Full Judgment Text
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CASE NO.:
Appeal (civil) 6073-74 of 1994
PETITIONER:
STATE OF BIHAR AND ORS.
RESPONDENT:
UNIVERSAL HYDROCARBONS CO. LTD. AND ANR.
DATE OF JUDGMENT: 12/08/1994
BENCH:
M.N. VENKATACHALIAH & S. MOHAN
JUDGMENT:
JUDGMENT
1994 SUPPL. (2) SCR 627
The Judgment of the Court was delivered by
MOHAN, J. Leave granted.
Respondent No. 1 is a private company. The respondent No. 2 of the
director-cum-shareholders.
The respondent purchases raw petroleum product. This product under goes a
process of manufacture in the factory. The ultimate com-modity is Calcined
Petroleum Coke (hereinafter referred to ’C.P.C’).
The respondent was subject to Sales Tax under Bihar Finance Act, 1981, Act
(hereinafter referred to as Finance Act) on the sale of C.P.C. as well as
the Central Sales Tax Act, 1956 (hereinafter referred to as ’the Act). The
respondent stated that he missed to Claim the adjustment of sales tax paid
on the purchase of raw materials in the returns filed or the months of July
and August, 1990. The admitted tax due thereon was paid. In terms of
Section 15(b) of the act, the respondent was entitled to refund of sale tax
paid under Finance Act. While filing the return for the month of September,
1990, the respondent did not pay the admitted tax of Rs. 1,96,072 but
claimed refund of Rs. 5,22,728 which would be adjusted towards the admitted
tax of 1, 96,072 and the balance of Rs. 3,26,656 was to be refunded on
account of Bihar Sales Tax paid on the direct raw materials purchased for
the months of July, August and September, 1990.
The application for refund was considered by the Assistant Commissioner and
the same was dismissed since the claim for refund was against law. By order
dated 8.1.1990, a penalty of Rs. 9,852.85 was imposed. Against this order,
respondent preferred C.WJ.C. No. 7549/90.
Thereafter the respondent filed an application of refund for Rs.
19,22,340.12 for the period 1985-86 and Rs. 17,65,987.01 for the period
1986-87 under Section 15(b) of the Act read with Rule 35 of Bihar Sales Tax
Rules 1983. By notice dated 2.2.1991, the dealers was called Upon to
substantiate his claim. While that application was pending, he preferred
C.W.J.C. No. 5813/91 before the High Court of Patna. While disposing of the
writ petition, the High Court Ordered 5.9.1991 to consider the claim of
refund and pass orders. On a consideration of the matter, the Joint
Commissioner by order dated 16.12.1991 rejected the claim. Thereupon, the
respondent preferred C.WJ.C. 415 of 1992.
Both C.W.J.C. Nos.7549/90 and 415/92 came to be disposed of under a common
order dated 10.4,92 which impugned in this civil appeal. Ac-cordingly, the
writ petitions were allowed.
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The High Court set aside the findings of the Joint Commissioner in so far
as he held that R.P.C. and C.P.C. though different commercial commodities,
are declared goods under Section 14(l-a) of the Act. The petition was
liable to be reject on the ground that raw petroleum coke has undergone a
process of manufacture. On this line of reasoning, the High Court took the
view that C.P.C. is a form of R.P.C. and, therefore, petitioners before it,
would be entitled to exemption/reimbursement under Section 15(b) of the
Act.
In this civil appeal before us, the only contention urged by the State of
Bihar is that no doubt the entry under Section 14 (1-a) of the Act says
’Goal’, including Coke in all its forms, but excluding ’charcoal’. Having
regard to the ruling of this Court in State of Tamil Nadu v. Pyare Lal
Malhotra, ATR (1976) SC 800 it should be held if R.P.C. has undergone a
process of manufacture which ultimately results in C.P.C., it is a
different product for the purpose of taxation. In the field of taxation,
the State has a wide choice in choosing the object of taxation. In this
ease, one added feature is that for the purpose of excise duty, R.P.C. is
treated different than C.P.C. both the products being subject to separate
excise duty. Therefore, it is prayed that the judgment of the High Court be
set-aside and the order of the Joint Commissioner be restored.
In opposition to this, the learned counsel for the respondents urges that
there is a wide distinction between entry under Section 14(l-a) of the
Central Salts tax relating to cock in aft forms an Section 14(iv) iron and
steel, ’that is to say". Because of this peculiar phraseology ’’that is to
say’, the riding of Pyare Lal case (supra) came to be so-laid down. But
here, there is no such difficulty, having regard to the nature of the
entry, the same principle same to be adopted with regard to "oil and seeds"
in Sait Rikhaji Furtamal and another V. State of Andhra Pradesh, [1991]
Supp, 1 SCC 202. As a matter of fact, India Carbon Ltd, v. Superintendent
of Taxes, Gauhati and others, AIR (1972) SC 154 fully supports the stand of
the respondents. The High Court was justified in relaying on this ruling.
This decision also refers to Pyare Lai’s ruling (supra).
Further, in State of Tamil Nadu v. Mahi Traders, [1989] 1 SCC 724 in
relation to Hides & Skins, at page 734 the test of different commercial
commodities has been categorically rejected.
In other to appreciate this controversy, we will now refer to the relevant
provisions of the Act,
Section 14 of the Act catalogues certain goods of special importance in
inter-state trade or commerce. They are commonly called ’declared goods’.
Item (i-a) read as follows:
"Coal, including Coke in all its form, but excluding charcoal:
Provided that during the period commencing on the 23rd day of February 1967
and ending with the date of Commencement of Section 11 of the Central Sales
Tax (Amendment) Act, 1972 (61 of 1972), this clauses shall have effect
subject to the modification that the words "but excluding charcoal" shall
be omitted."
The object of classifying the goods as ’declared goods’ can be gathered
from Section 15 of the Act. This Section imposes restrictions and
conditions with regard to tax on sale an purchase of declared goods’ within
a State. Clauses (a) & (b) of the said Section read as follows:
"The tax payable under that law in respect’ of any sale of purchase of such
goods inside the State shall not exceed (four per cent) or the sale or
purchase price thereof, and such tax shall not be levied at more than on
stage;
Where a tax has been levied under that law in respect of the Sale of
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purposes inside the State of any declared goods and such goods are sold in
the course of inter- state trade of commerce, and tax has been paid under
this Act in respect of the sale of much goods in the course of inter-State
trade or commerce, the tax levied under such law shall be reimbursed to the
person making such sale in the course of inter- State trade or commerce in
such manner and subject to such conditions as may be provided in any law in
force in that State."
In the instant case, the respondent purchases R.P.C. and after sub-jecting
that to a process of manufactures C.P.C. is produced. When exemption was
sought to be claimed on the ground that both these items will fall under
Section 14(l-a) of the Act, that was rejected by the Joint Commissioner. He
took the following view:
"It is not disputed that the Raw Petroleum Coke and the Calcined Petroleum
Coke, though different commercial com-modities are both declared goods. In
order to entitle inter State Sale of such goods to avail the benefit of
Section 15(b) of the Central Sales Tax Act, the same goods as subjected to
inter State levy of tax must be sold in course of inter-State trade or
commerce. The expression ’such goods used in section 15(b) quoted above and
underlined by me is very significant in the matter.
Once the particular goods which had earlier been subjected to inter-State
tax in the State was again put to a process of manufacture, it loses it
original identity and emerges as another from of finished product though
still remaining a declared goods. The cite an example, case of steel scrap
of billets rolled into different kinds of steel materials may be taken.
When these are purchased as raw materials within a State after being
subjected to State Tax at 4 per cent being declared goods and are then
rolled into rods, channels, wire etc., they become different commercial
commodity though still remaining declared goods as defined under Section 14
of the Central Sales tax Act, In the instant case, the Raw Petroleum Coke,
a declared good is put tot he process of production by the dealer in his
factory called Universal Hydrocarbons Co. Pvt. Ltd. and another commercial
commodity, namely, calcined petroleum coke, again a declared goods in terms
of Section 14 (la) is produced. Therefore, the original identity of Raw
Petroleum Coke is lost and than Calcined Petroleum Coke is the outcome of
the process of manufacture.’
In supporting the reasoning, reliance is placed on Pyare Lal’s case
(supra). The ultimate finding given by him is as under :
"That though Raw Petroleum Coke and Calcined Petroleum Coke/both
commodities are declared goods under Section 14(l-a) of the Central Sales
Tax Act in the light of judgment of the Hon’ble Supreme Court in the case
of India Carbon Co. dated 18.8.1997 for the purposes of sales tax they are
two separate commercial commodities.
That the raw Petroleum Coke has riot been sold in course of Inter-State
trade or commerce in the Same Fonns in terms of Section 15(b) of the
Central Sales Tax Act rather it has undergone a process of manufacture in a
factory and the commodity turned but thereby is Calcined Petroleum Coke
which is a different Commercial commodity proved by levy of separate
central excise duty at both the: points of production of raw petroleum Coke
and Calcined Petroleum Coke."
In rendering this finding reliance is placed on the purchase bills, sales
bills and registration certificate.
The High Court in the Impugned judgment considered the scope of the phrase
’that-is to say. Thereafter it proceeded to hold that C.P.C. is a form of
R.P.C. and, therefore, the exemption under Section I5(b) of the Act would
be available;
We have already referred to entry relating to coke occurring under Section
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14(l-a) of the Act. When the entry says ’coke’ in all its forms’, there is
no possibility of bringing coke of different forms except under this entry.
The Joint Commissioner has clearly held that both Raw Petroleum Coke and
Calcined Petroleum Coke, though different commercial commodities are
’declared goods’. However, he held that by process of manufacture, Raw
Petroleum Coke has lost its original identity and has resulted in a new
product, namely, Calcined Petroleum Coke. Therefore, according to him, the
benefit under Section I5(b) of the Act could be availed of only If the same
goods are subject to inter-State levy of tax. He opined the use of words
’such goods’ under Section 15(b) of the Act are of significance.
We are totally unable accept this line of reasoning. Once the entry is
"coke in all its forms" irrespective of the Raw Petroleum Coke loses its
original identity or in the process of manufacture Calcined Petroleum Coke
is produced, cannot take Calcined Petroleum Coke out of the purview of this
entry. In more of less identical situation, this Court held in India
Carbons; case (supra) that Petroleum Coke is one form the coal governed by
the expression ’coal’ within Sections 14(l-a). The relevant extract of the
judgment is as under:
"It is not disputed that petroleum coke is covered by Clauses(i) of Section
14 which reads ’coal including coke in all its forms" the State was not
competent to levy tax at a rate exceeding the one given in Section 15 (a)
of the Central Act.
The High Court was of the view that the word ’coal’ includes coke in all
its forms in clause (i) of Section 14 of the Central Act and must be taken
to mean coke derived from coal. In other words it must be coke, which had
been derived or acquired from coal by following the usual process of
heating or burning. The contention, therefore, of the appellant was
negatived that petroleum coke was covered by the aforesaid provision of the
Central Act."
This decision fully supports the respondent. The fact that Calcined
Petroleum Coke is a different commodity is of little consequence. In
interpreting the scope of Hides and Skins which fail under Section 14(i)
(iii) of the Act, this Court in Mahi Traders -case (supra) held at pages
734-35 as under :
"According to him the products purchased and sold are not different even
under the classification by way of the dichotomy between raw and dressed
hides and skins under the Tamil Nadu General Sales Tax Act. Under the
Central Sales Tax Act, the appellant is in a much better position, because
all the hides and skins are brought together in one entry, Whether raw or
dressed, the product falls; under the same entry.
The operations involved in leather manufacture however fall into three
groups. Pre-tanning operations includes soaking, liming, de-liming, bating
and pickling, and post-tanning operations are splitting and shaving,
neutralising, bleaching, dyeing, fat-liquoring and stuffing, setting out,
samming, drying, staking and finishing. These operations bring about
chemical changes in the leather substance and influence the physical
characteristics of the leather, and different varieties of commercial
leather are obtained by suitably adjusting the manufacturing operations.
These processes need not be gone into in detail but the passages relied
upon clearly show that hides and skins are termed "leather’ even as soon as
the process of tanning is over and the danger of their putrefaction is put
an end to. The entry in the CST Act, however, includes within its scope
hides arid skins until they are ’dressed’. This, as we have seen,
represents the stage when they undergo the process of finishing and assume
a form in which they can be readily utilised for manufacture of various
commercial articles. In this view, it is hardly material that coloured
leather may be form of leather or may even be said to represent a different
commercial commodity. The statutory entry is comprehensive enough to
include the products emerging from hides and skins until the process of
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dressing or finishing is done." (emphasis supplied)
This is enough to conclude the case against the appellant. However, since
reliance is placed on Pyare Lal Malhotra’s case (supra), we have to make a
brief reference to the same. That case dealt with the scope of the entry
14(iv) of the Act, Iron and steel ’that is to say". The interpretation of
this phrase ’that is to say" loomed large. It was held in paragraph 13 & 14
as under:
"It is true that the question whether goods to be taxed have subjected to a
manufacturing process so as to produce a new marketable commodity, is the
decisive test in determining whether an excise duty is leviable or not on
certain goods. No doubt, in the law dealing with the sales tax the taxable
event is the sale an not the manufacture of goods. Nevertheless, if the
question is whether a new commercial commodity has come into existence or
not, so that its sale is a hew taxable event, in the Sales Tax law, it may
also become necessary to consider whether a manufacturing process, which
has altered the identity of the commercial com-modity, has taken place. The
law of sales tax is also concerned with "goods" of various descriptions.
It, therefore, becomes necessary to determine when the cease to be goods of
one taxable description and become those of a Commercially different
category and description,
It appears to us that the position has been simplified by the amendment of
the law, as indicated above, so that each of the categories falling under
"Iron and Steel" constitutes new species of commercial commodity more
clearly now. It follows that when one commercial commodity is transformed
into another, it be-comes a separate commodity for purposes of sales tax."
The position hereis entirely different. There is no such phrase under
Section 14(ia) of the Act. In the case of ’Oil’ an seeds’ occurring under
namely, ’that is to say’ occurs. This Court in State of A.P, (supra) held
in paragraph 4 as under :
"Mr. Rangam appearing in support of the appeals contended that there was a
circular of Government of India with reference to the provisions of the
Central Sales Tax Act as to what would be included within the meaning of
oil seeds and all the five items referred to here were included in the
circular as being oil seeds. It is difficult for us to accept his
submission that after the Act has been amended reliance is available to be
placed on the circular. On the basis of the test indicated by this Court in
State of Tamil Nadu v. Pyare lal Malhotra, we must hold that the expression
’that is to say’ employed in the definition in the statute with reference
to oil seed is exhaustive and is not illustrative. Since on amendment these
five items were no more included in oil seeds, the appellant is not
entitled to claim the benefit,"
This vital distinction cannot be lost sight of. Therefore, the argument of
the appellant has to be rejected, in the result, upholding the judgment Of
the High Court, we find no merit in this appeal which is accordingly
dismissed. However, there shall be no order as to costs.