TMI Blog2015 (8) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no liability cast on petitioner under section 3 of Act to pay entry tax in respect of purchases made – Assessing authority during original assessment, despite all details, did not form any opinion that goods purchased by petitioner were different items manufactured by seller, thus, were local goods within its meaning – Once it was held that basis for reassessment was change of opinion, such reassessment was impermissible under law, as laid down in case of Sales Tax Officer, Ganjam v. Uttareswari Rice Mills [1972 (9) TMI 109 - SUPREME COURT OF INDIA] – Reassessment proceedings on ground that purchase has escaped assessment, was clearly illegal and unsustainable in law in view of authoritative pronouncement of Supreme Court in case of Commissioner of Income-tax v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] – Reassessment orders set aside – Decided in favour of Assesse. - Writ Petition (T) Nos. 4775, Writ Petition (T) Nos. 5448, Writ Petition (T) Nos. 5449 of 2006 - - - Dated:- 25-6-2014 - MANINDRA MOHAN SHRIVASTAVA, J. Neelabh Dubey for the petitioner. Sumesh Bajaj, Government Advocate, for the respondents. ORDER This common or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was initially made treating those purchases as tax paid and no tax was levied. This was so because at the time of original assessment made, the respondents did not impose tax in the matter of purchase of M. S. steel scrap from seller, i.e., BALCO, who did not make any endorsement in the sale invoices that they were local goods and not tax paid. However, later on, in each of the three cases, the respondent authorities issued notices under section 28(1) of the Act of 1994 in form 47. The petitioner filed his reply in response to reassessment notice in each case. In sum and substance, the reply of the petitioner was that the notices were vague and there was no indication in the notices as to on what basis, reassessment proceedings were being initiated. There was no indication in the notice that assessment had been opened either because there was under-assessment or it was a case of escapement or concealment or whether goods were now being treated as local goods in the hands of BALCO. The petitioner, in its objection/reply to reassessment notice stated that at the time of original assessment proceedings, all invoices made from BALCO were reflected in the returns and also in the stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to qualify as local goods in relation to local area and liable for levy of entry tax. The scrap is not a manufactured product out of the goods which have been purchased. It is only a scrap. Therefore, the BALCO while selling those M. S. steel scrap rightly did not make any endorsement in the invoices/bills that they are local goods and not tax paid under the provisions of section 7(1) of the Act. These invoices did not contain any such endorsement as required under section 7(1) of the Act, which clearly meant that the BALCO had sold and the petitioner purchased M. S. steel scrap, which were already tax paid by the BALCO. As such, there was no liability on the part of the petitioner to again make payment of entry tax while purchasing those items from BALCO. Initially, at the time of making original assessment when returns were submitted before the assessing authority, despite specific details submitted which included the quantity and the nature of item purchased by the petitioner from BALCO and all the invoices open to scrutiny by the assessing authority which did not contain any specification as it being local goods not tax paid, the assessing authority did not hold that such purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the basic goods which had been used by the BALCO. Therefore, under these circumstances, the orders of reassessment passed by the assessing officer and confirmation of such reassessment order by the revisional authority are illegal and unsustainable in law. Per contra, learned State counsel submits that the present is not a case of change of opinion but a case where purchase of steel scrap escaped assessment on entry tax and it was because factually incorrect information was placed before the assessing authority at the time of original assessment that entry tax has already been paid whereas no such tax was paid. Learned State counsel submits that though at the time of purchasing plant and machinery and other items and causing its entry in the local area, BALCO pays entry tax, the steel scrap which are generated are different from those items purchased and brought to the local area by the BALCO. The steel scrap are generated during the process of manufacturing and have different identity than the plant and machinery and building structural, therefore, they are local goods manufactured by BALCO and at the time of sale of such M. S. steel scrap by BALCO to the petitioner, the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold items being local goods tax not paid under the provisions of section 7(1) of the Act. The petitioner purchased M. S. steel scrap from the BALCO. The BALCO while selling those M. S. steel scrap, the petitioner did not declare the M. S. steel scrap as local goods and for this rea son, no endorsement as required under section 7(1) of the Act was made. Under Chhattisgarh Entry Tax Act, 1976, entry tax is leviable on the entry of goods in the local area for the consumption, use or sale therein. section 3 of the Act deals with incidence of taxation. Entry tax is leviable on the entry in the course of business of a dealer of goods specified in Schedule II into local area for consumption, use and sale therein. Such tax is liable to be paid by every dealer liable to tax under the Sales Tax Act who has effected entry of such goods. Sub-section (1)(b)(i) of section 3 of the Act however provides that no tax under sub-section (1) shall be levied in respect of goods specified in Schedule II other than local goods purchased from a registered dealer on which entry tax is payable or paid by the registered dealer. Section 7 of the Act provides that every registered dealer who, in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax paid so as to require the petitioner to pay entry tax. Therefore, the petitioner in his submission before the authority at the time of assessment rightly submitted that the goods were tax paid. It was the burden of the Revenue, as held in the case of Mohan Singh and Sons v. Commissioner of Sales Tax, Madhya Pradesh [1996] 29 VKN 243 that such goods are local goods. However, the assessing authority during the course of original assessment, despite all such details submitted before it, did not form any opinion that the M. S. steel scrap which were purchased by the petitioner from BALCO were different items manufactured by BALCO within the local area and thus, the local goods within the meaning of its definition as provided in clause (f) of section 2 of the Act. Obviously at the time of assessment, the opinion formed by the authority was that the M. S. steel scrap purchased by the petitioner were not local goods as they are not different than the items namely plant and machinery and building structural which were brought into the local area by the BALCO and already tax paid. However, later on, the assessing authority changed its opinion, which is reflected from the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourable Supreme Court in the case of Commissioner of Income tax v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) examining ambit and scope of power of reassessment under section 147 in respect of income escaping assessment held thus (page 564 in 320 ITR): On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two con ditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in section 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained, viz., that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-April 1, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, section 147 would give arbitrary powers to the assessing officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance of the machinery of the cement manufacturing plant, in which M. S. scrap and iron scrap arise, has no contribution or effect on the process of manufacturing of the cement, which is the excisable end-product, as since welding electrodes, mild steel, cutting tools, M. S. angles, M. S. channels, M. S. beams, etc., which are used in the process of repair and maintenance are not raw material used in the process of manufacturing of the cement, which is the end-product. The issue of getting a new identity as M. S. scrap and iron scrap as an end-product due to manufacturing process does not arise for our consideration. The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of end-product. Therefore, the M. S. scrap and iron scrap cannot be said to be a by-product of the final product. At the best, it is the by-product of the repairing process which uses welding electrodes, mild steel, cutting tools, M. S. angles, M. S. channels, M. S. beams, etc. The aforesaid decision of the Supreme Court is directly and squarely applicable in the present case also. Reliance placed by learned counsel for the State in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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