TMI Blog2007 (4) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Act, 1969, is no longer valid in view of the decision of the Gujarat Sales Tax Tribunal, Ahmedabad, rendered in Second Appeal No. 682 of 2003 filed by M/s. Pandesara Industries Private Limited against State of Gujarat decided on September 28, 2004 and, therefore, circular dated February 19, 2001 is cancelled with effect from the date of issuance of the said circular, i.e., February 19, 2001. Another common alternative relief claimed in all these petitions is to issue a writ of mandamus or a writ of certiorari or any other appropriate writ or order declaring that the circular dated September 2, 2005 revoking and/or cancelling the circular dated February 19, 2001 does not have any retrospective effect. In addition to the abovementioned reliefs, the petitioners in Special Civil Application No. 12104 of 2006 have prayed to issue a writ of mandamus or any other appropriate writ or order to set aside judgment dated September 28, 2004 rendered by the Gujarat Sales Tax Tribunal in Second Appeal No. 682 of 2003, which was filed by Pandesara Industries Private Limited against State of Gujarat. As common questions of facts and law arise for determination of the court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des that the dealer is entitled to claim the tax paid under section 15B of the Act as a set-off. The petitioners claim that they have paid purchase tax on the LDO and have been granted set-off by the respondent-authorities. What is asserted by the petitioners is that in view of the decision rendered by the Gujarat High Court in Saurashtra Calcine Bauxite and Allied Industries v. State of Gujarat [1993] 91 STC 435 holding that furnace oil used to produce heat in the process of calcination of raw bauxite into calcined bauxite and also used for the purpose of heating the mixture of soda ash and silica in the manufacture of sodium silicate, is not merely a fuel, but is a processing material, the applicants in the said cases were given benefit of set-off under rule 42A of the Rules, and, therefore, circular dated September 2, 2005 is liable to be set aside more particularly when the Division Bench rendered decision after distinguishing the decision of the Supreme Court in Deputy Commissioner of Sales Tax (Law) v. Thomas Stephen Co. Ltd. [1988] 69 STC 320; [1988] 2 SCC 264 and after following the decisions in J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the cases arising under the Act, is no longer valid in view of the decision of the Gujarat Sales Tax Tribunal, Ahmedabad, rendered in Second Appeal No. 682 of 2003 filed by Pandesara Industries Private Limited against State of Gujarat decided on September 28, 2004 and, therefore, the circular dated February 19, 2001 is cancelled with effect from the date of issuance of the said circular, i.e., February 19, 2001, to contend that the judgment of the Tribunal, which is referred to in circular dated September 2, 2005, was inter party and restricted to the facts of that case and, therefore, the same could not have been made basis for the purpose of withdrawing benefits conferred upon the petitioners by the circular dated February 19, 2001. According to the petitioners, in fact, the LDO is used as processing material in the manufacturing process by the petitioners whereas in absence of the same, it is not possible for the petitioners to undertake the manufacturing process and, therefore, the petitioners would be entitled to set-off as provided by the law. The petitioners have averred that they have acted upon the representation made by the respondents in circular dated February 19, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the court. Mr. Rajendrabhai R. Patel, who is authorised signatory of petitioner No. 1, i.e. M/s. AMI Pigment Private Limited, has filed affidavit-in-rejoinder on behalf of the petitioners stating, inter alia, that in circular of 2001, the respondents had clarified that the raw materials and stores used in the manufacturing process would be entitled to set-off and, therefore, they are estopped from contending to the contrary nor are they entitled to withdraw or revoke the said circular with retrospective effect. In the said rejoinder on behalf of the petitioners, the points, which are urged in the petition, have been reiterated and, therefore, this court is of the opinion that it is not necessary to refer to the same in detail. Mr. Shankerbhai Patel, who is authorised signatory of petitioner No. 10, has filed affidavit dated March 19, 2007 on behalf of the petitioners for the purpose of placing on record the relevant abstracts of the assessment orders for the year 2000-01 in respect of petitioner No. 9-company and the relevant abstracts of the assessment orders for the year 1999-2000 in respect of petitioner No. 10-company as well as the relevant abstracts of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable or unidentifiable form in the aforesaid final products. To substantiate this assertion, it is stated that the petitioners use furnace oil/LDO for firing a boiler whereby the water contained therein gets converted into steam which, in turn, is carried through pipelines to the reactor, which normally consists of two vessels, i.e., a bigger vessel containing a small one and between the two, the steam travelling through pipelines enters for creating uniform temperature. It is further explained that the said reactor is filled with raw materials like vinyl sulphone, gama acid, k-acid, etc., wherein chemical reaction takes place and ultimately the above referred to final products get manufactured. What is emphasised in the said reply is that after pronouncement of the judgment of the Supreme Court in the case of Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465, it was realised that the above referred to furnace oil/LDO cannot and would not qualify to be either raw material or processing material or consumable store in the manufacture of finished final products, i.e., dyes, dye-intermediates, pigments, etc., of the petitioners and/or can at the most be considered to be raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the natural gas purchased by it. The petitioner is a public limited company engaged in the business of manufacture and marketing of float glass. The case of the petitioner is that the State Government had passed a resolution known as Special Incentive to Pioneer Units Scheme, 1986 to give special package and certain higher benefits under its incentive policy based on the categories of backwardness of the areas whereas the Government of Gujarat had also issued another notification dated June 25, 1987 for Composite Sales Tax Incentive Scheme, 1987 for pioneer industrial units and, therefore, the petitioner had established its unit at the address mentioned in the cause title of the petition. The claim made by the petitioner is that the petitioner has been purchasing natural gas from Gas Authority of India Limited to be used as fuel for the float glass manufacturing process and has availed of sales tax benefits under the composite scheme in the nature of concessional purchase rate of tax for purchase of raw material, processing material, consumable store and packing material. The petitioner has referred to entry 175 of notification issued under section 49(2) of the Act and claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the manufacturing process undertaken by the petitioner, it is stated in the affidavit that the petitioner uses the said natural gas for firing glass furnace for heating the furnace to a very high temperature in order to convert/melt raw materials consisting of sand, limestone, soda ash, dolomite, iron oxide, salt cake, etc., into the final finished product called float glass, which is nothing but a sheet of glass made by floating the molten glass on a bed of molten tin, which gives the glass, uniform thickness and very flat surface. After explaining the manufacturing process undertaken by the petitioner, it is asserted that the natural gas never gets used up or consumed or burnt up or wasted or remain in an identifiable or unidentifiable form in the aforesaid final product, i.e., float glass, and, therefore, natural gas used for firing glass furnace cannot and would not qualify to be either the raw material or the processing material or consumable stores in the manufacturing of finished final product, namely, float glass more particularly in view of the judgment of the Sales Tax Tribunal in the case of Pandesara Industries Private Limited (Second Appeal No. 682 of 2003 decided on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Sales Tax Exemption Scheme. The petitioner has also prayed to direct respondent No. 4 to withdraw the letter dated September 7, 2005 issued to the Gujarat State Petroleum Corporation for non-acceptance of form 40 from the incentive enjoying industries for purchase of fuel necessary for generation of power/steam for the manufacture of the goods. The petitioner, i.e., M/s. Arvind Mills Limited, is a company incorporated under the provisions of the Act of 1913. It is engaged in the business of manufacture and marketing of textiles fabrics and textile products. According to the petitioner, the Government by resolution dated September 11, 1995 announced Premier Unit Scheme for Incentive under the Industrial Policy 1995-2000 whereas the Finance Department issued resolutions dated July 19, 1996 and July 24, 1997, announcing the corresponding incentive scheme under the Gujarat Sales Tax Act, 1969. The petitioner has claimed that it received provisional premier registration certificate on February 1, 1999 whereas it was granted an ad hoc eligibility certificate on June 5, 2000. According to the petitioner, respondent No. 2 issued a circular dated February 19, 2001 clarifying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner and that naptha, natural gas and furnace oil are used by the petitioner to run its captive cogen power plant for generation of electricity/steam which are, in turn, used for manufacture of the goods. According to the petitioners, the fuel purchased by the petitioner would certainly fall within the ambit of the term raw material or processing material or consumable store as provided in entry 69(2) of the Act, and as fuel used to generate electricity/steam is wholly consumed in the overall manufacturing process of manufacturing goods under the Act, it would be entitled to exemption of sales tax. What is asserted by the petitioner is that electricity and steam generated by the petitioner using the fuel purchased by it at concessional rate are part and parcel of the composite process that produces the end-product and, therefore, the circular dated September 2, 2005 is liable to be set aside. Under the circumstances, the petitioner has filed the instant petition and claimed the reliefs to which reference is made earlier. On service of notice, Mr. Rameshkumar Parmar, Assistant Commissioner of Commercial Tax in the office of the Commissioner of Commercial Tax, Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forum. What is asserted in the reply is that under the pretext of challenging the validity of circular dated September 2, 2005, the petitioner wants to halt further proceedings with reference to reassessment, etc., which is not permissible in law because if in law, tax is leviable at full rate on the aforesaid products, nothing would prevent the State from recovering the said tax, of course, within the period of limitation available under the Act since there cannot be an estoppel against the statute. It is further asserted in the reply that it is a well established position of law that the law declared by the Supreme Court is binding on all courts, Tribunals and authorities within the territories of the country and, therefore, the contrary view expressed in circular of 2001 perforce loses its validity and becomes non est and, therefore, the petition should be dismissed. It may be mentioned that at the conclusion of the lengthy hearing of the petitions, the learned counsel for the petitioners and the respondents have placed before the court detailed written submissions for consideration. This court has, therefore, condensed the lengthy written submissions as precisely as possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued as such and not as two individual words nor the word consumable stores be equated with the word consumables which is generic in nature. Referring to common parlance meaning of the word consumable stores , it was argued that the words consumable stores are synonymous with indirect material required to be used in the manufacturing process, e.g., fuel, lubricating oils, greases, etc., and, therefore, the said term should not be interpreted to mean as analogous to the words raw material . It was pointed out that the application of doctrine of noscitur a sociis while interpreting section 15B of the Act or entry 175(2) would render the words processing material and consumable stores redundant which should be avoided and the word consumable stores should not be interpreted to mean that it is that material which gets used up or consumed or wasted in the final product. It was argued that by circular dated February 19, 2001, it was rightly clarified by the respondents that the exemption of sales tax on purchase of fuel under the Act would continue to be available to the petitioner and similarly situated industries even after the judgment in the matter of Coastal Chemicals L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under entry 175 of the Act and, therefore, circular dated February 19, 2001 should be upheld by the court whereas circular dated September 2, 2005 should be set aside. It was emphasised by the learned counsel for the petitioners that in the Gujarat Sales Tax Act and the Rules, the term consumable is not used along with terms like components parts sub-assembly parts and intermediate parts as is the case in section 5B(1) of the Andhra Pradesh General Sales Tax Act, which was considered by the Supreme Court in Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465, and, therefore, on the basis of the judgment of the Supreme Court in Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465, circular dated September 2, 2005 could not have been issued. What was highlighted on behalf of the petitioners was that natural gas purchased by the petitioners at concessional rates is part and parcel of the composite process of manufacturing the goods and is clearly a processing material and/or consumable stores as envisaged by the exemption notification and, therefore, the circular dated September 2, 2005 should be quashed. According to the learned counsel for the petitioners, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing material nor consumable store and would not earn benefit under the exemption entry. The learned counsel referred to the definition of the word raw material as appearing in section 2(19) of the VAT Act and contended that the fuel used by the petitioners should be treated as raw material used for the purpose of manufacturing final product. In the alternative, it was argued that respondent No. 2, i.e., Commissioner of Sales Tax, Vechanvera Bhavan, Ashram Road, Ahmedabad, who was the author of the circular dated February 19, 2001, could not have issued circular dated September 2, 2005 in complete volte face cancelling the circular dated February 19, 2001 from its original date, i.e., February 19, 2001, and holding that the judgment in the matter of Coastal Chemicals Ltd. [2000] 117 STC 12 (SC); [1999] 8 SCC 465, would be applicable to the provisions of the Gujarat Act inasmuch as it is not open to the respondents to seek to recover sales tax liability retrospectively more particularly when such liability was imposed/enhanced due to change in interpretation of law and the petitioners could not collect tax from their customers. It was contended by the learned counsel for the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise, New Delhi v. Ballarpur Industries Ltd. [1990] 77 STC 282 (SC), (7) Filterco v. Commissioner of Sales Tax, Madhya Pradesh [1986] 61 STC 318 (SC); [1986] 2 SCC 103, (8) Vishwanath Jhunjhunwala v. State of Uttar Pradesh [2004] 135 STC 562 (SC); [2004] 4 SCC 437, (9) Chowgule Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 (SC); [1981] 1 SCC 653, (10) Standard Fireworks Industries, Sivakasi v. Collector of Central Excise, Madurai [1987] 1 SCC 600, (11) Judgment rendered by the Gujarat Sales Tax Tribunal at Ahmedabad on September 28, 2004 in Second Appeal No. 682 of 2003 which was filed by Pandesara Industries Ltd. against State of Gujarat, (12) Indian Metals and Ferro Alloys Ltd., Cuttack v. Collector of Central Excise, Bhubaneshwar [1991] Supp 1 SCC 125, (13) State of Tamil Nadu v. Mahi Traders [1989] 73 STC 228 (SC); [1989] 1 SCC 724, (14) Collector of Central Excise, Guntur v. Andhra Sugar Ltd., VenkataRaypurama [1989] 73 STC 216 (SC); [1989] Supp 1 SCC 144, (15) Collector of Central Excise, Bombay-I v. Parle Exports (P.) Ltd. [1989] 75 STC 105 (SC); [1989] 1 SCC 345, (16) Commissioner of Sales Tax v. Industrial Coal Enterprises [1999] 114 STC 365 (SC); [1999] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, third Edition, F A R Bennion MA (Oxon), Barrister, Butterworths; (c) Accounting Standard Corporate Accounting Practice. Mr. S. Ganesh, learned Senior Advocate, with Ms. Amrita Thakore and Mr. Navin Kumar, learned Advocates for the petitioner in Special Civil Application No. 12106 of 2006, argued that the circular dated February 19, 2001 drawing the conclusion that the decision in Coastal Chemicals Ltd. [2000] 117 STC 12 (SC); [1999] 8 SCC 465 is not applicable to the provisions of the Act inasmuch as the term processing materials was missing in the A.P. Act whereas in the Gujarat Act, the term consumable stores occurred in the immediate conjunction with the terms raw or processing materials was just and is binding on the tax authorities as a result of which, the circular issued in the year 2005 should be set aside. In support of this contention, the learned counsel relied upon decisions in (1) Collector of Central Excise, Patna v. Usha Martin Industries [1998] 111 STC 254 (SC); [1997] 7 SCC 47, (2) Collector of Central Excise v. Dhiren Chemical Industries [2002] 126 STC 122 (SC); [2002] 2 SCC 127, (3) Collector of Central Excise v. Dhiren Chemicals Industries [2002] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting rights and that section 49(2) of the Act confers powers on the State Government to issue exemption notification prospectively as a result of which, the rights accrued in favour of the assessees pursuant to circular of the year 2001 could not have been nullified retrospectively by circular dated September 2, 2005. It was contended that when an assessee is prohibited or prevented from recovering tax from its customers by reason of an exemption notification, no demand for sales tax can be raised on the assessee in respect of the past period during which he was prohibited or inhibited from recovering the amount of tax and, therefore, circular dated September 2, 2005 should be regarded as illegal. In support of this submission, the learned counsel placed reliance on the decisions in (1) West Bengal Hosiery Association v. State of Bihar [1988] 71 STC 298 (SC); [1988] 4 SCC 134, (2) British Physical Lab India Ltd. v. State of Karnataka [2000] 119 STC 6 (SC); [1998] 9 JT 313 SC, (3) Shree Cement Ltd. v. State of Rajasthan [2000] 119 STC 10 (SC); [2000] 1 SCC 765 and (4) Texmaco Ltd. v. State of Andhra Pradesh [2000] 118 STC 290 (SC); [2000] 1 SCC 763. It was pointed out that all selle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce oil, which is purchased and utilised in an industrial process to manufacture goods is not a processing material or consumable store within the meaning of para 255(2) of the exemption notification. According to the learned Senior Advocate, in Pandesara case(1), the Tribunal had blindly followed the judgment of the Supreme Court in Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465 without considering the significant and material differences between the scheme of the Andhra Pradesh Act and the Gujarat Act and, therefore, the judgment of the Tribunal in Pandesara's case(1) should be set aside. According to the learned Senior Advocate, in Pandesara's case(1), the assessee had, in fact, succeeded because the Revenue had failed to discharge the burden cast on it of showing that natural gas purchased by M/s. Pandesara was used as raw material , processing material or consumable store so as to attract the charge of purchase tax under section 15B of the Gujarat statute and, therefore, the decision of the Tribunal in Pandesara's case Second Appeal No. 682 of 2003, decided on September 28, 2004-Gujarat Sales Tax Tribunal. cannot be considered as laying down any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llector of Central Excise, Guntur v. Andhra Sugar Ltd., Venkata-Raypurama [1989] 73 STC 216 (SC); [1989] Supp 1 SCC 144; [1988] 4 JT 410 (SC) and (2) State of Karnataka v. Balaji Computers [2007] 5 VST 120 (SC); [2007] 2 SCC 743. It was argued that the circular dated February 19, 2001 is binding on the Department and the Department cannot canvass a view contrary to what is stated in the circular. In support of this submission, the learned counsel placed reliance on the decisions in (1) K. P. Varghese v. Income-tax Officer, Ernakulam [1981] 131 ITR 597 (SC); AIR 1981 SC 1922, (2) Commissioner of Sales Tax, U.P. v. Indra Industries [2001] 122 STC 100 (SC); AIR 2000 SC 3442, (3) Collector of Central Excise, Guntur v. Andhra Sugar Ltd. [1989] 73 STC 216 (SC); [1989] Supp 1 SCC 144; [1988] 4 JT 410 (SC) and (4) State of Karnataka v. Balaji Computers [2007] 5 VST 120 (SC); [2007] 2 SCC 743. According to the learned Senior Advocate for the petitioners, the impugned circular dated September 2, 2005 cannot be sustained by the submission that it merely reflects the interpretation placed by the Department in view of the decisions of the court nor is the Department justified in issuing the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 216 (SC); [1989] Supp 1 SCC 144, (4) State of Karnataka v. Balaji Computers [2007] 5 VST 120 (SC); [2007] 2 SCC 743 and (5) Govind Prasad v. R. G. Parsad [1994] 1 SCC 437. As against this, Mr. Kamal B. Trivedi, learned Advocate-General, assisted by Ms. Sangeeta Vishen, learned Assistant Government Pleader for the respondents, contended that while ascertaining the meaning of the words raw material , processing material and consumable store , the principle of noscitur a sociis should be applied to find out the real meaning of those words as those words are not defined under the Act nor meaning of the words processing material and consumable store available in the dictionary. After emphasising that ordinary meaning of the words raw material is that material which gets transformed into the end-product, it was argued that the words processing material and consumable store should also be given the same meaning as they are in the company of the words raw material . According to the learned Advocate-General, the fuel, i.e., gas, which is used by the petitioners, is not used or consumed or vested in the final product and, therefore, it cannot be regarded either as raw m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) would not apply to the facts of the instant case. It was pleaded that the words, i.e., in the manufacture and processing of goods , used in the Central Law have wider meaning in comparison to the words in the manufacture of goods as used in the Act and, therefore, the fuel used by the petitioners would not qualify for earning exemption under the Act. According to the learned counsel, the facts and circumstances in case of J.K. Cotton Spinning Weaving Mills Co. Ltd. [1965] 16 STC 563 (SC), were different from those obtaining in the present case and, therefore, the same cannot be pressed into service by the learned counsel for the petitioners more particularly after later pronouncement of the judgment of the Supreme Court in Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465. It was argued that in J.K. Cotton Spinning Weaving Mills Co. Ltd. [1965] 16 STC 563 (SC), the Supreme Court was concerned with section 8(3)(b) of the Central Sales Tax Act, 1956 read with rule 13 of the Central Sales Tax (Regulation and Turnover) Rules, 1957, which are quite different from the provisions of section 15B and the language employed in entry 175(2) made under section 49(2) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hammers used for giving shape to certain articles being used in the manufacture of oil engines as a result of which, the contention of the assessee that ghan and hammers are tools and, therefore, they should be treated as consumable tools, was negatived by holding that neither ghan nor hammer is being used in the process of manufacture of oil engine as a result of which, by no stretch of imagination, it can be said that ghan and hammer are at any stage becoming an integral part of the taxable goods so as to make taxable goods marketable and in case Saurashtra Calcine Bauxite [1993] 91 STC 435 (Guj), the Division Bench was dealing with furnace oil used to produce heat required in the processing of calcine bauxite wherein sulphur and carbon of the furnace oil were admittedly found in the final product calcine bauxite and, therefore, these judgments relied upon would not be applicable to the facts of the instant case while considering the question, whether the fuel used by the petitioners is raw material or processing material or consumable store . The learned counsel asserted that unless the material becomes an integral part of the final taxable goods by getting used u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 19, 1993 in Sales Tax Reference No. 4 of 1988, as well as the decision of the Tribunal in Pandesara Industries Private Ltd. The learned counsel contended that the ratio laid down in the decisions in (1) West Bengal Hosiery Association v. State of Bihar [1988] 71 STC 298 (SC); [1988] 4 SCC 134, (2) British Physical Lab India Ltd. v. State of Karnataka [2000] 119 STC 6 (SC); [1998] 9 JT 313 SC and (3) Shree Cement Ltd. v. State of Rajasthan [2000] 119 STC 10 (SC); [2000] 1 SCC 765 would not apply to the facts of the captioned proceedings inasmuch as they deal with the statutory notifications issued by the State Government under various tax legislations, which came to be quashed and set aside by the court and question arose as to whether the State authorities should be permitted to recover the amount of tax, which would have been paid, but for the said notifications whereas in the instant case, the provision of law has remained the same, but the understanding thereof on the part of the State Government was against the law, which came to be clarified and corrected pursuant to the judgment of the Supreme Court in the case of Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat Sales Tax Tribunal), which is based on sound principles, is demonstrated to be wrong and, therefore, the petitions, which lack merits, should be dismissed. This court has heard the learned counsel for the parties at length and in great detail for days together. This court has also considered the facts pleaded in the petitions and replies thereto. As is evident from the record of the case, the learned counsel for the parties have cited several decisions for the guidance of this court, but reference to all of them is avoided in order to see that the judgment, which has even otherwise become lengthy, is not burdened unnecessarily. In the first group of petitions, the question posed for consideration of the court is, whether the use of furnace oil/LDO for firing a boiler whereby the water contained therein gets converted into steam which, in turn, is carried through pipelines to the reactor filled with raw materials like vinyl sulphone, gama acid, K-acid, etc., wherein chemical reaction takes place because the steam travelling through pipelines enters between the two vessels of the reactor for creating uniform temperature and ultimately the final products, namely, dyes, dye- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re this court, this court is of the view that the question whether fuels used by the petitioners can be regarded as raw materials or processing materials or consumable stores is essentially a question of fact depending upon the process of manufacture employed in different industries. The question whether the fuels used by the petitioners should be regarded as raw materials or processing materials or consumable stores, requires a close look. This and other contentions require appropriate evaluation as well as an indepth analysis. The assistance from the technical persons to ascertain whether the fuels used by the petitioners should be regarded as raw materials or processing materials or consumable stores may also be required. As the entire matter requires a second look and better investigation, the learned counsel for the petitioners, on instructions of the petitioners, who are present in the court, have agreed that the matters be remitted to the assessing authority/appellate authority, as the case may be, with appropriate directions, in respect of period post September 2, 2005. In view of the stand taken by the respondents in their affidavit-in-reply and willingness shown by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the sales tax authorities, which had completed all the assessments on that basis and footing. This position continued from February 19, 2001 till the impugned circular was issued on September 2, 2005. There is no manner of doubt that the transactions, which took place during the period between 2001 and 2005 on the basis that the sales tax chargeable was 0.25 per cent, are now incapable of being reversed, set aside or even modified. Section 86 of the Gujarat Sales Tax Act, which confers power on the State Government to make rules does not anywhere authorise the State Government to make a rule with retrospective effect, i.e., which has an effect of taking away or nullifying the existing rights and interest, which have already come into existence in favour of the assessees. Similarly, the power conferred by section 49(2) of the Act on the State Government to issue exemption notification, is prospective in nature. The scheme of the Act is such that the tax authorities have not been conferred powers to pass any order or issue any circular whereby pre-existing rights of the assessees can be nullified or set at naught. Therefore, this court is of the opinion that the rights, which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would become payable by the dealers in the State of Bihar in respect of sales of local hosiery goods made during the period when the said notification was in operation should not be collected. This is quite evident from paragraph 9 of the reported decision. In British Physical Lab India Ltd. v. State of Karnataka [2000] 119 STC 6 (SC); [1998] 9 JT 313 SC, notifications under section 8A of the Karnataka Sales Tax Act prescribing preferential rates of concession for dealers of locally manufactured television sets and components, were issued. Those notifications were quashed by the High Court. Thereupon, the State Government sought to recover differential amount of tax from the dealers. In view of the hardship faced by such dealers and in the interest of justice and equity, the Supreme Court restrained the State of Karnataka from collecting the amount, which had become payable exclusively by reason of quashment of the said notifications. Further, in Shree Cement Ltd. v. State of Rajasthan [2000] 119 STC 10 (SC); [2000] 1 SCC 765, the State of Rajasthan had issued three notifications in exercise of powers conferred by section 8(5) of the Central Sales Tax Act. The effect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferential amount. The Supreme Court found that the very same position existed in the matter before it and, therefore, directed in the interest of justice and equity that the respondent-State shall not collect the amount of sales tax that became payable only by reason of the order in the case of Shri Digvijay Cement [1997] 106 STC 11 (SC); [1997] 5 SCC 406 quashing the three notifications issued earlier. In Texmaco Ltd. v. State of Andhra Pradesh [2000] 118 STC 290 (SC); [2000] 1 SCC 763, the Andhra Pradesh Government notification prescribing concessional rate of tax on sale of cement by manufacturers to local dealers was set aside by the Supreme Court in writ petition filed by cement-manufacturing units. Consequently, the State Government initiated proceedings to recover the concessional amount. Therefore, by filing writ petition under article 32 of the Constitution, the affected dealers sought declaration of the Supreme Court that the order was prospective in nature and recovery proceedings be quashed on the grounds that: (i) the attention of the learned judges passing the order in question had not been drawn to the fact that the order would lead to recovery of such sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t competent to issue the circular withdrawing the benefits granted by an earlier circular with retrospective effect. In Govind Prasad v. R.G. Parsad [1994] 1 SCC 437, there were no separate recruitment rules for engineers working in Electrical and Mechanical branches of the Public Works Department of U.P. Government, but by way of long practice, the United Provinces Service of Engineers (Building and Roads Branch) Class-II Rules, 1936 were being mutatis mutandis applied to them. The Rules, as modified by the Government Order, provided for a minimum ten years' experience for promotion of Junior Engineers to Assistant Engineers. On January 7, 1980, the State Government issued another OM, which enumerated the existing conditions of eligibility for promotion and the modified conditions which were decided after consultation with the Public Service Commission. The memorandum further stated that the above provisions shall be deemed to be effective from July 1, 1978. The Supreme Court held that paragraph 3 of the memorandum gave deeming effect from July 1, 1978, but an executive order of the Government could not have been made operative with retrospective effect. In Binani Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Division Bench held that incorrect circular did not bind the Revenue and that law declared by the court had a binding effect. The question, which was considered by the Supreme Court, was when two opinions were expressed in the two circulars on the basis of change in opinion, whether it was permissible for the Revenue to reopen the completed assessments on the basis of the subsequent circular. While considering the said question, the Supreme Court has held in paragraph 16 Paras 27 and 28 page 804 of [2007] 6 VST. of the reported decision as under: 16. The issues can be looked at from a different angle. Undisputedly, the 1996 circular was binding on the Revenue Authorities as is spelt out in the case of April 12, 1996 and October 23, 1999 circulars. The assessments were completed on the basis of April 12, 1996 circular. Merely because the Commissioner changes his view/opinion and according to him it was review of the earlier decision that cannot have any effect on any assessment which has been completed on the basis of the 1996 circular. That being so, the question of reopening the assessment by mere change of opinion is entirely impermissible. Applying the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of fuels. The purchasing customers, namely, the petitioners had also determined their costings and prices of their manufactured products on the basis and footing that they were required to pay sales tax at the rate of 0.25 per cent. The recovery of sales tax in excess of 0.25 per cent by the sellers of fuels during the period between 2001 and 2005 would certainly have been considered as constituting a serious violation of the provisions of the Act and the sellers would have been subjected to punishment of imposition of penalty. This is what is contemplated by the impugned circular of 2005 which seeks to withdraw the exemption of paying sales tax at the rate of 0.25 per cent, conferred by the circular dated February 19, 2001. Clearly, this would not only amount to a violation of the provisions of the Act, but would also be unjust and inequitable, since the petitioners would have to pay tax at a higher rate for the period between 2001 and 2005, during which they could recover only 0.25 per cent from their customers in transactions which are now finally concluded, only on the ground that the opinion and understanding of the respondents regarding circular dated February 19, 2001 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the petitioners to submit before the authorities concerned, a statement showing the tax paid by the petitioners to the named suppliers after September 2, 2005 along with a letter from the suppliers confirming that the same has been deposited with the Sales Tax Department. In addition to this, the petitioners may also submit forms for the concessional rate to the respective suppliers/sellers for the said period during which, such forms were accepted by the suppliers/sellers along with the information thereof duly supplied to the Department, whereupon, the Department shall issue notices under section 50 of the Act to the petitioners with a clear understanding that the sales tax already paid at the full rate to the suppliers/sellers shall be treated as deposit of the petitioners and be subject to the final outcome of the notice under section 50 of the Act. It is clarified that for the initial period commencing from September 2, 2005, if any of the petitioners had purchased fuels at the reduced rates against submission of the forms, the differential amount shall also be deposited by the petitioners for the said period and the same shall also be given similar treatment as aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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