TMI Blog2018 (3) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... being a quasi judicial authority, speaks through his DDQ order passed under Section 52 of the BST Act. This being the case, he is neither a necessary nor a proper party to the appeal. His order is only under scrutiny and examination of the MSTT and beyond that the Commissioner is not required to and nor can he state anything more than what has already been stated by him in his DDQ order - we do not find that the MSTT was at all wrong when it came to the conclusion that it was competent to entertain the appeal filed by the State of Maharashtra through its Principal Secretary (Finance) through Shri Shashank D. Mathane, officer on Special Duty, Finance Department, Government of Maharashtra. We must also note that Article 154 of the Constitution of India clearly stipulates that the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. When one reads Article 154 with the Rules of Business made by the Governor of Maharashtra along with the decision of the Government of Maharashtra to prefer the Appeal, we are left with no doubt that the MSTT was fully justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 2006, we feel that this was a fit case where the MSTT ought to have exercised its discretion and granted prospective effect to its judgment and order. Petition allowed in part. - Writ Petition No. 2217 of 2015 With Writ Petition No.2247 of 2015 With Sales Tax Application(L) No.27 of 2015, 5 of 2016, 95 of 2015 - - - Dated:- 22-3-2018 - S. C. DHARMADHIKARI B. P. COLABAWALLA, JJ. Mr. N. Venkatraman, Senior Counsel a/w Ms. Nikita Badheka, Mr. Vipin Jain, Mr. Ashwin Dave I/b M/s A. S. Dayal and Associates, for the Petitioner in WP.2217/15, and Appellant/Applicant in STR.5/16 and STAL.27/15. Mr. Rafiq Dada, Senior Counsel a/w Mr. Vikram Nankani, Senior Counsel, Mr. Prithviraj Choudhary, Mr. Abhijeet Singh, Mr. Rajan Mishra , Mr. Sarthak Gupta I/b Mr. Mihir Prashant Deshmukh for the Petitioner in WP.2247.15 and Appellant in STRL No.95/15. Mr. V. A. Sonpal, Special Counsel a/w Mr. Dushyant Kumar Asst. Govt. Pleader for Respondent Nos.1 and 4 State in WP.2217/15 and WP.2247/15 and for Respondents in STAL.27/15, STRL.95/15 and STR.5/16. JUDGMENT :- [ PER B. P. COLABAWALLA J ] 1. At the out set, we must mention that all these matters were placed on Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all the above matters, they are being disposed of by this common judgement. For the sake of convenience, we shall refer to the facts as set out in Writ Petition No.2217 of 2015 filed by Reliance Industries Limited. 3. In Writ Petition No.2217 of 2015, the Petitioner is Reliance Industries Limited (for short RIL ) which is a public limited company inter alia engaged in the manufacture of petrochemicals. Respondent No.1 is the State of Maharashtra, through its Secretary, Ministry of Finance. Respondent No.2 is the MSTT constituted under the BST Act. Respondent No.3 is Bharat Petroleum Corporation Limited (for short BPCL ) which is a public sector undertaking engaged in the business of refining and selling petroleum products and who is the supplier of Kerosene to RIL in the present dispute. Respondent No.4 is the Commissioner of Sales Tax functioning and discharging his duties under the provisions of the BST Act. 4. It is the case of RIL that in or around 1992, RIL had established a petrochemical plant in Patalganga for manufacturing Linear Alkyl Benzenes ( LAB ). RIL required N-Paraffin as a raw material for the manufacture of LAB. According to RIL, Kerosene also known as P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eam is a common phrase used in the petroleum and petrochemical industry both within India as also internationally. A petroleum product would be sent by the refinery to a petrochemical complex. The petrochemical complex would use/consume the required quantity of item and return the balance petroleum product to the refinery as a return stream . According to RIL, in the said trade and industry, the return stream is always described by the same name as the upstream . Some of the important clauses in this agreement read thus:- KO (LABFS) SUPPLY AGREEMENT AN AGREEMENT made this Twenty fourth day of August, 1992 between Bharat Petroleum Corporation Ltd., a Government of India Enterprise and a Company within the meaning of the Companies Act, 1913, having their Registered office at Bharat Bhavan, Ballard Estate, Bombay 400038 (hereinafter called the 'Sellers' which expression shall unless it be excluded by or repugnant to the subject or context, be deemed to include its successors and permitted assigns) of the one part and Reliance Industries Ltd., a Company registered under the Companies Act 1956, having their Registered office at Maker Chambers IV, 3rd Floor, Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the said pipeline from the Sellers' Refinery at Mahul to the Buyers Plant site at Patalganga through the aforesaid pipeline of CPPL at Buyers cost. The Buyers will also make arrangements for the delivery of the stream after consuming the suitable quantity of KO (LABFS), (hereinafter called Return Stream) by the said pipeline from the Buyers' plant at Patalganga to the Seller's' Refinery at Mahul through the aforesaid pipeline at Buyers Cost. However, the responsibility of loss, damage and / or claim arising out of return of the product from the Buyers Plant to the Seller's Storage Tank will be entirely on the Buyer 's Account, and the Buyers shall keep the Sellers indemnified in all respects. Now therefore in consideration of the promises and the mutual covenants and undertakings hereinafter contained, IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS: 1. SCOPE AND SUBJECT MATTER The Sellers undertake to sell and deliver to the Buyers and the Buyers undertake to purchase from the Sellers and to take delivery of and pay on the terms and subject to the conditions hereinafter specified a quantity of KO (LABS) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce shall include the pumping charges and other operating costs incurred by the Sellers. b. The price to be determined being exclusive of duties, taxes and other levies as may be imposed from time to time by Central/State/Quasi Govts. and other authorities, such charges are solely on the account of the Buyers and shall be borne by them in addition. The price as well as the other duties/levies mentioned above are subject to revision without notice. The basic price plus levies and duties as prevailing on the date of delivery shall be charged from the Buyers. 7. DELIVERY OF RETURN STREAM a. The Sellers undertake that they shall accept from the Buyers Return Stream by the said pipeline after consuming suitable quantity of KO(LABS) by the Buyers as per the terms and conditions contained in this agreement. b. i. The Return Stream should conform to BIS:1949, Specification for superior kerosene product and should consist only of KO (LABFS). ii. In the event of Return Stream quality not conforming to the agreed specification, as sampled and tested at the Sellers end as per laid down procedures, the Sellers reserve the right to charge the Buyers processing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and signed jointly by the Buyers and the Sellers representatives immediately following the completion of measurement and such quantity shall be accepted by the Buyers and the Sellers as the invoice quantity which shall be final and binding on both parties. In the absence of Buyers representative, the Certificate of Quantity shall be issued by the Sellers representative. b. In the event of any dispute between the Buyers and the Sellers as to the quantity to be entered in the Certificate of Quantity, the matter shall be submitted and determined by the Arbitrator pursuant to Clause 15 hereof. 12. SAMPLING AND CERTIFICATION OF QUALITY a. The quality of the KO (LABFS) delivered hereunder shall be certified in a Certificate of Quality which shall be drawn up and signed by the Sellers and submitted to the Buyers within seven (7) days of delivery of each parcel. The quality to be certified shall be ascertained from samples drawn from the Sellers Lankage prior to each delivery. The sample shall be drawn in accordance with the standard practice of the Sellers. The Sellers shall extend to the Buyers representatives all reasonable facilities for being present and for wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement shall not be assigned or transferred by either party without the written consent of the other party, which shall not however be unreasonably withheld. 10. In the meanwhile, on 21st April, 1992, BPCL filed a determination application under Section 52 of the BST Act before the Commissioner of Sales Tax for determining three questions which were as follows:- (i) Whether the sale of KO (LABFS) by BPCL to RIL (sale invoice No.000900 dated 25th April, 1992) is liable to tax? (ii) Whether the return stream i.e. return of kerosene by the RIL to BPCL (sales return credit note No.147857 dated May 1, 1992) would be legally allowable as sales returns or whether that return will amount to purchase of kerosene by BPCL from RIL? (iii) Whether subsequent sale of kerosene effected by BPCL (sale invoice No.357494 dated May 21, 1992) out of return stream is liable to tax? 11. To answer these questions, the Commissioner, Vide his letter dated 15th May, 1993, asked BPCL for details regarding the manufacturing process of Kerosene Simplicitor , Kerosene intended for the manufacture of LAB and a write up indicating the distinguishing features of Kerosene simplicitor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i of the University Department of Chemical Technology (UDCT), Bombay expressed his opinion to the Assistant Commissioner of Sales Tax (L.M.) about the classification of Kerosene used as feed stock for production of LAB and the returned Kerosene. Mr. K. K. Tiwari opined that it was clear from the specification of Superior Kerosene that both Kerosene supplied by BPCL for extraction of N-Paraffins (and which was used for manufacture of LAB) and the return stream Kerosene sent back to BPCL (after the said extraction) met the specification of Superior Kerosene as per IS 1448 (196) and BIS 1459 of 1974. He further opined that though the N-Paraffin content of the return Kerosene would be lower than the Kerosene originally supplied by BPCL, the IS 1448 and 1459 standards do not specify the compositions of Aliphatics and Aromatics and hence as per IS specifications, the feed stock Kerosene and the return Kerosene may both be treated as a Superior Kerosene. We must mention here that heavy reliance has been placed by RIL as well as BPCL on both these opinions. Thereafter, several other queries were raised by the Commissioner to BPCL vide its letters dated 20th January, 1995 and 9th March, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return is the same. But this is not the deciding factor as to whether it is goods return . The condition of the agreement is also not a very relevant factor to decide the issue. It only lays down two conditions that (i) return stream should conform to BIS 1459 and (ii) refund made to buyer on the return stream will be related to the original sale price. These two conditions are no doubt fulfilled, but they have no relevance in stream as 'goods return'. The return stream conforms to BIS 1459 and hence, it will not go outside the meaning of kerosene but it is certainly not in the form in which it was sold. For the purpose of kerosene it would be treated as kerosene but it has no potentiality to be used in the manufacture of N-Paraffin which SKO (LABFS) has, I am, therefore, of the view that return stream is not a goods return of N-Paraffin which SKO (LABFS) has, I am, therefore, of the view that return stream is not a goods return but these are a purchases of the applicant. 15. What can be seen from this DDQ order is that the Commissioner took the view that since the Kerosene supplied to RIL by BPCL was different from the Kerosene returned back to BPCL by RIL, it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t vide its order dated 18th February, 2003. For the purpose of determination of this Question No.2, the matter went back to the Commissioner of Sales Tax. After hearing the respective parties, the Commissioner of Sales Tax proceeded to pass a fresh DDQ order dated 16th October, 2004, wherein he held that the return stream of Kerosene by RIL to BPCL amounted to purchase of Kerosene by BPCL from RIL. In other words, Question No.2 as set out above was answered in favour of the revenue. 19. This order dated 16th October, 2004 was challenged by RIL by filing an Appeal before the MSTT on the ground that sufficient opportunity was not given to RIL of being heard as well as to adduce evidence as directed by this Court in its order dated 18th February, 2003. This submission of RIL was accepted by the MSTT vide its order dated 12th August, 2005 and the matter was again remanded back to the Commissioner of Sales Tax for passing a fresh order after giving an opportunity of being heard to RIL. 20. Thereafter, a full hearing was given to RIL as well as BPCL. After hearing all parties, and after perusing the evidence and submissions, the Commissioner of Sales Tax, vide his order dated 11th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 2014 condoned the delay in filing the Appeal and also rejected the other preliminary objections of RIL. 24. Being aggrieved by this, RIL challenged the same before this Court by filing Writ Petition (L) No.2855 of 2014. This Writ Petition was disposed of with a direction that since the Appeal was still pending before the MSTT, the matter be heard on merits by the Tribunal and if the final orders in the Appeal were in any way adverse to RIL, then, whilst challenging the same, RIL could raise all contentions and grounds including those set out in Writ Petition (L) No.2855 of 2014. In other words, they could also challenge the order of the MSTT whereby the delay was condoned and other preliminary objections of RIL were rejected. 25. Thereafter, the MSTT heard the Appeal on merits. By the impugned order dated 20th January, 2015, the Tribunal allowed the Appeal filed by the State of Maharashtra against DDQ order dated 11th September, 2006 holding that the transaction of the return stream of Kerosene by RIL to BPCL tantamounted to purchase of Kerosene by BPCL from RIL and it was not a sales return . The Tribunal further dismissed the Petitioner's written application to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned by RIL to BPCL after extraction of N-Paraffin (the return stream ) is only a sales return as contemplated under the provisions of the BST Act and the Rules framed thereunder and not a sale by RIL to BPCL; and (v) without prejudice to the aforesaid argument, it is contended that in any event the Tribunal grossly erred in not considering to give prospective effect to its order dated 20th January, 2015 as contemplated under Section 52 (2) of the BST Act. These are the five contentions that were canvassed before us and which we shall advert to in detail hereinafter. Contention (i): Condonation Of Delay 27. Mr. Venkatraman and Mr. Dada both the learned Senior counsels submitted before us that the MSTT had grossly erred in condoning the delay in entertaining the Appeal filed by the State of Maharashtra. They submitted that the Appeal against the DDQ order dated 11th September, 2006 was filed by the Government with a delay of 11 months and 15 days calculated from the date of the DDQ order. This, according to the learned counsel, was also evident from the order of the Tribunal dated 9th September, 2014 wherein the said fact was duly recorded in paragraph 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard the learned counsel for the parties on this issue and have carefully gone through the order dated 9th September, 2014. What is important to note is that even before us it was submitted by the learned counsel appearing for RIL as well as BPCL that this is the first time that the Government of Maharashtra has decided to file an Appeal from a DDQ order passed by the Commissioner of Sales Tax. This fact itself would indicate that this is a very peculiar situation. It is also not in dispute before us that the DDQ order was never communicated by the Commissioner of Sales Tax to the Government of Maharashtra. In fact, in law there is no requirement for the Commissioner to do so. We do not think that the findings of the MSTT in paragraph 24 of the order dated 9th September, 2014 suffers from any perversity or patent illegality that would entitle us to interfere with the same. As correctly held by the MSTT, the existence of sufficient cause would depend upon the facts of each case and no hard and fast rule can be applied in deciding the application for condonation of delay. Judicial discretion has to be exercised on the facts of each individual case which may differ drastically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Finance Secretary had acquired the authority to authorize the OSD to sign the appeal memo. This being the case, both the learned counsel submitted that the appeal itself was incompetent and the MSTT had gone completely wrong in holding that the appeal signed and filed by the OSD was entertainable by the MSTT. 31. On the other hand, Mr. Sonpal, the learned counsel for the State, submitted that the executive power of the State is vested in the Governor and is exercised by him either directly or through the officers subordinate to him. He submitted that the Governor of Maharashtra had made Rules of Business in exercise of the powers conferred under clauses (2) and (3) of Article 166 of the Constitution of India. He submitted that the Finance Department is transacting the business of the Government pertaining to Finance. The Secretary of the Finance Department, being the official head of the Finance Department, was executing the decision of Government to prefer an appeal. He, in turn, had given a letter of authority to Shri Shashank Mathane, the OSD to prepare and file the appeal which includes the signing of the memorandum of appeal. He brought to our attention the said authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is informed by the Principal Secretary of the Finance Department vide his letter of authority and to which we have referred to earlier. The said communication is an authentication of the fact that the Government had decided to prefer an appeal against the DDQ order dated 11th September, 2006. This authority letter and which has been reproduced in paragraph 14 of the order dated 9th September, 2014, clearly states that Shri Shashank Mathane, officer on Special Duty, Finance Department, Government of Maharashtra is authorized to prepare and file the appeal memo before the MSTT. This being the case, we do not find that the MSTT was at all wrong when it came to the conclusion that it was competent to entertain the appeal filed by the State of Maharashtra through its Principal Secretary (Finance) through Shri Shashank D. Mathane, officer on Special Duty, Finance Department, Government of Maharashtra. We must also note that Article 154 of the Constitution of India clearly stipulates that the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. When one re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the supply of kerosene from BPCL to RIL was not a sale. Further, as there was no tax liability on BPCL under the DDQ order, BPCL did not have any reason to challenge the same on the ground that the supply of kerosene from BPCL to RIL was a sale. Mr. Venkatraman submitted that RIL was not a party to these proceedings and they came into the picture for the first time only when they filed a rectification application on 26th July, 2001 to implead themselves in the matter. He submitted that RIL has never conceded that the supply of Kerosene by BPCL to RIL is a sale. According to Mr. Venkatraman, the transaction is not a contract of sale but is merely a contract of bailment. He submitted that the MSTT had completely gone wrong in not deciding this issue at all. He submitted that the question whether the supply of Kerosene by BPCL to RIL was in fact a sale or not remained an active issue for consideration, and therefore, RIL was entitled to seek a decision on this issue before us. 35. On the other hand, Mr. Sonpal submitted that this argument canvassed by Mr. Venkatraman cannot be entertained by us at all. In this regard, he brought to our attention the order passed by this Court on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as Question No.2 was concerned, it was answered against BPCL and it was held that the return stream (namely the return of Kerosene by RIL to BPCL) was not a sales return but a purchase by BPCL from RIL. This DDQ order was challenged before the MSTT. This appeal of BPCL was rejected by the MSTT vide its order dated 21st April, 2001. This order was subsequently recalled by the MSTT itself vide its order dated 16th April, 2002, in view of the fact that the MSTT was of the opinion that RIL was not a party to the said Appeal and its rights were likely to be affected. Being aggrieved by this order dated 16th April, 2002, the State of Maharashtra approached this Court by filing a Writ Petition, being Writ Petition No. 2599 of 2002. BPCL also filed a Writ Petition, being Writ Petition No.3198 of 2002. Both these Writ Petitions were disposed of by a common order dated 18th February, 2003 which set aside the order of the MSTT dated 21st April, 2001 as well as the order dated 16th April, 2002 and restored the matter back to the file of the Commissioner of Sales Tax only to decide Question No.2 afresh after hearing both BPCL as well as RIL. This is absolutely clear on an ex-facie reading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any objection regarding the finality about Question Nos.1 and 3 respectively. Further, the order dated 18th February, 2003 (to which RIL was a party) was never challenged by RIL before the Supreme Court. This being the case, we cannot today allow Mr. Venkatraman on behalf of RIL to contend otherwise and now seek to argue that the first leg of the transaction, namely the supply of Kerosene by BPCL to RIL, was not a sale but was only a contract of bailment. 40. Even otherwise, from the record also we find that Mr. Venkatraman's argument on this issue is not well founded. After the DDQ application was filed by BPCL on 21st April, 1992, the Commissioner of Sales Tax, by his letter dated 20th February, 1995, asked for a clarification from BPCL as to whether KO (LABFS) is sold as Kerosene to their distributor or agent and if so, then at what rate it was sold. The second question asked was the rate at which normal Kerosene was sold by BPCL. In reply to these questions, the advocate for BPCL stated as under:- There are two questions which you have posed and they are replied as under:- Question 1: Whether SKO (LABFS) is sold as 'kerosene' by you, to your distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier, is that BPCL is described as the Sellers and RIL is described as the Buyers in the said agreement. The agreement further records that the Buyers have erected a petrochemical plant at Patalganga for manufacturing LAB and are desirous of entering into an agreement for purchase from the Sellers KO (LABFS) in bulk as a feedstock for the manufacturing process of N-Paraffin. The agreement further records that the title, property and risk in KO (LABFS) in each delivery shall pass to the Buyers when the said KO (LABFS) crosses the Sellers' refinery fence at Mahul through the said pipeline. Any damage, loss or claim arising out of the return of the product from the Buyers' plant to the Sellers' storage tank would be entirely on the Buyers' account and the Buyers shall keep the Sellers indemnified in all respects against any such loss, damage or claim. The agreement further records that the Sellers' responsibility will cease as soon as the product passes the refinery fence. Even in Clause (1) of this agreement, it is categorically stated that the sellers undertake to sell and deliver to the Buyers and the Buyers undertake to purchase from the Sellers and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e its letter dated 11th May, 1994 had stated that it was a standard practice for a feedstock to go from the refinery to a petrochemical plant and to receive the return stream. The feedstock under reference would be denuded with respect to only the N-Paraffin. However, the return stream would qualify as per the established practice as a blendable stock for Kerosene. They also placed reliance on the letter dated 17th December, 1994 addressed by Professor K. K. Tiwari, University Department of Chemical Technology, Mumbai. Mr. Tiwari opined that although the N-Paraffin content of the returned Kerosene is expected to be lower than LAB feedstock Kerosene, the IS 1448 and 1459 do not specify the composition of aliphatics and aromatics. Hence, as per the IS specifications, the feedstock Kerosene and the return Kerosene may be treated as Superior Kerosene. Placing heavy reliance on these letters, both the counsels submitted that the return stream, namely the Kerosene redelivered by RIL to BPCL, was the same Kerosene that was supplied by BPCL to RIL in the first leg of the transaction. Both counsels submitted that apart from these two opinions, it was also a common fact that the return strea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale/purchase of the return stream. 45. Over and above this, Mr. Venkatraman as well as Mr. Dada submitted that in the present case the business prudence test ought to be applied. They both submitted that the supply agreement envisages delivery of the return stream since RIL do not have any commercial use of retaining the balance quantities of Superior Kerosene. RIL are neither dealers nor Government companies nor parallel marketers to stock, sell, distribute or divert the balance quantities of Kerosene. Even the pipeline infrastructure is a single loop ensured to hand over the return stream to BPCL. RIL can neither commercially nor in the light of the statutory prohibition in the Kerosene Control Order retain the balance quantities of Superior Kerosene. It makes no business or commercial sense to attribute an empty sale followed by a mechanical re-sale, was the submission. 46. In support of their submissions the learned counsel placed reliance upon a decision of the Supreme Court in the case of United Breweries Ltd v/s State of Andhra Pradesh reported in (1997) 3 SCC 530. Reliance was also placed on a decision of the Supreme Court in the case of Citibank, N. A. v/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods supplied in the first leg of the transaction and the goods returned in the second leg of the transaction were one and the same, is of no assistance to RIL or BPCL. He submitted that even a special grade of Kerosene oil known as Aviation Turbine fuel used as fuel in airplanes and which has ISI No. 1571:2008, has its own standards for various uses and there are no standards for SKO (LABFS) fixed by BIS. He therefore submitted that merely to say that Kerosene remains Kerosene is not the same thing as saying that the supplied product is the same as the returned product. 48. Mr. Sonpal submitted that BIS is a body which fixes standards for the purposes of uniformity and as a mandatory condition for being present in the product to conform to the standards to claim the ISI mark and nothing more. There are no standards fixed by BIS for SKO (LABFS) and hence the standards of Kerosene cannot be compared with the standards of SKO (LABFS). He submitted that in the facts of the present case, it is undisputed that the Kerosene supplied by BPCL to RIL in the first leg of the transaction is rich in N-Paraffin. Once it is supplied, RIL then extracts the N-Paraffin from the Kerosene and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required no interference by us either in our writ jurisdiction or in our reference jurisdiction. 50. Having heard the learned counsel for the parties, we find considerable force in the arguments canvassed by Mr. Sonpal. The word manufacture has been defined in Section 2(17) of the BST Act which reads as under:- 2(17) manufacture , with all its grammatical variations and cognate expressions, includes:- (a) producing, making, extracting, altering, ornamenting, finishing or otherwise processing treating or adapting any goods, or using or applying any such process, as the State Government may, having regard to the impact thereof of any goods or to the extent of alteration in the nature, character or utility of any goods brought about by such process, by notification in the Official Gazette specify (b) cutting, sawing, shaping, sizing or hewing of timber; and (c) refining of oil; (d) Lacquering of polyester film but does not include such manufacture or manufacturing processes as may be prescribed. (emphasis supplied) 51. The word sale has been defined in Section 2(28) to mean a Sale of goods made within the State for cash or deferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efines the words turnover of sales . They read thus:- 2(35) turnover of purchases means the aggregate of the amounts of purchase price paid and payable by a dealer in respect of any purchase of goods made by him during a given period, after deducting the amount of purchase price, if any, refunded to the dealer by the seller in respect of any goods purchased from the seller and returned to him within the prescribed period; 2(36) turnover of sales means the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period after deducting the amount of sale price; if any, refunded by the dealer to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period and includes - (i) the amounts received or receivable during the given period, in respect of goods delivered on or after the commencement of the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1985 on hire purchase or any system of payment by installments; and (ii) where the registration certificate is cancelled, the amounts, in respect of sales made before the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame purpose. The process of extraction carried out by RIL is thus a manufacture within the meaning of the said expression as defined in the BST Act and the kerosene is therefore not returned to BPCL in the same form. In other words, BPCL cannot use the Kerosene returned by RIL to be supplied to another Petrochemical plant for extraction of N-Paraffin. This, to our mind, would clearly go to establish that the Kerosene supplied by BPCL to RIL in the first leg of the transaction and the product returned by RIL to BPCL in the second leg of the transaction, at least for the purposes of sales tax, are two different products. It cannot be disputed that the two products are different in character and use. This being the case, it is quite clear that the return stream of Kerosene and which was sought to be returned by RIL to BPCL can never be termed as a sales return but in fact a sale by RIL to BPCL. 55. We find that the heavy reliance placed on the two expert opinions of Professor Manmohan Sharma as well as Mr K. K. Tiwari is wholly misplaced. Both these opinions only state that the return stream of Kerosene also meets the standards of the Kerosene that was originally supplied by BPCL t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ented by the advocates, as is clear from an ex-facie reading the said order. It is only in this light that the matter was remanded back to the Commissioner of Sales Tax to determine whether the return stream of Kerosene (from RIL to BPCL) was a sales return or whether the same was a sale by RIL to BPCL. We are therefore convinced that as far as the first leg of the transaction is concerned, it was clearly a sale and that is even how the parties understood it. It is in these circumstances that the order of this Court passed on 18th February, 2003 was never challenged before the Supreme Court and the only issue that was left to be decided was Question No.2 regarding whether the return stream was a sales return or a sale. We, therefore, find that the arguments canvassed by Mr. Venkatraman as well as Mr. Dada on the business prudence test is wholly misconceived. 58. There is yet another reason for taking this view. As mentioned earlier, Section 2(17) defines the words manufacture and with all its grammatical variations and cognate expressions, includes producing, making, extracting, altering, ornamenting, finishing or otherwise processing treating or adapting any goods, or using o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers did not always return the bottles and crates. The sale of beer included sale of the crates and the bottles. The Commercial Tax Officer was also of the view that the bottles and crates were higher in value than the amounts deposited as security. For these two reasons, it was held that the scheme was not genuine. The Commercial Tax Officer, therefore, came to the conclusion that the taxable turnover had to be computed not only by taking into account the sale price but also the value of the bottles. It is in these facts the Supreme Court held that an out and out sale of the bottles did not take place when beer was supplied in the bottles by UB to its customers against the deposits which had to be refunded when the bottles were returned. Having regard to the scheme and the nature of the transaction, the Supreme Court was of the view that the High Court was in error in holding that when beer was sold in bottles, not only beer but also the bottles were sold and the price of beer along with the deposits became exigible to sales tax. Looking to the scheme and the nature of the transaction before it, the Supreme Court came to a categorical finding that the terms and conditions un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated under Section 11 of the Arbitration and Conciliation Act, 1996 (before its amendment in 2015). We, therefore, doubt whether this decision will be binding upon us. Be that as it may, there is no dispute about the proposition laid down in paragraph 52 of this decision. The learned Judge of the Supreme Court has held that the contract in that case was a commercial document and must be interpreted in a manner to give efficacy to the contract rather than to invalidate it. It was held that a narrow and technical approach is not proper. It is on this basis that the learned Judge of the Supreme Court held that Clause 10 which was the arbitration agreement between the parties imported in itself all the disputes and the arbitration agreement could not be said to be vague or uncertain so as to be unenforceable. We fail to see how this decision can be of any assistance to RIL as well as BPCL in the facts and circumstances of the present case. As held earlier, it is not in dispute that the first leg of the transaction (namely the supply of Kerosene by BPCL to RIL) was a sale. This is ex-facie clear from the answer given to Question No.1 that was posed by BPCL to the Commissioner of Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be legally allowable as sales return or whether that return will amount to purchase of Kerosene by BPCL from RIL. To only decide this question, the matter was remanded back to the Commissioner of Sales Tax. We find that all the aforesaid three decisions that were relied upon by RIL and BPCL would be of no assistance to them for deciding this question. We, therefore, find that all these three decisions relied upon by them including the decision in the case of BSNL (supra) are wholly inapplicable to the facts and circumstances of the present case. Contention (v):- Prospective Effect 63. This now leaves us only to decide whether the MSTT ought to have given prospective effect to its judgment as contemplated under section 52(2) of the BST Act. In this regard Mr Venkatraman and Mr. Dada both submitted that under Section 52(2) of the BST Act, the Commissioner has the power to give prospective effect to the DDQ order passed by the Commissioner under Section 52 (2) of the BST Act. They both submitted that in the present case, the Commissioner had in fact passed the DDQ order dated 11th September, 2006 in favour of RIL and BPCL. The said DDQ order has thereafter been reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the learned counsel. It is in these circumstances that both counsel requested us to consider the plea for grant of prospective effect to the decision of the Tribunal. Mr. Venkatraman also placed reliance on certain other orders passed by the Tribunal in other matters to bolster his argument that in many cases the Commissioner has exercised his discretion under Section 52 (2) and granted prospective effect to the DDQ order. In the facts of the present case, Mr. Venkatraman was at pains to point out that all the way from 1992 till 2005, for all the assessment years, sales return were allowed with reference to the Kerosene returned by RIL to BPCL (second leg of the transaction) in the assessments filed by RIL. This itself goes to show that the Sales Tax Authorities themselves for a long period of time and until the order of the Tribunal, were also proceeding on the basis that the return stream of Kerosene from RIL to BPCL was nothing but a goods return / sales return, was the submission. For all the aforesaid reasons, the learned counsel prayed that prospective effect be given to the order of the Tribunal. 66. Without prejudice to the aforesaid argument, both Mr Venkatraman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any branch or department of any firm, is a dealer, or (b) any particular thing done to any goods amounts to or results in the manufacture of goods, within the meaning of that term, or (c) any transaction is a sale or purchase, or where it is a sale or a purchase the sale price or the purchase price, as the case may be, therefor, or (d) any particular dealer is required to be registered, or (e) in the case of any person or dealer liable to pay tax, any tax is payable by such person or dealer] in respect of any particular sale or purchase, or if tax is payable the rate thereof, the Commissioner shall, subject to rules, make an order determining such question. Explanation - For the purposes of this sub-section, the Commissioner shall be deemed to have commenced assessment or re-assessment of dealer under section 33 or 35, when the dealer is served with any notice by the Commissioner under section 33 or 35, as the case may be. (2) The Commissioner may direct that the determination or, as the case may be, review shall not affect the liability of any person under this Act, as respects any sale or purchase effected prior to the determination or, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective effect to the DDQ order passed by him under Section 52(1). As correctly submitted by Mr. Venkatraman as well as Mr. Dada, in the facts of the present case, since the DDQ order dated 11th September, 2006 was passed in favour of the assessee, there was no occasion nor any reason to request the Commissioner to grant prospective effect to his order. The question of prospective effect would only arise when the order of the Commissioner was reversed by the Tribunal vide the impugned order dated 20th January, 2015. Further, it is not in dispute before us that it is for the first time in the history of the Bombay Sales Tax Act that the DDQ order passed by the Commissioner under Section 52 (1) was challenged by the State of Maharashtra before the MSTT. From the facts narrated in this judgment, it is also clear that bonafide litigation between the parties has gone on right from the year 1992 till 2015. Further, right from the assessment years 1988-1989 till 2004-2005, the assessments have been allowed in favour of the assessee, namely RIL on the basis that the return stream of Kerosene was a goods return . If prospective effect is not given to the order of the Tribunal it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bombay Sales Tax Act and rule 4 of the Bombay Sales Tax Rules? In the affirmative and in favour of the Revenue. (ii) Whether, in the facts and circumstances of the case, the tribunal was correct in holding that the return KO(LABFS) as stipulated for by the Memorandum of Agreement, dated 24.08.1992, will amount to purchase of KO(LABFS) by the Applicants? In the affirmative, and in favour of the Revenue. (iii) Whether, in the facts and circumstances, the Tribunal ought to have held that the sale, if any, pertained to the quantum of KO(LABFS), consumed by Reliance Industries Limited? Does not arise. (iv) Whether, in the facts and circumstances of the case, the Tribunal erred in condoning the delay in filing the appeal No.113 of 2007 by State of Maharashtra? In the negative and in favour of the Revenue. (v) Whether, in the facts and circumstances of the case, the Tribunal ought to have given prospective effect to its order dated 20.01.2015? In the affirmative and in favour of RIL and BPCL. (vi) W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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