Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Odisha Power Generation Corporation Ltd. Versus State of Odisha & Another

2015 (5) TMI 62 - ORISSA HIGH COURT

Concessional rate of entry tax - Section 9C of the Orissa Entry Tax Act, 1999 - petitioner is engaged in business of generation of electricity and distribution thereof in the State of Odisha - whether generation of electricity is a manufacturing activity. - Held that:- Court in the case of Orient Paper & Industries Ltd. (1989 (1) TMI 138 - HIGH COURT OF ORISSA) while interpreting Section 2(b) of the Central Excise and Salt Act, 1944 has held that generation of electricity for the purpose of Cent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

would qualify as a manufacturing activity.

Whether coal is a raw-material for generation of electricity in thermal power plant - Held that:- When the processes that are involved in manufacturing/ generation/production of electricity in a thermal plant as narrated in the preceding paragraph is considered in the light of the above observation of the Hon'ble Supreme Court, it can safely be concluded that coal is a raw material for production/generation of electricity. - perusal of the i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he above reasons given by the Assessing Authority to hold that coal is not a raw material for generation/production of electricity in thermal power station and that generation of electricity is not a manufacturing activity and therefore the petitioner is not entitled to avail concessional rate of entry tax as provided under Rule 3(4) of the OET Rules. - by no stretch of imagination, it can be said that the findings/observations of this Court that 'coal is a raw material for generation of electri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dent from the impugned assessment order relying on various statutory provisions, the Supreme Court judgments, judgments of the High Court in support of its contention, the Assessing Authority without dealing with the contention of the petitioner with reference to the judgments relied upon by it passed the assessment order raising huge tax and penalty amounting to ₹ 7,22,44,608/-. Thus, the impugned order shows complete non-application of mind which ultimately amounts to judicial indiscipli .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

avail concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules - Decidedin favour of assessee. - WP(C) No. 17017 of 2014 - Dated:- 30-3-2015 - I. Mahanty And B. N. Mahapatra,JJ. For the Appellants : Mr N Venkataraman (Sr Adv.), M/s Satyajit Mohanty, D P Sahu, S Das & D K Mohanty For the Respondent : Mr R P Kar (Standing Counsel for Revenue) ORDER B. N. Mahapatra, Petitioner-Odisha Power Generation Corporation Ltd. in the present writ petition challenges the order of asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y on the ground that such levy is illegal, arbitrary and barred by limitation and outcome of non-application of mind, without jurisdiction and contrary to the provisions of OET Act. 2. Petitioner's case in a nut-shell is that it is a Government of Odisha Undertaking incorporated under the Companies Act, 1956 and a joint venture of Government of Odisha and AES of USA having main objects to establish, operate and maintain power generating stations and tielines, sub-stations and main transmissi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r short 'OVAT Act') and OET Act and in the said registration certificate it has been authorized to purchase coal as raw-material for generation of electricity. The petitioner having thermal power plant is engaged in manufacture and distribution of electricity. It uses coal as primary/only raw-material in its thermal power plant for manufacture of electricity. Petitioner purchases coal for use as raw-material from Mahanadi Coal Fields Ltd. in Lakhanpur area. In thermal power plant, chemic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessment, the petitioner purchased coal for consumption in its power plant as rawmaterial at a cost of ₹ 482,63,03,305.63 and paid entry tax thereon at the rate of 0.5% amounting to ₹ 2,41,31,516.52. On the basis of audit visit report, the Assessing Authority passed the impugned assessment order denying the concessional rate of entry tax on coal without affording reasonable opportunity of hearing to the petitioner and without considering written note of submissions in its proper p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y this Court in Bhushan Power and Steel Limited (supra) including the other judgment in NALCO in [W.P.(C) No.1597 and 1686 of 2012] relied upon by the petitioner before the Assessing Authority. Decision of this Court in Bhushan Power and Steel Limited (supra) holding that coal is a raw-material for the purpose of generating electricity has not been followed by the Assessing Authority on the ground that such finding of this Court is a cursory remark, i.e., Obiter Dicta and the said judgment havin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(5) of OET Rules stating therein that coal purchased shall be used for production of finished product, i.e., electricity. 5. It was further submitted that 'manufacture' means bringing into existence a new substance. In other words, manufacture implies that when a change takes place a new and distinct article comes into existence known as a commercial product, which can be no longer regarded as the original commodity. Any process or processes creating something else having a distinct name .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nce on the judgment of the Hon'ble Supreme Court in the case of Collector of Central Excise, New Delhi vs. Ballarapur Industries Ltd., [1990] 77 STC 282 (SC), it was submitted that coal is a raw material for production of electricity. Further relying upon the judgment of this Court in the case of Orient Paper & Industries Ltd. vs. Orissa State Electricity Board, (1989) 42 ELT 552 (Ori), Mr. Venkatraman submitted that electricity is a good and generation of electricity involves manufactur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

only when goods purchased as raw material and used in manufacturing of goods for sale i.e. goods which go into composition of the finished product will be eligible for concessional rate of entry tax as provided in sub-rule (4) of Rule 3 of the OET Rules. Referring to the counter affidavit filed in another connected case, Mr. Kar submitted that in the present case, since generation of electricity is not a manufacturing activity and coal is not a raw material for generation of electricity, the pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is an article/a good as referred to in Section 2(28) of the OVAT Act which defines the expression "manufacture"? (iii) Whether coal is a raw-material for generation of electricity in thermal power station? (iv) If the answers to question (i), (ii) and (iii) are affirmative whether the petitioner is entitled to avail concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules? 9. Question No.(i) is whether generation of electricity is a manufacturing activity. The expr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

espectively assigned to them in that Act." 11. Section 2(28) of the OVAT Act defines "manufacture" as under: "2(28) "Manufacture" means any activity that brings out a change in an article or articles as a result of some process, treatment, labour and results in transaction into a new and different article so understood in commercial parlance having a distinct name, character and use, but does not include such activity or manufacture as may be notified." 12. It .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e meaning of expression. The definition given in the statute is the determinative factor. 14. The Hon'ble Supreme Court in the case of Dy. CST Vs. Pio Food Packers, 1980 (Supp) SCC 174 at page 176 held that only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. 15. The Hon'ble Supreme Court i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

16. In Collector of Central Excise, Madras Vs. M/s. Kutty Flush Doors & Furniture Co. (P) Ltd., (1988) Suppl. SCC 239 at page 240, the Hon'ble Supreme Court held as follows: "3. It may be worthwhile to note that "manufacture" implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation, a new and different article must emerge ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

terial is subjected to (sic that the) manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. 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 impossible or commercially inexpedient, that process is one in relation to the manufacture." 18. This Court in the case of Orient Paper & Industries Ltd. (supra) w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uncements of the Hon'ble Supreme Court and High Court, we are of the considered view that the activity of generating electricity in thermal power plant by using coal would qualify as a manufacturing activity. 20. Question No.(ii) is as to whether electricity is an article/a good as referred to in Section 2(28) of the OVAT Act which defines the expression "manufacture". We need not retain ourselves for a longer period to adjudicate this question in view of the decision of the Hon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed or included and electric energy or electricity is not one of them. The term "movable property" when considered with reference to "goods" as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be movable property when it has all the attributes of such property. It is needless to repeat that it is capable of abs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ke any other movable object we see no difficulty in holding that electric energy was intended to be covered by the definition of "goods" in the two Acts. If that had not been the case there was no necessity of specifically exempting sale of electric energy from the payment of sales tax by making a provision for it in the Schedules to the two Acts. It cannot be denied that the Electricity Board carried on principally the business of selling, supplying or distributing electric energy. It .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of electricity in thermal power plant. The processes that are involved in manufacture/generation/ production of electricity as narrated in the written submission filed by the petitioner before the Assessing Authority and not disputed by the opposite party-Department, are as follows:- (a) Coal is the primary material for power generation; (b) In a Thermal Power Plant chemical energy available in Coal is converted into electricity; (c) Coal is fed into a boiler along with water and air; (d) Coa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ciple of electromagnetic induction. (i) In other words, chemical energy in coal gets converted to heat energy which in turn gets converted to mechanical energy which ultimately gets converted to electrical energy. 23. The above process clearly demonstrates that coal is the primary raw-material for generation/production of electricity in thermal power plant and without coal, no electricity can be produced/generated/ manufactured. 24. In Ballarapur Industries Ltd., (supra), the Hon'ble Supreme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ingredients used in the chemical technology of manufacture of any end-product might comprise, amongst others, of those which may retain their dominant individual identity and character throughout the process and also in the end-product; those which as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end-product; those which, like catalytic agents, while influencing and acceleratin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for the chemical processes culminating in the emergence of the desired end-product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burning-up is its quality and value as raw-material. In such a case, the relevant test is not its absence in the end product, but the dependance of the end product for its essential presence at the delivery and of the process. The ingredient goes into the making of the end-product in the sen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly be concluded that coal is a raw material for production/generation of electricity. 26. This Court in Bhushan Power and Steel Limited (supra) held that coal is a raw material for the purpose of generating electricity. 27. Apart from the above, perusal of the impugned assessment order reveals that before the Assessing Authority, the petitioner produced the expert opinion obtained from IIT, Kharagpur, wherein, it has been opined that coal is a raw material which results in the emergence of elect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of heat energy delivered to the turbine rotates the generator, rotor to produce electrical energy based on Faradyne's Principles of Electro Magnetic Induction…." Admittedly, the Department has not produced any acceptable evidence in rebuttal. Therefore, the expert opinion given by the IIT, Kharagpur has the binding force on the Department. 28. The Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. Damnet Chemicals (P) Ltd., (2007) 7 SCC 490 at page 495 h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at Bone Mill, (2007) 4 SCC 136, at page 139 held as under:- 11. Moreover, it is well-known that the question as to whether a commodity would be exigible to sales tax or not must be considered having regard to its identity in common law parlance. If, applying the said test, it is to be borne in mind that if one commodity is not ordinarily known as another commodity; normally, the provisions of taxing statute in respect of former commodity which comes within the purview of the taxing statute would .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ilizer or whether crushed bones are sold to the farmers for use thereof only as fertilizer." 30. In view of the above, we are of the considered opinion that coal is a raw material for production of electricity in thermal plant. The facts and the issues involved in Ahmedabad Electricity Co. Ltd. and others (supra) are completely different from the present case and therefore, it is of no assistance to the Department. 31. Now, let us examine whether the reasons given by the learned Assessing A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot convert to electric energy; (c) In absence of any standard input and output ratio between coal and generation of electricity, it cannot be said that coal is a raw material for consumption of electricity; (d) In the process of generation of hydro electricity, water remains with all its ingredients even after completion of process of generation of hydro electricity. Thus, neither water nor coal transforms to hydro electricity and thermal power. To strengthening his view, the Assessing Authority .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Supreme Court in the case of Kutty Flush Doors and Furniture Co.(supra), hence, although coal undergoes the change, yet it cannot be said that it transforms into a new article and hence, it does not satisfy the condition of transformation from one article or another as envisaged under Rule 3(4) of the OET Rules; (g) The contention of the dealer that the coal is a raw material for the purpose of generating electricity as held by this Court in Bhusan Power and Steel Limited (supra) is not a sett .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the Hon'ble Supreme Court and the matter is subjudice, the same is not a settled ratio, 32. For the following reasons, we feel it extreme difficult to accept the above reasons given by the Assessing Authority to hold that coal is not a raw material for generation/production of electricity in thermal power station and that generation of electricity is not a manufacturing activity and therefore the petitioner is not entitled to avail concessional rate of entry tax as provided under Rule 3( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tween coal and electricity is not necessary/relevant in deciding whether coal is a raw material for generation/production of thermal power. (c) While adjudicating as to whether coal is a raw material for generation/production of thermal power, it is irrelevant to find out whether water, wind, solar power are raw material for generation of hydro electricity, wind energy and solar energy respectively. Such questions may be adjudicated in appropriate case (s). (d) There is no dispute over the legal .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

electricity is a manufacturing activity and coal is a raw material for generation/production of electricity. 33. We are shocked to notice that the learned Assessing Authority held that the observation of this Court that "coal as a raw material for generation of electricity" is a "cursory remark, i.e., obiter dicta" and the said judgment having been challenged in the Hon'ble Supreme Court which is subjudice, the same is not a settled ratio and therefore, the petitioner-com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is either not necessary for the decision of the case or does not relate to the material facts in issue. 35. Now, let us see whether the observation/finding of this Court in the case of Bhusan Power & Steel Ltd. (supra) that "coal is a raw material for generation of electricity" is not necessary for the decision of the case or such observation does not relate to the material facts in issue. In Bhusan Power & Steel case (supra) the petitioner was engaged in manufacturing of spong .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ation qualifies for availing of concessional levy of entry tax in terms of Rule 3(4) of the OET Rules. On the basis of the above contention of the petitioner, this Court held that requirement of Rule 3(4) of the OET Rules is that scheduled goods purchased must be used as raw material in manufacturing the finished product. Thus, those scheduled goods are exclusively confined to "raw material" only used in manufacture of the finished products. The petitioner-company manufactures sponge i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oal is a raw material for generation of electricity' are unnecessary for the decision of that case or it does not relate to the material facts in issue. Therefore, the learned Assessing Authority is wholly unjustified to hold that the observation of this Court in Bhusan Power and Steel Ltd. (supra) that "coal is a raw material for generation of electricity" is a cursory remark, i.e., obiter dicta. 37. It may be relevant to note that the Assessing Authority is not competent to decla .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ourt in the State is binding on them. 39. The Hon'ble Supreme Court in the case of East India Commercial Co. Ltd., Calcutta and Another vs. Collector of Customs, Calcutta, AIR 1962 SC 1893, held as under: "We therefore, hold that the law declared by the highest court in the state is binding on authorities or Tribunals under its superintendence and they cannot ignore it." 40. The Hon'ble Supreme Court in the case of Sri Baradakant Mishra vs. Bhimsen Dixit, (1973) 1 SCC 446, held .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

conduct falls within the purview of the law of Contempt. Just as the disobedience to a specific order of the Court undermines the authority and dignity of the court in a particular case, similarly the deliberate and malafide conduct of not following the law laid down in the previous decision undermines the Constitutional authority and respect of the High Court. Indeed, while the former conduct has repercussions on an individual case and on a limited number of persons, the latter conduct has a mu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ticized the conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws." 42. The Hon'ble Supreme Court in the case of Sri Baradakant Mishra (supra) held that a Subordinate Court or Tribunal/Authority refusing to follow a High Court's decision where a petition for leave to appeal to Supreme Court against t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llowing judgments of the High Courts by the Assessing Officer, the Allahabad High Court has observed as under: "Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore merely on the ground that the Tribunal's order is the subject matter of revision in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of committing contempt of the High Court and is liable to be proceeded against." 45. Needless to say that if the Tribunal and authorities functioning within the territorial jurisdiction of the High Court would not follow the order of the High Court that will lead to chaos. Everybody would be then seeking interpreting the law according to their own whims and fancies. In such situation, lawyers may confuse not knowing how to advise their clients. The general public would be in dilemma as to w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ame is pending. Hence, the Assessing Authority is clearly guilty and committed contempt of this Court and is liable to be proceeded against. The Registry of this Court is directed to separately initiate a contempt proceeding against Mr. A.C. Nayak, Joint Commissioner of Sales Tax, Sambalpur Range, Sambalpur by name, who has passed the assessment order dated 03.05.2014 under Section 9C of the OET Act for the period 01.04.2011 to 31.03.2013. 47. We are afraid to notice that even though the petitio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version