TMI Blog2021 (2) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture or processing of goods for sale in Section 8(3)(b) of the Central Sales Tax Act, 1956. In Union of India Vs. J.G. Glass Industries Ltd., [ 1997 (12) TMI 110 - SUPREME COURT ] , the Hon ble Supreme Court laid down the test as to when an activity amounts to manufacture and when an activity amounts to processing of goods. If the test laid therein is applied, the activity undertaken by the petitioner would amount to processing of goods. The petitioner has provided a taxable service within the meaning of Finance Act, 1994. The service provided as a Common Effluent Treatment Plant Operator for treatment of effluent was exempted from Service Tax w.e.f. 01.04.2015 vide Notification No.6/2015-ST dated 01.03.2015. The exemption was added to entry mega exemption Notification No. 25/2012-ST dated 20.06.2012 . Prior to this exemption, services provided by an association of dyeing units in relation to common effluent treatment plants was exempted from payment of Service Tax vide Notification No. 42/2011- ST dated 25.07.2011. The scope of the exemption was expanded with retrospective effect from 16.06.2005 vide Section 145 of the Finance Act, 2012. It validated exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Tamil Nadu General Sales Tax Act, 1959 and later under Tamil Nadu Value Added Tax Act, 2006 and under the provisions of the Central Sales Tax Act, 1956 only for the purpose of taking unfair advantage of concession available under these enactments by making it seem as if the petitioner was engaged in processing of goods for sale when indeed it was not engaged in such activity of sale - Even otherwise, it was also not open for the petitioner to transfer the goods procured at concessional rate of tax against Form C to its sister concerns contrary to the requirements of Certificate. If the goods cleared against invoices in Annexure II(A),( B) and (C) were exempted, the petitioner was not required to issue Form-C. There is no proper explanation forthcoming either in the reply or in the affidavit filed in support of the present writ petition as to why the petitioner issued Form-C No.TN-2006-C-BB-728640 (Annexure I) to the supplier. It shows complicity on the part of the petitioner to facilitate evasion of Central Sales Tax - As the petitioner was not entitled to issue Form C to the supplier, there is no error in the impugned order seeking to impose penalty under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner can procure goods for re-sale and for manufacture and processing of goods for sale against Form C. 7. The petitioner had procured goods from a dealer outside the State of Tamil Nadu and gave Form C to the said dealer, thereby, enabling the dealer to pay CST at concessional rate of tax under Section 8(3)(b) of the Central Sales Tax Act, 1956. 8. The petitioner transferred some of the goods procured at concessional rate of CST against Form C to some of its sister units which were also engaged in provision of similar services to dyeing units in and around Noyyal River, where, the directors of the petitioners were the directors. 9. Under these circumstances, a notice was issued to the petitioner to levy penalty and to prosecute the petitioner under Section 10(b) and (d) of the Central Sales Tax Act, 1956 and in lieu of the penalty and prosecution, the petitioner was called upon to show cause why penalty under Section 10-A of the Act should not be levied on the petitioner. 10. It is the case of the petitioner that the petitioner was entitled to procure panel board, pollution - control equipment and accessories thereof, machinery parts and accessories thereof and electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no avail against. He submits that the respondent has correctly imposed the penalty on the petitioner under Section 10-A of the Central Sales Tax Act, 1956. 17. It is further submitted that not only the petitioner but also its sister companies were organised under the provisions of the Companies Act, 1956 and therefore they cannot feign ignorance of law and therefore, the impugned order passed by the respondent cannot be interfered with. 18. I have heard the learned counsel for the petitioner and the learned counsel for respondent. I have also perused the impugned order passed by the respondent and the notice issued to the petitioner. 19. A notice dated 23.7.2010 was issued to the petitioner, wherein, it was alleged that the dyeing units were dyeing the yarn or fabric supplied by their customers. It was therefore stated that the dyeing units were not engaged in any manufacturing activity. It also stated that the activity undertaken by them were purely works contract and the activity undertaken by the petitioner falls under the category of job work/works contract. 20. The notice further stated that copies of Form C issued to the petitioner against which procurements we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 As per enclosure Tvl. Noyyal CFT Co. Ltd., 33092403702 Arulpuram CETP Co. Pvt. Ltd., 33036246196 2060000 2 Tvl. Noyyal CFT Co. Ltd., 33092403702 Kallikadu CETP Co. Pvt. Ltd., 33912325651 2000000 3 Tvl. Noyyal CFT Co. Ltd., 33092403702 Rayapuram CETP Co. Pvt. Ltd., 33202467419 2060000 4 Tvl. Noyyal CFT Co. Ltd., 33092403702 Tirupur Murugampalayam CETP Co. Pvt. Ltd., 33752394027 3205000 Total 9325000 C FORM NO. TN - 2006 - C - BB 728640 Sl. No. Invoice No. Date Invoice to Consumed by Value (Rs.) Name TIN Name TIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al rate of tax against Form C from a dealer outside the state. 32. It is further stated that the petitioner diverted the goods purchased and procured against Form C to its sister concerns and therefore, even otherwise the petitioner had misused the facility of Form C. 33. Therefore, the issue that arises for consideration in the facts of the present case is whether petitioner was entitled to procure goods at concessional rate of tax against Form C under Section 8(3)(b) of the Central Sales Tax Act, 1956? 34. As per Section 8(1) of the Central Sales Tax Act, 1956, every dealer who in the course of interstate trade or commerce, sells to a register dealer, goods of the description referred to in Sub- Section (3), shall be liable to pay tax under the Act, which shall be 4% of turnover or at the rate applicable to the sale or purchase of the goods inside the appropriate State under the sales tax law of that State, whichever is lower. 35. Under Section 8(3)(b) of the Central Sales Tax Act, 1956, procurement at concessional rate of tax is available to a class or classes of goods specified in the certificate of registration of the registered dealer purchasing the goods as being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, a twofold test emerges for deciding whether the process is that of manufacture . First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity already in existence will be of no commercial use but for the said process. In the present case, the plain bottles are themselves commercial commodities and can be sold and used as such. By the process of printing names or logos on the bottles, the basic character of the commodity does not change. They continue to be bottles. It cannot be said that but for the process of printing, the bottles will serve no purpose or are of no commercial use. 41. However, the treated effluent was not sold by the petitioner. Therefore, the petitioner was not entitled to issue Form C to the selling dealer from Ahmedabad. 42. The petitioner has provided a taxable service within the meaning of Finance Act, 1994. The service provided as a Common Effluent Treatment Plant Operator for treatment of effluent was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronment but also assiduously encouraged by the Government and the Courts to deal with the menace of water pollution due to rampant discharge of effluent into water bodies by polluting industries and local bodies. 51. In Paryavaran Suraksha Samiti Vs. Union of India , (2017) 5 SCC 326 : 2017 SCC OnLine SC 182, the Hon ble Supreme Court recognised the importance of Common effluent Treatment Plant and the duty cast on the local bodies to preserve the environment. It observed as under:- 7. Having effectuated the directions recorded in the foregoing paragraphs, the next step would be, to set up common effluent treatment plants. We are informed, that for the aforesaid purpose, the financial contribution of the Central Government is to the extent of 50%, that of the State Government concerned (including the Union Territory concerned) is 25%. The balance 25%, is to be arranged by way of loans from banks. The above loans, are to be repaid, by the industrial areas, and/or industrial clusters. We are also informed that the setting up of a common effluent treatment plant, would ordinarily take approximately two years (in cases where the process has yet to be commenced). The reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bodies) concerned, to evolve norms to recover funds, for the purpose of generating finances to install and run all the common effluent treatment plants , within the purview of the provisions referred to hereinabove. Needless to mention that such norms as may be evolved for generating financial resources, may include all or any of the commercial, industrial and domestic beneficiaries, of the facility. The process of evolving the above norms, shall be supervised by the State Government (Union Territory) concerned, through the Secretaries, Urban Development and Local Bodies, respectively (depending on the location of the respective common effluent treatment plant). The norms for generating funds for setting up and/or operating the common effluent treatment plant shall be finalised, on or before 31-3-2017, so as to be implemented with effect from the next financial year. In case, such norms are not in place, before the commencement of the next financial year, the State Governments (or the Union Territories) concerned, shall cater to the financial requirements, of running the common effluent treatment plants , which are presently dysfunctional, from their own financial resources. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant and, partly, indirectly, in the production of urea in off-site plants, namely, the water treatment plant, steam generation plant, inert gas generation plant and effluent treatment plant. Use of Effluent Treatment Plant was considered as a part of the integral process of the manufacture of urea. 57. Exemption Notification No.187/1961 issued under the provisions of Rule 8 of the Central Excise Rules, the Central Government exempted raw naphtha falling under Item 6 of the First Schedule to the Central Excises and Salt Act, 1944, from the payment of excise duty in excess of ₹ 4.36 per kilolitre at 15 degrees centigrade if used in the manufacture of ammonia provided such ammonia was used elsewhere in the manufacture of fertilisers and the procedure set out in Chapter X of the said rules was followed. 58. A question arose as to whether the ammonia used in the off-site plants was also ammonia used in the manufacture of fertilisers . Therefore, the offsite plants belonged to the manufacturers. The Court held as follows:- These off-site plants are part of the process of the manufacture of urea. There is no good reason why the exemption should be limited to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in processing of goods for sale when indeed it was not engaged in such activity of sale. 63. Even otherwise, it was also not open for the petitioner to transfer the goods procured at concessional rate of tax against Form C to its sister concerns contrary to the requirements of Certificate. 64. It is also not clear on what basis the supplier supplied the goods covered by invoices in Annexure II(A),( B) and (C) without charging any tax under the local law or under the Central Sales Tax Act, 1956. 65. Perhaps, there was a local exemption under Section 8(2)(c) of the Act and therefore, no tax was charged by the supplier. It is also not clear why the petitioner has issued Form-C No.TN-2006-C-BB-728640 (Annexure II Invoices) for the proportionate of value of goods covered by Invoices in Annexure II(A), (B) and (C) if no tax was charged in the invoice by the supplier. 66. If the goods cleared against invoices in Annexure II(A),( B) and (C) were exempted, the petitioner was not required to issue Form-C. There is no proper explanation forthcoming either in the reply or in the affidavit filed in support of the present writ petition as to why the petitioner issued Form-C N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 8 of the Act. The scheme of Section 8 indicated that concessional rates contemplated by sub-section (1) thereof would be available only with reference to those goods which are covered by the declarations in Form C . The moment it is found that in respect of particular quantity of goods the undertaking given by the assessee in Form C declaration has not been carried out, the goods were presumed to be such in respect of which no undertaking was existing. Therefore such goods would be liable to normal tax contemplated under sub-section (2) of Section 8. Therefore, the penalty should be worked out only on the basis of the normal rates prescribed under sub-section (2) of Section 8. That would make sense. That is a reasonably possible construction. That would avoid absurd result. 70. The Court there considered the various conflicting view and ultimately held that it must remember that the provision is a penal provision. It has to be further borne in mind that the expression if is not same as as if nor does it contemplate a deeming provision. It has also to be borne in mind that the provision was introduced for the imposition of penalty in lieu of prosecution. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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