TMI Blog2023 (4) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... erein) was upheld by treating coal as the raw material brought in the course of business for generation of electricity? Whether coal imported by petitioners for generation of electricity by Thermal Power Plant is exempted from Entry Tax on the anvil of notification dated 13.12.2010 by virtue of being raw material purchased in the course of business? - HELD THAT:- Bare perusal of the charging provision Section 3 of M.P. Entry Tax Act reveals that the levy of Entry Tax is on the entry in the course of business of a dealer of goods specified in Schedule II into each local area for consumption, use or sale. However, no levy of entry tax can be made over goods specified in Schedule III which are for sale - The State is vested with power to exempt certain goods from levy of entry tax subject to such restrictions and conditions and on such terms and conditions as it thinks fit. In the instant case, the State by notification dated 13.12.2010 Annexure P/3 in W.P. No.16965/2016 exempted in whole payment of Entry Tax on coal which is brought by dealers into the local area as raw material in the manufacture of goods. Petitioners or all dealers bring coal into local area for being consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is raw material as defined in Section 2(g) of M.P. Entry Tax Act required for the process of manufacturing/generation of electricity. More so coal is also one of the items mentioned in Schedule II appended to the Entry Tax Act. Once it has been held that coal is raw material for manufacturing/generating electricity and thus is exigible to Entry Tax Act, the exemption/concession notification issued by the State u/S 10 of M.P. Entry Tax Act vide Annexure P/3 in W.P. No.16965/2016, and Annexure P/4 in W.P. No.3109/2015 are available to be availed by petitioners exempting them from payment of Entry Tax on coal brought into local area where the thermal power station of petitioners are situated on such terms and conditions as mentioned in the notification. Applicability of judgement in the case of Odisha Power Generation Corporation Ltd. vs. State of Odisha and another - HELD THAT:- Bare perusal of the aforesaid comparison of provisions in Madhya Pradesh and Orissa reveal that textually as well as contextually the provisions are para materia and are not materially different and distinct as contended by the State. Thus, there is no substance in the State s objection about ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances the contention of petitioners therein (which were similar to the petitioners herein) was upheld by treating coal as the raw material brought in the course of business for generation of electricity ? (iii) Whether Special Leave Appeal(Civil) No.35253/2015 dismissed by Apex court on 05.07.2017 amounts to confirmation of Division Bench judgment of Orissa High Court dated 30.03.2015 as binding precedent ? 4 . Learned senior counsel Shri A.K. Shrivastava, Shri G.N. Purohit, Shri Naman Nagrath with Ms. Uma Parashar, Shri Eshan Tripathi, Shri Varun Chopra, Shri Sanjay K. Agrawal, Shri Vaibhav Mishra, Shri K.S. Jha, Shri Anshuman Singh, Shri Anuj Shrivastava, Shri Vasu Jain, Shri Viraj Shankar Jha, Shri Greeshm Jain and Shri Abhijeet Shrivastava and learned counsel for State Shri Ashish Anand Bernad, Additional Advocate General, Shri A.D. Bajpai, Government Advocate and Shri Piyush Dharmadhikari, Government Advocate are heard. 5 . It is not disputed at the Bar that Division Bench of Orisha High Court while considering a similar grievance of Odisha Power Generation Corporation Ltd. formulated following questions for its consideration: (i) Whether generation of electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er coal is a raw material for generation/production of thermal power, it is irrelevant to find out whether water, wind, solar power are raw material for generation of hydro electricity, wind energy and solar energy respectively. Such questions may be adjudicated in appropriate case(s). (4) There is no dispute over the legal proposition that every change in a processing is not manufacture as held by the Hon ble Supreme Court in Kutty Flush Doors Furniture Co. (supra). As in the present case a new and different article, i.e., electricity energy emerges which is distinct in name, character and use from coal, the above case of the Hon ble Supreme Court supports the petitioner. (5) While dealing with question Nos. (i) and (iii) above, we have already held for the reasons stated therein that generation of electricity is a manufacturing activity and coal is a raw material for generation/production of electricity. 5.3 The Division Bench of Orissa High Court ultimately held thus: 49. In view of our answer to question Nos.(i), (ii) and (iii) in favour of the petitioner, we are of the considered opinion that the petitioner is entitled to avail concessional rate of entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is a marked difference between the text and context of the charging provision Section 3 of Odisha Entry Tax Act and Section 3 of M.P. Entry Tax Act. (iv) The exemption notification vide Annexure P/3 exempts entry of raw material for manufacture which does not include generation of electricity. (v) The definition of manufacture in M.P. VAT Act is inclusive whereas in Odisha VAT Act it is exhaustive. (vi) Since any element/part of raw material of coal is untraceable in the end product/finished goods (electricity), coal cannot be treated as raw material for generating electricity. (vii) The SLA(C) dismissed on 05.07.2017 by Apex Court does not confirm the order of the Division Bench of Orissa High Court since the SLA(C) was dismissed without hearing on merits. It is thus contended that petitioner cannot take advantage of the doctrine of merger and thus Division Bench judgment of Orissa High Court is open to be distinguished on facts. (viii) That in case of ambiguity in taxing statutes, the same needs to be read in favour of the assessee whereas in cases of ambiguity in exemption provision, the same needs to be read in favour of Revenue. On the anvil of aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purview of manufacturing , it is implied that generation of electricity is a component of manufacture . 9 . Before adverting to the process of adjudication of various issues raised by rival parties, it would be apt to reproduce the relevant statutory provision of M.P. Entry Tax Act and M.P. VAT Act. 9.1 Pertinently, expression manufacture is not defined in Section 2 of M.P. Entry Tax Act but by virtue of Section 2(2) of M.P. Entry Tax Act, all expressions which are not defined in M.P. Entry Tax Act but are defined in M.P. VAT Act shall have the meaning assigned to them in M.P. VAT Act. Thus, relevant expressions defined in M.P. Entry Tax Act and M.P. VAT Act are being reproduced hereinunder : Entry Tax Act, 1976 Section 2 : (1) xxx xxx xxx (a) xxx xxx xxx (b) xxx xxx xxx (c) xxx xxx xxx (d) xxx xxx xxx (e) xxx xxx xxx (f) xxx xxx xxx (g) raw material means an article used as an ingredient in any manufactured goods, or an article consumed in the process of manufacture and includes fuel and lubricants required for the process of manufacture; (h) xxx xxx xxx (i) xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern an irrespective of the volume, frequency, continuity or regularity of such trade, commerce, manufacture, adventure or concern; and (ii) any transaction of sale or purchase of goods in connection with or incidental or ancillary to the trade, commerce, manufacture, adventure or concern referred to in clause (i), that is to say,- (a) goods whether or not they are in their original form or in the form of second hand goods, unserviceable goods, obsolete or discarded goods, mere scrap or waste material; and (b) goods which are obtained as waste products or by-products in the course of manufacturing or processing of other goods or mining or generation of or distribution of electrical energy or any other form of power. (e) xxx xxx xxx (f) xxx xxx xxx (g) xxx xxx xxx (h) xxx xxx xxx (i) xxx xxx xxx (j) xxx xxx xxx (k) xxx xxx xxx (l) xxx xxx xxx (m) Goods means all kinds of movable property including computer software but excluding actionable claims, newspapers, stocks, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and conditions subject to which exemption is granted. (4) 1. Registered dealer who established a new industrial unit in any of the districts in the State of Madhya Pradesh. For a period of five years from the date of effecting the first purchase of raw material as on or after 1st November, 2010 for consumption in the industrial unit. (1) The exemption from payment of entry tax shall be available to the dealer when any goods specified in Schedule II and Schedule III appended to the Entry Tax Act are entered into a local area by him for consumption or use as raw material or for use as incidental goods in the manufacture of goods or for use in the packing of goods manufactured in his industrial unit. 2. Registered dealer who has acquired or purchased a sick/closed industrial unit in which new investment in fixed capital is more than 50% of the previous capital investment of the unit, which is not less than rupees ten crores and in respect of which the High Level Committee has sanctioned a Special Package, 2010 under the provisions of Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is brought by dealers into the local area as raw material in the manufacture of goods. Petitioners or all dealers bring coal into local area for being consumed by their thermal power stations for generation of electricity. 11.2 The Registration Certificate of petitioner vide Annexure P/2 in W.P. No.16965/2016 specifies karobar ka swarup as power generation, coal, SHD, etc. 11.3 The process of generation of electricity in a thermal power station is succinctly enumerated in the Division Bench judgment of Orissa High Court which can very well be borrowed for convenience, brevity and to avoid prolixity, as such; (i) Coal is burnt to create heat; (ii) The energy so generated by burning coal is used to heat water and air; (iii) This leads to creation of steam; (iv) The steam fired at high pressure turns the blades of turbine; (v) Turning of blades of turbine which contains dynamo converts mechanical energy into electrical energy based on the Faradey s Principle of Electromagnetic Induction. 11.4 The aforesaid process makes it palpable that in absence of coal which is the very primary source for generation of heat leading to creation of steam resultin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2015) 14 SCC 47 27. The case law discussed above falls into four neat categories: (1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from good complete in themselves and/or processes which clean goods that are complete in themselves fall within this category. (2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process. (3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case [Brakes India Ltd.v. Supt. of Central Excise, (1997) 10 SCC 717] and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods taken place (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.P. Entry Tax Act/M.P. VAT Act Orissa VAT Act Raw Material Section 2(1)(g) of M.P. Entry Tax Act. raw material means an article used as an ingredient in any manufactured goods, or an article consumed in the process of manufacture and includes fuel and lubricants required for the process of manufacture; Raw Material Section 20(8)(k) In respect of raw materials used in manufacture or processing of goods, where the finished products are exempt from tax. Manufacture Section 2(p) of M.P. VAT Act Manufacture includes any activity that brings out a change in an article or articles as a result of some process, treatment, labour and results in transformations into a new and different article so understood in commercial parlance having a distinct name, character and use, but does not include such activity of manufacture as may be notified; Manufacture Section 2(28) Manufacture means any activity that brings out a change in an article or articles as result of some process, treatment, labour and results ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation. - For the purposes of this clause,- (i) the activity of raising of man-made forest or rearing of seedlings or plants shall be deemed to be a business, (ii) transaction of sale or purchase of capital goods pertaining to any trade, commerce, manufacture, adventure, concern or transaction shall be deemed to be a transaction comprised in business, (iii) purchase of any goods, the price of which is debited to the business and sale of any goods, the proceeds of which are credited to the business shall be deemed to be transactions comprised in business; Goods Section 2(m) of M.P. VAT Act Goods means all kinds of movable property including computer software but excluding actionable claims, newspapers, stocks, shares, securities or Government stamps and includes all materials, articles and commodities, whether or not to be used in the construction, fitting out, improvement or repair of movable or immovable property, and also includes all growing crops, grass, trees, plants and things attached to, or forming part of the land which are agreed to be severed before the sale or under the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of Apex Court passed on 05.07.2017 is of dismissal of SLA(C) No.35253/2015 and thus it appears that leave to prefer an appeal is declined to State of Odisha. As such, the doctrine of merger does not come into play but, however, the judgment of Division Bench of Orissa High Court acts as res judicata in subsequent proceedings between the parties therein. This principle has been laid down in the case of Kunha Yammed and others vs. State of Kerala and another, (2000) 6 SCC 359 where in concluding paragraph, Apex Court held thus: 44(v) If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the considered opinion of this Court, will do offence to the plain and clear language of the Statute. 16 . In the conspectus of above discussion, this Court has no manner of doubt that submissions of State deserve to be rejected and petitions with regard to exemption as well as concession deserve to be allowed. 17 . Accordingly, petitions are allowed in following manner: (1) W.P. No.16965/2016 To the extent indicated above the impugned order dated 02.09.2016 Annexure P/17 passed by Divisional Deputy Commissioner, Commercial Tax, Jabalpur Division II stands quashed. (2) W.P. No.2034/2015 - To the extent indicated above the reassessment notice dated 10.06.2014 Annexure P/2 and the order of reassessment dated 19.12.2014 Annexure P/6 passed by Divisional Deputy Commissioner, Commercial Tax, Satna stand quashed. (3) W.P. No.2380/2015 - To the extent indicated above the reassessment notice dated 10.06.2014 Annexure P/2 and the order of reassessment dated 19.12.2014 Annexure P/6 passed by Divisional Deputy Commissioner, Commercial Tax, Satna stand quashed. (4) W.P. No.2552/2015 - To the extent indicated above the reassessment notice dated 10.06.2014 Annexure P/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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