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2015 (11) TMI 48 - ALLAHABAD HIGH COURT

2015 (11) TMI 48 - ALLAHABAD HIGH COURT - [2016] 87 VST 393 (All) - Benefit of form III-B for concessional rate of tax under Section 4-B - Maintainability - Alternate remedy - Whether use of diesel oil in generator sets to run plant and machinery to manufacture the final products as mentioned in the Recognition Certificate would qualify the essential requirement "for use in the manufacture of notified goods" under Section 4-B(2) of the Act - Held that:- Article 226 of the Constitution of India c .....

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rule to be applied rigidly for entertaining a writ petition.

In order to run plant and machinery, the generators are essential, and for that purpose, diesel oil has been used in the generators. There is no denial of the fact that the entire process of manufacture carried on by the petitioners for converting raw material into finished goods essentially require generators in which diesel oil has been used. Thus the generation of power by generators by use of diesel oil so as to run pl .....

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e generators so as to run plant and machinery by the petitioners is so integrally related to the manufacture of their final products that without that process or activity manufacture shall not be possible. Therefore, diesel oil required to run generators would necessarily fall within the expression "for use in the manufacture of notified goods" - expression "for use in the manufacture of notified goods" which finds mentioned in Section 4-B(2) of the Act, would take within its sweep the "diesel o .....

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ated:- 10-9-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. ORDER ( Per: Surya Prakash Kesarwani, J. ) 1. Heard Sri S.D. Singh, learned Senior Counsel assisted by Sri Piyush Agarwal, learned counsel for the petitioners and Sri C.B. Tripathi, learned Special Counsel for the respondents. 2. In this bunch of writ petitions the interpretation of the provision of Section 4-B(2) of the U.P. Trade Tax Act, 1948 (hereinafter referred to as 'the Act') is involved. T .....

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ct was granted by the Assessing Authority in which the goods 'diesel' was also mentioned under the category 'fuel'.' The petitioners were using diesel in their generator sets, which produced electricity, which was used to run the plant and machinery to manufacture the notified goods. Subsequently, the Commissioner of Trade Tax, U.P., Lucknow, issued a circular dated 20.7.2000 to all the subordinate officers directing that the benefit of form III-B for concessional rate of tax .....

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d in terms of the judgment dated 25.3.2003, in leading Writ Petition No.628 of 2000, M/s. Vam Organic Chemicals Ltd. Vs. State of U.P. and others, 2003 U.P.T.C. 467, and the Circular dated 20.6.2000 and the notice dated 29.6.2000 were quashed. The Court held: "14. In our opinion the stand taken by the respondent, is overtechnical. In our opinion the diesel oil used by the petitioner is used for the manufacture of notified goods as mentioned in Section 4-B(2) of the U.P. Trade Tax Act. It ma .....

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t is accepted then we will be adding the word 'directly' in Section 4-B(20 before the words 'for use in the manufacture'. This would be against the settled principle of interpretation referred to above. In our opinion, diesel oil is certainly fuel which is essential for operating the machinery in a continuous process industry like that of the petitioner. Hence in our opinion, diesel is clearly covered by Clause (a) of the Explanation to Section 4-B(2) of the U.P. Trade Tax Act. I .....

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naphtha, etc." 4. Against the aforesaid Division Bench judgment of this Court, the respondents filed Civil appeal no.1929 of 2004 before the Hon'ble Supreme Court which was allowed by judgment dated 26.2.2010, State of U.P. and others Vs. Van Organic Chemicals Ltd., 2010, U.P.T.C., 413 and the matter was remanded to the Assessing Authority for de novo adjudication on the show cause notices. While allowing the Civil Appeals of respondents, Hon'ble Supreme Court observed that under t .....

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reme Court held that the show cause notices issued would constitute as a show cause notices for amending the Recognition Certificate. Hon'ble Supreme Court further directed that Assessing Authority would decide each case on its own merit uninfluenced by the decision of the High Power Committee dated 12.6.2000 and the circular issued by the Additional Commissioner dated 20.6.2000. It was further clarified that in case where the Assessing Authority had already passed an adjudication order in t .....

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tition No.279 of 2012 and Writ Petition No.289 of 2012, took the stand that they do not have any power connection from U.P. State Electricity Board/U.P. Power Corporation and that the entire plant and machineries are operated by the diesel generator sets installed in the factory premises which is the only source of energy to operate the plant and machineries and, in the absence of which, the manufacture of their final product was not possible. They also stated that diesel is a fuel and is a nece .....

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he final product. The diesel purchased has been used to run the plant and machinery in the factory which is covered by the word 'fuel' under clause (a) of the explanation to Section 4 B(2) of the Act. 7. However, the Assessing Authority passed the order under Section 4 B-(4) of the Act and deleted HSD Oil from the Recognition Certificate of the petitioners on the ground, namely, (i) HSD Oil is not a raw material but is used in generator sets for producing electricity, (ii) Electricity it .....

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sent writ petition. Submission of the Petitioners 9. Learned counsel for the petitioners submitted as under ; (i) The petitioners of Writ Petition no.255 of 2012, Writ Petition No.399 of 2012, Writ Petition No.279 of 2012 and Writ Petition No.289 of 2012 have no electricity connection from the U.P. Electricity Board/U.P. Power Corporation. They run their plant and machinery by diesel generator sets only. (ii) The industry of petitioners of Writ Petition No.254 of 2012, and Writ Petition No. 342 .....

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ture their final product. (iv) Section 4-B(2) read with explanation clearly indicates that fuel may be used in the manufacture of notified goods under the Recognition Certificate granted for concessional rate of tax on purchase of fuel. Undisputedly, diesel is fuel. (v) The Assessing Authority merely used the term 'raw material', whereas, the explanation to Section 4-B(2) of the Act provides for goods required for use in the manufacture to mean raw materials, processing materials, machin .....

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entertainable. 10. In support of his submissions learned counsel for the petitioners has relied on the following judgments ;- (i.) (Commercial Taxation Officer, Udaipur Vs. Rajasthan Taxchem Ltd. 2007(3) SCC 124, (paras 2,3,5,6 and 17) (ii) Dr. Bal Krishna Agarwal Vs. State of U.P. and others 1995 (1) SCC 614 (iii) Durga Enterprises (P) Ltd. And another Vs. Principal Secretry, Govt. of U.P. and others 2004(13) SCC 665 (iv) Babubhai Muljibhai Patel Vs. Nandlal Khodidas Barot and others 1974(2) SC .....

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facture electricity and, therefore, benefit of concessional rate of tax could not be extended on purchase of diesel for use in generator sets to produce electricity so as to use the same in the manufacture of their final product. (ii)Section 4-B(2) of the Act uses the phrase "for use in the manufacture of notified goods', since electricity is a notified goods and diesel oil is consumed as such use of diesel can not be said to be for use in the manufacture of final products of the petiti .....

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ned orders, the petitioners have a statutory remedy of first appeal under Section 9 and, thereafter IInd appeal before the Tribunal under Section 10 and thereafter revisions under Section 11 of the Act before the High Court and, therefore the present writ petitions under Article 226 of the Constitution of India are liable to be dismissed on the ground of alternative remedy. 12. In support of his submissions learned Special Counsel has relied upon the judgment of Hon'ble Supreme Court in the .....

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nch Judgement dated 13.8.2012 in Writ Tax 1640 of 2011, M/s. Flex Industries Limited Vs. State of U.P. and others. He also placed some notifications in support of submission that electricity is a notified goods. 13. We have carefully considered the submissions of learned counsel for the parties and perused the record. Discussion and findings: 14. Having considered the submissions of the learned counsel for the parties, we find that the following questions arises for adjudication : (i) Whether wr .....

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ionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon the facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition. Some exceptions t .....

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ner. (v) Where procedure required for decision has not been adopted. (vi) Where Tax is levied without authority of law. (vii) Where decision is an abuse of process of law. (viii) Where palpable injustice shall be caused to the petitioner, if he is forced to adopt remedies under the statute for enforcement of any fundamental rights guaranteed under the Constitution of India. (ix) Where a decision or policy decision has already been taken by the Government rendering the remedy of appeal to be an e .....

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indu Kanya Mahavidyalaya, L.K. Verma v. HMT Ltd. and anr., (2006) 2 SCC 269, Paras 13 and 20, M.P. State Agro Industries Development Corpn. Ltd. & Anr. vs. Jahan Khan (2007) 10 SCC 88 para 12, Dhampur Sugar Mills Ltd. v. State of U.P. and others (2007) 8 SCC 338, BCPP Mazdoor Sangh Vs. NTPC (2007) 14 SCC 234 (para 19), Rajasthan State Electricity Board v. Union of India, (2008) 5 SCC 632 (para 3), Mumtaz Post Graduate Degree College Vs. University of Lucknow,(2009) 2 SCC 630 (para 22 and 23) .....

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ara 11 to 19), Star Paper Mills Ltd. Vs. State of U.P. and others, JT (2006) 12 SC 92, State of Tripura vs. Manoranjan Chakraborty, (2001) 10 SCC 740 para 4; Paradip Port Trust vs Sales Tax Officer and Ors. (1998) 4 SCC 90, Feldohf Auto & Gas Industries Ltd. Vs. Union of India (1998) 9 SCC 710; Isha Beebi Vs. Tax Recovery Officer (1976) 1 SCC 70 (para 5); Whirlpool Corporation Vs. Registrar of Trademarks (1998) 8 SCC 1; Guruvayur Devasworn Managing Committee Vs C.K. Rajan (2003) 7 SCC 546 (p .....

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rissa High Court dated 19-2-1998 in writ petitions filed by the appellant Port Trust against the orders of assessment passed by the Sales Tax Officer, Cuttack, in respect of Assessment Years 1990-91 to 1994-95. In the said writ petitions the case of the appellant was that the assessment for sales tax has been made in respect of matters which do not fall within the legislative power of the State to impose sales tax. The writ petitioners raise questions involving interpretation of the words " .....

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erpretation of sub-clause (d) of Clause (29-A) of Article 366 of the Constitution and the taxability of the transactions in respect of which sales tax has been assessed by the Sales Tax Officer, we are of the view that the High Court should have entertained the writ petitions and should have considered the said question instead of requiring the appellant to avail the remedy of appeal under the Sales Tax Act, The appeals are, therefore, allowed, the impugned judgment of the High Court is set asid .....

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interfere, then notwithstanding the alternative remedy which may be available by way of an appeal under Section 20 or revision under Section 21, a writ court can in an appropriate case exercise its jurisdiction to do substantive justice. Normally of course the provisions of the Act would have to be complied with, but the availability of the writ jurisdiction should dispel any doubt which a citizen has against a high-handed or palpable illegal order which may be passed by the assessing authority. .....

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of judicial review inter alia in cases where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the Act is in question. In the aforementioned circumstances, the alternative remedy has been held not to operate as a bar. (See Whirlpool Corpn. v. Registrar of Trade Marks, 1998)8 SCC 1, Sanjana M. Wig v. Hindustan Petroleum Corpn. Ltd. 2005(8) SCC 242 and State of H.P. v. .....

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20. In the case of State of Union of India v. Tantia Construction (P) Ltd. (Supra) Hon'ble Supreme court held as under : "21. In support of his aforesaid submissions Mr. Chakraborty firstly relied on and referred to the decision of this Court in Harbanslal Sahnia v. Indian Oil Corporation Ltd. (2003) 2 SCC 107, wherein this Court observed that the Rule of exclusion of writ jurisdiction by availability of an alternative remedy, was a rule of discretion and not one of compulsion and ther .....

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remedy, a writ petition would not be maintainable. The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution. 21. In the case of State of H.P. vs. Gujarat Ambuja Cement Ltd. (supra) Hon'b .....

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jurisdiction of discretion of the High Court to grant relief under Article 226 of the Constitution. At the same time, it cannot be lost sight of that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. If somebody approaches the High Court without availing the alternative remedy provided the High Court should ensure that he has made out a stron .....

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ide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. 19. Anoth .....

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. Kamal Kumar, AIR (1965) SC 1321;Siliguri Muncipality v. Amalendu Das, AIR (1984) SC 653; S.T. Muthusami v. K. Natarajan, AIR 1988 SC 616; Rajasthan S.R.T.C. v. Krishna Kant, AIR (1995) SC 1715; Kerala State Electricity Board v. Kurien E. Kalathil, AIR (2000) SC 2573; A. Venkatasubbiah Naidu v. S. Chellappan, 2000(7) SCC 695; L.L. Sudhakar Reddy v. State of Andhra Pradesh,2001(6) SCC 634; Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha v. State of Maharashtra .....

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enforcement of any of the fundamental rights; where there is failure of principles of natural justice or where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. 22.If, as was noted in Ram and Shyam Co. v. State of Haryana, AIR 1985 SC 1147 the appeal is from "Caeser to Caeser's wife" the existence of alternative remedy would be a mirage and an exercise in futility. In the instant case the writ petitioners had indicated the reasons as to .....

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tence of an alternative remedy this Court while dealing with the matter in an appeal should not permit the question to be raised unless the High Court's reasoning for entertaining the writ petition is found to be palpably unsound and irrational. Similar view was expressed by this Court in First Income-Tax Officer, Salem v. M/s. Short Brotheers(P) Ltd., (1966) 3 SCR 84 and State of U.P. v. M/s. Indian Hume Pipe Co. Ltd, 1977(2) SCC 724. That being the position, we do not consider the High Cou .....

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rse. Secondly, the doctrine has no application when the impugned order has been made in violation of the principles of natural justice. We may add that where the proceedings itself are an abuse of process of law the High Court in an appropriate case can entertain a writ petition. 23. Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the g .....

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t had entertained a petition despite availability of alternative remedy and heard the parties on merits it would be ordinarily unjustifiable for the High Court to dismiss the same on the ground of non exhaustion of statutory remedies; unless the High Court finds that factual disputes are involved and it would not be desirable to deal with them in a writ petition." (Emphasis supplied by us) 22. In the case of Union of India and others Vs. Major General Shri Kant Sharma, (2015) 6 SCC 773, the .....

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al under Section 31 of the Act or leave granted by the Supreme Court, or bar of leave to appeal before the Supreme Court under Article 136(2) of the Constitution of India bars the jurisdiction of the High Court under Article 226 regarding matters relating to the Armed Forces. A preliminary objection was raised on behalf of the Union of India regarding maintainability of the Writ Petition on the ground that against the impugned orders a remedy of appeal to the Supreme Court was provided under Sec .....

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26 is one of the basic essential features of the Constitution of India and legislation including the Armed Forces Tribunal Act, 2007 could not override or curtail the jurisdiction of the High Court under Article 226. In the case of Major General Shri Kant Sharma, (supra), Hon'ble Supreme Court considered the basic principles of exercising power under Article 226 of the Constitution of India. 23. In the case of Major General Shri Kant Sharma, (supra) which has been heavily relied by the learn .....

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tion under Article 226 of the Constitution of India where statutory alternative remedy is available. It is equally settled that this canon of law is not free of exceptions. The courts, including this Court, have taken the view that the statutory remedy, if provided under a specific law, would impliedly oust the jurisdiction of the Civil Courts. The High Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India can entertain writ or appropriate proceedings .....

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r remedy by itself may not operate as an absolute bar for exercise of jurisdiction by the Courts. It will normally depend upon the facts and circumstances of a given case. The further question that would inevitably come up for consideration before the Court even in such cases would be as to what extent the jurisdiction has to be exercised. 81. Should the Courts determine on merits of the case or should they preferably answer the preliminary issue or jurisdictional issue arising in the facts of t .....

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o the very root of jurisdiction and where the authorities have acted beyond the provisions of the Act. However, it should only be for the specialized Tribunal or the appellate authorities to examine the merits of assessment or even factual matrix of the case." 32. In Cicily Kallarackal vs. Vehicle Factory 2012(8) SCC 524, the Division Bench of this Court held: (SCC pp.525-26, paras 4 and 9) "4. Despite this, we cannot help but state in absolute terms that it is not appropriate for the .....

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rticle 226 of the Constitution of India. Even in the present case, the High Court has not exercised its jurisdiction in accordance with law. The case is one of improper exercise of jurisdiction. It is not expected of us to deal with this issue at any greater length as we are dismissing this petition on other grounds. * * * * 9. ........, we hereby make it clear that the orders of the Commission are incapable of being questioned under the writ jurisdiction of the High Court, as a statutory appeal .....

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this Court. It is settled law that non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. Undoubtedly, it is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy. However, the High Court must not interfere if there is an adequate eff .....

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6) SCC 499. 12. The Constitution Benches of this Court in K.S. Rashid and Son v. Income Tax Investigation Commission, AIR 1954 SC 207, Sangram Singh v. Election Tribunal, AIR 1955 SC 425, Union of India v. T.R. Varma, AIR 1957 SC 882, State of U.P. v. Mohd. Nooh AIR 1958 SC 86 and K.S. Venkataraman and Co. (P) Ltd. v. State of Madras, AIR 1966 SC 1089 have held that though Article 226 confers very wide powers in the matter of issuing writs on the High Court, the remedy of writ is absolutely disc .....

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r,AIR 1965 SC 1321, Siliguri Municipality v. Amalendu Das, 1984(2)SCC 436, S.T. Muthusami v. K. Natarajan, 1988(1) SCC 572, Rajasthan SRTC v. Krishna Kant,1995(5) SCC 75, Kerala SEB v. Kurien E. Kalathil, 2000(6) SCC 293, A. Venkatasubbiah Naidu v. S. Chellappan, 2000(7) SCC 695, L.L. Sudhakar Reddy v. State of A.P., 2001(6) SCC 634 Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha v. State of Maharashtra, 2001(8) SCC 509, Pratap Singh v. State of Haryana 2002(7 .....

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that the writ petition will not be entertained if an effective remedy is available to the aggrieved person and observed: (AIR p. 1423, para 7) "7. ... The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by the statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or ev .....

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d that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford, 1859(6) CBNS 336 in the following passage: (ER p. 495) * * * *" 14. In Mafatlal Industries Ltd. v. Union of India B.P. Jeevan Reddy,J., 1997(5) SCC 536, (speaking for the majority of the larger Bench) observed: (SCC p. 607, .....

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h the provisions of the enactment." ' (See G. Veerappa Pillai v. Raman & Raman Ltd., AIR 1952 SC 192, CCE v. Dunlop India Ltd., 1985(1)SCC 260, Ramendra Kishore Biswas v. State of Tripura, 1999(1)SCC 472, Shivgonda Anna Patil v. State of Maharashtra, 1999(3)SCC 5, C.A. Abraham v. ITO, AIR 1961 SC 690, Titaghur Paper Mills Co. Ltd. v. State of Orissa,1983(2)SCC 433, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath and Sons, 1992 Supp(2)SCC 312, Whirlpool Corpn. v. Reg .....

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has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, AIR 1964 SC 1419, Titaghur Paper Mills case, 1983(2) SCC 433 and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained o .....

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td.(supra) that it is a settled canon of law that the High Court should not normally interfere in exercise of its jurisdiction under Article 226 of the Constitution of India where statutory alternative remedy is available but it is equally settled that this canon of law is not free of exceptions. The Courts, including the Supreme Court, have taken the view that statutory remedy, if provided under a specific law, would impliedly oust the jurisdiction of the civil courts. The High Court in exercis .....

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derstood to be an exhaustive exposition of law which is neither practical nor possible to state with precision. The availability of alternative statutory or other remedy by itself may not operate as an absolute bar for exercise of jurisdiction by the courts. It will normally depend upon the facts and circumstances of a given case. 25. The large number of judgments, as we have noted above, also clearly state the law that availability of alternative statutory remedy is not an absolute bar to enter .....

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rejoinder affidavits have already been exchanged and as such we do not consider it appropriate to accept the preliminary objection of maintainability of writ petition raised by the learned Special Counsel for the respondent. Accordingly, the preliminary objection is rejected and we hold that the present writ petitions are entertainable. Question no.2 27. It is undisputed that petitioners were granted a Recognition Certificate under Section 4-B of the Act read with Rule 25-A of the U.P. Trade Ta .....

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nerator set installed in the factory premises to run their plant and machinery so as to manufacture their final product. The other petitioners who have power connection but their industry is a continuous process industry and, therefore, so as to ensure to run plant and machinery continuously even in the event of power cut or power breakdown, generators have been installed in the factory in which diesel oil has been used to run the plant and machinery. 28. Thus, there is no dispute that in order .....

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s i.e. the final product of the petitioners. Thus the manufacture of the notified goods itself is dependent upon the use of diesel oils in the generator sets directly. 29. Even if it is assumed that the use of diesel oil is indirectly connected with the manufacture of the notified goods yet there is no denial of the fact by the Assessing Authority that the use of diesel oil in generator sets was essential for manufacture of the notified goods of the petitioners and the manufacturing itself is de .....

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quired for use in the manufacture" to mean not only raw materials but also processing materials, machinery, plant, equipment, consumable stores, spare parts, accessories, components, sub-assemblies, fuels or lubricants. Thus the goods which qualify for concessional rate of tax on purchases under Section 4-B(2) of the Act are not only raw material but also other classes of goods including Fuels which includes diesel oil. 31. Before we proceed further, it would be appropriate to notice the pr .....

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s under section 3-AAAA and the dealer holds a recognition certificate issued under sub-section (2) in respect thereof, he shall be liable in respect of those goods to tax at such concessional rate, or be wholly or partly exempt from tax, whether unconditionally or subject to the conditions are restrictions specified in that behalf, as may be notified in the Gazette by the State Government in that behalf: (a-1) Where any declared goods liable to tax under sub-section (1) of section 3-D are sold o .....

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rst day of May, 1977: Provided further that the rules to carry out the objects of this clause or clause (a) may also be made effective from a date not earlier than the first day of May, 1977: (b) Where any goods liable to tax under any other provision of this Act are sold by a dealer to another dealer and such other dealer furnishes to the selling dealer in prescribed form and manner a certificate to the effect that he holds a recognition certificate issue under sub-section (2) in respect thereo .....

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nt that the notified goods referred to in sub-clause (2) shall be manufactured in a "new unit" as defined in section 4-A, which goes into production after such date, whether before or after the date of the notification under this sub-clause, and within such period as may be specified. (2) Where a dealer requires any goods, referred to in sub-section (1) for use in the manufacture by him, in the State of any notified goods, or in the packing of such notified goods manufactured or proces .....

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all grant to him in respect of such goods a recognition certificate in such form and subject to such conditions, as may be prescribed. Explanation: For the purpose of this sub-section- (a) goods required for use in the manufacture shall mean raw materials, processing materials, machinery, plant, equipment, consumable stores, spare parts, accessories, components, sub-assemblies, fuels or lubricants; and (b) 'notified goods' means such goods as may, from time to time, be notified by the St .....

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ve. (3) Omitted by U.P. Act No.1/1973. (4) (I) Where the assessing authority is satisfied that the dealer in whose favour the recognition certificate in respect of any goods was granted under sub-section (2)- (a) has discontinued the manufacturing business for the purpose whereof the recognition certificate was granted; or (b) has made a breach of any condition of the recognition certificate or (bb) has failed to pay any tax, penalty or other dues payable under this Act within a period of three .....

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thority may amend a recognition certificate granted under sub-section (2) either of its own motion or on the application of the dealer, where the dealer has changed the name or place of his business or has closed down any branch or opened a branch or for any other sufficient reason: Provided that no registration certificate shall be cancelled or amended by assessing authority of its own motion except after reasonable opportunity of being heard has been given to the dealer. iii.The Joint Commissi .....

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(2) has purchased the goods after payment of tax at concessional rate under this section or, as the case may be, without payment of tax and has used such goods for a purpose other than that for which the recognition certificate was granted or has otherwise disposed of the said goods, such dealer shall be liable to pay as penalty such amount as the Assessing Authority may fix which shall not be less than the difference between the amount of tax on the sale or purchase of such goods payable under .....

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uch packing material are sold or disposed of otherwise than by way of sale in the State or in the course of inter-State or in the course of inter-State trade or commerce or in the course of export out of the Territory of India, such dealer shall be liable to pay an amount equal to the difference between the amount of tax on the sale or purchase of such goods payable under this section and the amount of tax calculated at the rate of four percent, on the sale or purchase of such goods. (7) For det .....

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me facts on which a penalty has been imposed under this section. 32. Recognition Certificate has been granted to the petitioners under Section 4-B(2) of the Act for concessional rate of tax on purchase of goods required by the petitioners for use in the manufacture by them in the State of any notified goods. Thus the entire controversy is dependent upon the interpretion of the expression "for use in the manufacture of any notified goods" 33. In the case of M/s. J.K. Cotton Spinning and .....

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or in mining, or in the generation or distribution of electricity or any other form of power. By Rule 13 the Central Government has prescribed the goods referred to in S. 8(3)(b) : such goods must be intended for use in the manufacture or processing of goods for sale or in mining or generation or distribution of power, and the intended use of the goods must be as specified in Rule 13. It is true that under Rule 13, read will S. 8(3)(b) mere intention to use the goods in the manufacture or proces .....

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on "in the manufacture of goods" would normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. 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 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 .....

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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. Goods used as equipment, as too .....

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ctivity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods "in connection with" manufacture of or "in relation to" manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Cour .....

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cial Taxes, Bihar and Ors. 10. The High Court has rightly pointed out that unless designs are prepared it would be "impossible for the workmen" to turn out goods for sale. If the process of designing is intimately connected with the process of manufacture of cloth, we see no reason to regard the process of designing as not being a part of the process of manufacture within the meaning of Rule 13 read with S. 8(3)(b). The process of designing may be distinct from the actual process of tu .....

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iption of goods intended for use as "equipment" in the process of designing which is directly related to the actual production of goods and without which commercial production would be inexpedient must be regarded as goods intended for use "in the manufacture of goods". 11. Building materials including lime and cement not required in the manufacture of tiles for sale cannot, however, be regarded within the meaning of Rule 13, as raw materials in the manufacture or processing .....

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t; cannot be said to be used as plant in the manufacture of goods. The Legislature has contemplated that the goods to qualify under S. 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 building materials fall within this description. The High Court was, therefore, right in rejecting the claim of the Company in that behalf. 12. The expression "electricals" is somewhat vague. But in a facto .....

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the High Court that in order that "electrical equipment" should fall within the terms of Rule 13, it must be an ingredient of the finished goods to be prepared, or "it must be a commodity which is used in the creation of goods". If, having regard to normal conditions prevalent in the industry, production of the finished goods would be difficult without the use of electrical equipment, the equipment would be regarded as intended for use in the manufacture of goods for sale and .....

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he expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer of converting raw material into finished goods. The power supply through generators by use of diesel, is so integrally connected with the ultimate production of notified that without it manufacture of the notified goods would be commercially inexpedient. The use of diesel oil to operate generators so as to run plant and machinery by the petitioners is so integrally related .....

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l in the manufacture of paper which was used in the chemical recovery cycle of Sodium Sulphate". The credit of duty was denied to the manufacturer by the Superintendent of Central Excise on the ground that Sodium Sulphate was burnt up in the process of manufacture and was not retained in the paper and, therefore, it could not be considered as raw material in the manufacture of paper. Following the law laid down in M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. (supra), Hon'ble Su .....

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in the course of manufacture of goods would be covered and held as under: "6. We have now to find out what exactly is the meaning of the expression "for use by him in the manufacture of goods for sale." Identical words are used in Section 8(b) of the Central Sales Tax Act 1956. This court was called upon to find out the scope of that expression in M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. Vs. The Sales Tax Officer, Kanpur and another, AIR 1965 SC 1310 Dealing with that .....

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ure of goods. In the present case the assessee company has sold the goods in question to certain manufactures who were manufacturing iron steel materials. It is also clear from question No. (1) that those gloves were to be used by workmen who were engaged in hot jobs or in handling corrosive substances in the course of manufacture. That being so it cannot be denied that those gloves had to be used in the course of manufacture. (Emphasis supplied by us) 37. In the case of Indian Farmers Fertilise .....

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preted the provisions in favour of the appellant, IFFCO, and held that water treatment, steam generation and inert gas generation plant are part and parcel of the composite process that produces Urea which is a fertiliser. In the present set of facts, the same principle would be applicable with reference to generator sets which are part and parcel of the composite process of manufacture of notified goods by the petitioners as their end product. Hon'ble Supreme Court held in Indian Farmers Fe .....

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it is not disputed, eligible to the exemption. The question is whether the ammonia used in the off-site plants is also ammonia which is "used elsewhere in the manufacture of fertilisers". The water treatment, steam generation and inert gas generation plants are part and parcel of the composite process that produces as its end product urea, which is a fertilisers. These off-site plants are part of the process of the manufacture of urea. There is no good reason why the exemption should .....

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which are a necessary part of the process of manufacturing urea, must, therefore, be held to be used in the manufacture of ammonia and the raw naphtha used for the manufacture thereof is entitled to the duty exemption. 8. For our conclusion we draw support from the judgment of this court in CCE Vs. Eastend Paper Industries Ltd. : 1989(4) SCC 244, where it was held, (SCC pp.248-49, para 5) "Where any particular process ........... is so integrally connected with the ultimate production of go .....

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tion". In CCE v. Ballarpur Industries Ltd. (1989)4 SCC 566, the respondent manufactured paper and paperboard, "in the processes relating to which "sodium sulphate" is used in the chemical recovery cycle of sodium sulphate which forms an essential constituent of sulphate cooking liquor used in the digestion operation". The Exemption Notification concerned provided exemption to goods which had used as raw material or component parts any goods (inputs) falling under Item 68 .....

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mething to qualify itself as a raw material it had necessarily and in all cases to go into and be found in the end product. The Court also quoted with approval the case of Eastend Paper Industries Limited (1989)4 SCC 244 cited above. 9. That leaves us to consider whether the raw naphtha used to produce the ammonia which is used in the effluent treatment plant is eligible for the said exemption. It is too late in the day to take the view that the treatment of effluents from a plant is not an esse .....

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from the urea plant of the appellants has, therefore, to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia to be entitled to the said exemption." (Emphasis supplied by us) 38. In the case of Steal Authority of India Ltd. Vs. Union of India and another (1997) 11 SCC 117, Hon'ble Supreme Court again considered an exemption notification under the Central Excise Act and held that Oxygen gas captively consumed by the manufacturer of ir .....

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Sulpher Heavy Stock (LSHS) and furnace oil used for generating electricity captively consumed to manufacture the final product such as caustic soda, cement etc. is qualified for MODVAT credit under Rule 57-A of the Central Excise Rules,1944 and held as under: "15. In the present case, the LSHS is used to generate electricity which is captively consumed. Without continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc. Without s .....

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n relation to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it is not correct to state that inputs used as fuel for generation of electricity captively consumed will not be covered as inputs under Rule 57-A." (Emphasis supplied by us) 40. Thus in the case of Solaris Chemtech Ltd. (supra) Hon'ble Supreme Court has held in no certain term that without continuous supply of electricity it is not possible to manufacture cement, caustic soda etc. We take j .....

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of State of Gujarat and another Vs. AMI Pigments Private Limited and others (2009) 11 SCC 240, Hon'ble Supreme Court considered the "test of essentiality" or the "test of dependency" in the matter of eligibility of sales tax exemption on the controversy whether fuel consumed for electricity generation which was used to manufacture the end products would qualify for exemption as raw material, processing material or consumable stores and observed as under: "8. In our v .....

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umed are natural gas, furnace oil, diesel oil and naphtha. Broadly, these fuels are used by the industry for carrying on its manufacturing process. In most cases, these fuels are used to generate electricity which is then used in the manufacture of end products like caustic soda, industrial chemicals, etc." (Emphasis supplied by us) 42. In the case of Collector of Central Excise, Jaipur Vs. Rajasthan State Chemical Works, Deedwana, Rajasthan 1991(4) SCC 473, Hon'ble Supreme Court explai .....

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ge at every intermediate stage. But the activities or the operations may be so integrally connected that the final result is the production of a commercially different article. Therefore, any activity or operation which is the essential requirement and is so related to the further operations for the end result would also be a process in or in relation to manufacture to attract the relevant clause in the exemption notification. In our view, the word 'process' in the context in which it ap .....

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