TMI Blog2010 (11) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... to O.P. No. 2, Assistant Commissioner, so far as the use of cement is concerned to decide the extent of period for which the petitioner should be allowed to purchase cement at a concessional rate of tax for the purpose of utilizing the same in mining operation and processing of the mining ore. Writ allowed. - W.P. (C) No. 13202 of 2006 - - - Dated:- 3-11-2010 - GOPALA GOWDA V. C.J. AND MAHAPATRA B.N., JJ. The judgment of the court was delivered by B.N. MAHAPATRA J. This writ petition has been filed for quashing annexures 1 and 2 on the ground that those are illegal, arbitrary and contrary to the provisions of the Orissa Value Added Tax Act, 2004 (for short, the OVAT Act ) and Central Sales Tax Act, 1956 (for short, the CST Act ) and settled principles of law decided by the apex court. Annexure l is the order dated August 18, 2006 passed by O.P. No. 1, Commissioner of Sales Tax, Orissa, Cuttack (for short, the Commissioner ) passed in Revision Case Jajpur 39/06-07 under the OVAT Act and the CST Act confirming the order passed in annexure 2. Annexure 2 is the order dated June 24, 2006 passed by O.P. No. 2, Assistant Commissioner of Sales Tax by which high speed diese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cement on payment of full tax for use in their own light vehicle and other construction purposes. O.P. No. 2 being not satisfied with the explanation of the petitioner passed the impugned order dated June 24, 2006 under annexure 2 by deleting cement and HSD from the registration certificate and issued the amended registration certificate under the OVAT Act and the CST Act. Being aggrieved by the order of opposite-party No. 2, the petitioner moved a revision application before opposite-party No. 1 challenging the order dated June 24, 2006. The revisional authority after hearing the petitioner has confirmed the order passed by opposite-party No. 2. Hence, the writ petition. Mr. Sanjit Mohanty, learned senior advocate appearing on behalf of the petitioner, submits that the impugned orders passed under annexures 1 and 2 have been passed arbitrarily by the opposite-parties contrary to the provisions contained in the OVAT Act and the CST Act and the settled principles of law. Under section 2(25) input includes consumables directly used in the processing or manufacturing. He placed reliance on section 2(28), which defines manufacture ; section 2(27), which defines input-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing counsel for the Revenue, on the other hand supported the impugned orders passed under annexures 1 and 2 by O. Ps. 1 and 2. According to Mr. Kar, considering the factual realities, the O.P. authorities deleted the items cement and HSD from the registration certificate of the petitioner in accordance with the statutory provisions and in consonance with the settled legal position. The learned Commissioner has properly construed the decision of the Andhra Pradesh High Court in Delta Paper Mills Ltd. v. Oil and Natural Gas Commission [1991] 81 STC 339 (AP) and has correctly applied the same in the case of the petitioner. According to Mr. Kar, the decisions relied upon by the learned senior counsel for the petitioner have no application to the case of the petitioner. The registering authority under the OVAT Act has recorded the finding that cement is inadmissible so far as mining and manufacturing activities are concerned. Similarly, HSD has no utility as raw material for mining. HSD and cement could not be accepted as capital goods/raw materials under section 2(8) of the OVAT Act. HSD was not used as raw material directly in the process of manufacturing of the finished produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted from the registration certificates of the dealer issued under the CST Act and OVAT Act. The petitioner s case is that it is eligible to purchase these two items at the concessional rate of tax on the strength of C form as those goods are inextricably connected with the process of mining activities of the minerals and processing of ores in the crusher owned by it. Though various points have been raised, they are really sidestepping the real issue. The issue involved in the present case is about application of section 8(3)(b) of the CST Act and rule 13 of the CST (R T) Rules to the petitioner. For proper appreciation and consideration of the issue involved in this case, the provisions of section 8(3)(b) of the CST Act and rule 13 of the CST (R T) Rules are reproduced below: Section 8(3)(b) of the CST Act: 8. Rates of tax on sales in the course of inter-State trade or commerce. (1) Every dealer, who in the course of inter-State trade or commerce, (a) sells to the Government any goods; or (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given below: 1. Fuels (i) Electricity (including lighting and heating) (ii) Lubricating materials (iii) Timber (iv) Iron and steel goods (v) Electrical goods (vi) Safety lamps (vii) Explosives (1) gun power, (2) salt peter, (3) sulphur, (4) catridge paper, (5) safety fuses, (6) gelignite, (7) detonators, (8) oil and catridge paper, (9) other explosives (viii) Construction materials (1) cement, (2) asbestos, zinc sheets, etc., (3) tiles, (4) paints and varnishes, (5) others (ix) Chemicals (x) Other articles. Thus, from the above, it follows that goods which are intended for use are integrally connected with production of goods without which commercial production would be inexpedient and therefore, the same must be treated as goods intended for use in the manufacturing of goods. At this juncture, it will be profitable to refer to some of the judicial pronouncements. In Indian Copper Corporation Ltd. [1965] 16 STC 259 (SC); AIR 1965 SC 891, the apex court held as follows (page 265 in 16 STC): . . . in a case where a dealer is engaged both in mining operations and in the manufacturing process the two processes being interdependent it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of cloth in that restricted sense would give rise to 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. Rule 13 does not justify importation of the restrictions, which are not clearly expressed nor imperatively intended. Goods used as equipment, such as tools, stores, spare parts, or accessories in the manufacture or processing of goods, in mining, and in the generation and distribution of power need not, to qualify for special treatment under section 8(1), be ingredients or commodities used in the process, nor they be directly and actually needed for turning out or the creation of goods . The honourable Supreme Court in Member, Board of Revenue, West Bengal v. Phelps and Co. (P.) Ltd. [1972] 29 STC 101 (SC); [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 (SC); AIR 1965 SC 1310 and held that gloves used by workmen who were engaged in hot jobs or in handling corrosive substance in the course of manufacture c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long mining operation and processing of mining ore goes on. Cement as stated above, is necessary for installation of machineries, i.e., primary stage of the mining activities and construction of benches and plates. After installation of the machineries and construction of benches/ plates, utilization of cement is almost insignificant. Therefore, we feel it proper to remit the matter to O.P. No. 2, Assistant Commissioner, so far as the use of cement is concerned to decide the extent of period for which the petitioner should be allowed to purchase cement at a concessional rate of tax for the purpose of utilizing the same in mining operation and processing of the mining ore. In view of our findings in the preceding paragraphs, the decision in Delta Paper Mills Limited [1991] 81 STC 339 (AP) is of no help to the petitioner. So far the initiation of the penalty proceeding under section 10A of the CST Act is concerned, it is open for the petitioner to file his reply before O.P. No. 2, Assistant Commissioner, who has initiated the penal proceeding. O.P. No. 2 is directed to decide the matter keeping in view the decision taken in this judgment. In view of the above, we set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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