas most of the items claimed were justified yet in his considered view certain specific items were not directly relatable to the generation or distribution of electricity are no longer being pressed for by the petitionercompany for inclusion. An additional affidavit on behalf of the petitionercompany was sworn by the Senior Manager (Finance) on December 20, 2007, enclosing therein the statement in a tabular form indicating various i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um-re-claimers, belt conveyor system with tripper chutes feeders, magnetic pulley, bunkers, dust extraction and dust suppression system, HP heaters and steel piping, magnetic pulley bunker level indicator, bunker sealing ballet, rack and pinion gates, flaps gates, coal sampling unit belt weigsmetal detector, belt mechanising machine. These materials are required for feeding coal to the boiler to run the turbine. Allowed but not incorporated. 5(b) Hydrogen generation plant, start-up boiler, turbine oil purification system (1/unit, 1 Central) 6000 liters/hr. H. P. and L. P. chemical dozing (phosphate and hydrazine) pumps, tanks, valves piping and instruments boiler elevators. These materials are required for feeding coal to the boiler to run the turbine. Allowed but not incorporated. 5(c) Passenger elevators, passenger-cum-goods elevators (in transform tower for CHP), chimney elevator, diesel generator set for emergency power supply, dozers, scraper, dumpers, chemical laboratory, service water piping, valves, generator. These materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rollers. Not allowed. 5(g) Electrical and pneumatic, analytical instruments, contractors-electrical rhematic, annuciators, local gauges/switch control switch/plush button microprocessor based P and C system, data acquisition system. MGR System equipment like rails, engines, bogies, tractions and rail lines, etc., cooling tower equipment. Conveyance equipment like buses, cars, jeeps, etc., Pollution control equipments. Required for operation and maintenance of the power house means plant. Not allowed. Mr. Das, learned counsel for the petitioner-company submitted that the order impugned suffers from perversity in law, inasmuch as the Commissioner has taken an extremely narrow and pedantic view of the term plant and machinery and further has sought to rely upon certain judgments passed under the Income-tax Act, i.e., in the case of Commissioner of Income-tax, Lucknow-II v. Kanodia Warehousing Corporation [1980] 121 ITR 996 (All) and in the case of Commissioner of Income-tax, Andhra Pradesh v. Taj Mahal Hotel [1971] 82 ITR 44 (SC), and that too by misconstruing and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s revision application against the first amendment dated September 25, 1987 was challenged by way of revision before the Commissioner of Sales Tax, the same remains pending and has not been disposed of whereafter the second amendment took place on August 1, 1988. Mr. Das further submitted that since the petitioner-company was at the relevant time in the midst of construction and establishment of its thermal power plant it was left with no choice but circumstantially coerced to make prayer for inclusion of certain specific items, in place of general description as originally contained. This attempt made by the petitioner-company met with partial success and ultimately came to be considered by this court in O.J.C. Nos. 2875 and 2876 of 1992 and this court by order dated October 26, 1992 was pleased to quash the said order. Mr. Das further submitted that the impugned order would indicate that once again not only the judgments referred to in the order have been erroneously construed but the Commissioner has once again taken a pedantic and narrow view and substantially rejected the petitioner's prayer for inclusion of these items by impugned order dated June 10, 1993. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition dated November 4, 1987 has remained undisposed of by the Commissioner of Sales Tax, Orissa, regardless of the fact that there is no specific reference to this revision petition earlier stating that the revision case is disposed of. In other words, it is contended that it is to be understood that the revision petition dated November 4, 1987 no longer subsists for consideration. The learned Standing Counsel further contended that in course of the revision proceeding, opportunity was given to the petitioner prior to deleting the word construction and that the said deletion is justified since the term construction is a foreign term to the stipulation contained under section 8(3) and 8(4) of the Central Sales Tax Act. Before proceeding to consider the rival contentions advanced by the counsel for both the parties, it is essential to first to take note of the law laid down by the honourable Supreme Court on the present subject. The honourable Supreme Court had the occasion to deal with section 8(3)(b) of the CST Act, in the case of J. K. Cotton Spinning Weaving Mills Co. Ltd. [1965] 16 STC 563. In that decision, their Lordships came to hold that section 6 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'. For instance, in the case of a cotton textile manufacturing concern, raw cotton undergoes various processes before cloth is finally turned out. Cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendered and pressed. All these process would be regarded as integrated process and included 'in the manufacture' of cloth. It would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth. To read the expression 'in the manufacture' of cloth in that restricted sense, would raise many anomalies. Raw cotton and machinery for weaving cotton and even vehicles for transporting raw and finished goods would qualify under rule 13 but not spinning machinery, without which the business cannot be carried on. In our judgment, rule 13 does not justify the importation of restrictions, which are not clearly expressed, nor imperatively intended. Goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of plant cannot be said to be used as plant in the manufacture of the goods. 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 and it cannot be said that the building materials fall within this description. (1)See at page 569 of [1965] 16 STC. The honourable Supreme Court in the case of Member, Board of Revenue, West Bengal v. Phelps Co. (P.) Ltd. [1972] 29 STC 101; [1972] 4 SCC 121, once again placed reliance on its earlier judgment in the case of J.K. Cotton Spinning Weaving Mills [1965] 16 STC 563 and came to hold that gloves used by workmen who were engaged in hot jobs or in handling corrosive substance in the course of manufacture cannot be denied those gloves which had to be used in the course of manufacture. It is necessary to take note of para 7(1) of the aforesaid judgment that honourable Supreme Court specifically negatived the contentions advanced by the learned counsel for the Board of Revenue to the effect that section 5(2)(a)(ii) takes into account only such goods which are actually used in the manufacture and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Commissioner of Income-tax, Lucknow-II v. Kanodia Warehousing Corporation [1980] 121 ITR 996 (All), while dealing with the term plant their Lordships came to hold that in order to find out if a building or structure or part thereof constitutes plant , the functional test must be applied. It must be seen whether the subject-matter involved, that is, the building structure or part thereof, constitutes an apparatus or a tool of the tax-payer or whether it is merely a space where the tax-payer carries on his business. If the building or structure or part thereof is something by means of which the business activities are carried on, it would amount to a plant but where the structure plays no part in the carrying on of those activities but merely constitutes a place within which they are carried on, it cannot be regarded as a plant. Having come to such conclusion, their Lordships held on the facts, it could not be said that the warehouses were something by means of which the assessee's business activities were carried on, but that they did not play any part whatsoever in the carrying on its business activity, but merely provided a place within which this business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it consisted of some structure of building, which is attached to the soil. If on the other hand, it is found that the structure or a building or a part thereof does not constitute a part of the apparatus employed in carrying on the activities of the business, then it cannot be regarded as a plant. The decision in the case of Kanodia Cold Storage [1975] 100 ITR 155 (All) applied the said functional test and came to hold that the subject-matter of the case, that is, the building, had insulated walls and was being used as a freezing chamber and hence it was treated as a part of the air-conditioning plant. In other words, that building played an active role in the business of the assessee and was not merely a passive spectator. Therefore, their Lordships laid down that appropriate test in the matter of involving a building or a structure or a part thereof, whether it constitutes an apparatus or a tool of the trade of the tax-payer or it is merely a space to carry on his business. For this purpose, the use, which is made of the subject-matter under consideration, is to be kept in view. If the building, structure or part thereof is something by means of which the business activities ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us High Courts noted hereinabove this court finds that, the impugned order of the Commissioner, Commercial Taxes, is based on a complete misunderstanding and misconsideration of the judgment referred hereinabove. It is now necessary to deal with each item sought for inclusion individually. The petitioner-company has sought for inclusion of item No. 1 for the purpose of laying the foundation of the power house building and the associated structure. The very term powerhouse building implies that such building would be constructed to house the thermal power generator. The power house building by its clear meaning refers to a building where thermal power plant will be installed for power generation. It is inconceivable even to suggest that power generation from a thermal power plant can take place bereft of a power house plant. Therefore the findings arrived at by the Commissioner, Commercial Taxes with regard to item at serial No. 1 is erroneous. Applying the functional test it would be clear that it would be clearly practically not possible to consider establishing a thermal power plant without a power house building and therefore, the Commissioner is clearly in error ..... X X X X Extracts X X X X X X X X Extracts X X X X
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