Madhya Pradesh High Court
General Foods Ltd.(Trading Division) ... vs The State Of Madhya Pradesh on 23 September, 2024
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-1- WP-57-2009 & 15 Ors.
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
WRIT PETITION No. 57 of 2009
RUCHI SOYA INDUSTRIES LTD. (V AND F UNIT) (NOW KNOWN
AS PATANJALI FOODS LTD)
Versus
STATE OF M.P TH. PRINCIPAL SECRETARY ANDOR AND
OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WITH
WRIT PETITION No. 4721 of 2008
PRAKASH SOLVEX LTD.
Versus
ADDL.COMMISSIONER OF COMMERCIAL TAX AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 24-09-2024
15:21:19
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-2- WP-57-2009 & 15 Ors.
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 387 of 2009
GENERAL FOODS LTD.(VANDF UNIT) (NOW KNOWN AS
PATANJALI FOODS LTD.
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 388 of 2009
PARAM INDUSTRIES LTD. (TRADING DIVISION) (NOW KNOWN
AS PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 24-09-2024
15:21:19
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-3- WP-57-2009 & 15 Ors.
WRIT PETITION No. 389 of 2009
PARAM INDUSTRIES LTD.(GENERAL FOOD PRODUCTS) (NOW
KNOWN AS PATANJALI FOODS LTD)
Versus
STATE OF M.P. AND ORS. AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 390 of 2009
GENERAL FOODS LTD.(TRADING DIVISION) (NOW KNOWN AS
PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 4487 of 2009
PRAKASH SOYA LTD.
Versus
STATE OF M.P. & ORS. AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 3438 of 2010
AVANTI FEEDS LTD.
Versus
PRINCIPAL SECRETARY THE STATE OF MADHYA PRADESH
AND 2 ORS. AND OTHERS
Appearance:
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 24-09-2024
15:21:19
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-4- WP-57-2009 & 15 Ors.
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 5221 of 2010
RUCHI SOYA INDUSTRIES LTD. (VANDF UNIT) (NOW KNOWN AS
PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 5222 of 2010
RUCHI SOYA INDUSTRIES LTD. (EXPORT UNIT) (NOW KNOWN
AS PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 7238 of 2010
GENERAL FOODS LTD. (V AND F UNIT) (NOW KNOWN AS
PATANJALI FOODS LTD)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 24-09-2024
15:21:19
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-5- WP-57-2009 & 15 Ors.
WRIT PETITION No. 7239 of 2010
GENERAL FOODS LTD.(TRADING DIVISION) (NOW KNOWN AS
PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 7240 of 2010
PARAM INDUSTRIES LTD.(MAIN UNIT) (NOW KNOWN AS
PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
WRIT PETITION No. 8297 of 2010
M.P.GLYCHEM INDUSTRIES LTD.(SOYA UNIT) (NOW KNOWN AS
PATANJALI FOODS LTD.)
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri P.M.Choudhary, learned Senior Advocate alongwith Shri
Madhav Khandelwal, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Dy. A.G. for the respondent / State.
Reserved on : 27.08.2024
Delivered on : 23.09.2024.
ORDER
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 24-09-2024
15:21:19
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-6- WP-57-2009 & 15 Ors.
Per: Justice Vivek Rusia The present batch of writ petitions has been filed challenging the respective impugned orders passed by the Revisional authority, viz, the Additional Commissioner of Commercial Tax, MP, Indore, confirming the imposition of Entry Tax on the crude Soyabean Oil brought by the petitioners within the State of MP for manufacturing/refining Soyabean Refined Oil.
For the sake of convenience, the facts are being taken from Writ Petition No.57/2009, are as under: -
1. The petitioner in Writ Petition No.57/2009 Patanjali Foods Limited (Formerly known as Ruchi Soya Industries Limited) has been engaged in manufacturing and selling Soya Oil & De-oiled Cake (DOC).
The present matter relates to the period from 01-04-2004 to 31-03-2005. During the said period the petitioner brought a large quantity of crude soya oil by way of import from outside the country and after refining the same, some quantity of refined soya oil was sold outside the state of MP or was sold in the course of interstate trade or commerce without being used or consumed in the state. The assessment for the said period was completed by the learned Assessing Authority viz, the Assistant Commissioner of Commercial Tax Division-3, Indore vide order dated 31-01-2008. The petitioner contested in levying of Entry tax in the assessment proceedings, in respect of the oil brought within the state on the grounds that the process of refining on the ground that this process does not constitute a manufacture, as such the oil before and after refining remains the same commodity. It was further submitted by the petitioner that as such, there is neither any consumption nor use of the oil in any of the local areas of MP, as such, no entry tax on such oil entered in the state but sent outside the state is leviable. The assessing authority did not agree with the above contention of the petitioner and levied an entry tax on the oil transferred Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-7- WP-57-2009 & 15 Ors.
out of the state of M.P. vide order dated 31-01-2008.
2. Being aggrieved by the said order, the petitioner filed a revision u/s 62 of the MPCT Act read with the relevant provision of the Entry Tax Act. Alternatively, the petitioner also challenged the levy of tax on the ground that in case, the refining of Soya crude oil is treated as a process of manufacture then even in such case, soya crude oil being Raw material would be exempted under Notification No. A-3-10-2000-ST-V(82) dated 06-09-2001.
3. The revision filed by the petitioner was dismissed by the impugned order dated 12-09-2008 confirming the levy of Entry tax. Hence these Writ Petitions.
4. According to the petitioner the revisional authority has not decided the principal issue of the charging of the Entry tax on consumption or use of soya crude oil to the extent of transfer or sale outside the state of M.P. in view of proviso (ii) to section 3(1) of Entry Tax Act because aliment of manufacturing is not being carried out by the petitioner. However, while rejecting the alternative submission of the petitioner regarding exemption under Notification No. 82 dated 06-09-2001, the revisional authority has specifically admitted that the process of refining crude oil does not constitute a process of the manufacturer in view of exclusion of said process from manufacture under Notification No. 18 dated 01-04-1995 issued by state government u/s 2(o) of MPCT Act, 1994. The present petition thus challenges the said revisional order and imposition of an entry tax on the entry of crude soya oil, which after refining was sold out of M.P.. The crude oil entered within the local area of the State of M.P. to the extent of sale of such oil after refining outside state of MP either by way of sale outside state or in the course of interstate trade or commerce in view of proviso (ii) to Section 3(1) of the Madhya Pradesh ke Sthaniya Kshetra Me Maal ke Pravesh Par Kar Adhiniyam, 1976 (MP Entity Tax Act for Short).
Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-8- WP-57-2009 & 15 Ors.
Submissions of the petitioner:
5. Shri P.M. Choudhari learned senior counsel appearing for the petitioner submitted that the expression "use or consumption" which is the basis of the levy of tax under the act has been the subject matter of interpretation by the Hon‟ble Apex Court in several decisions rendered in connection with entry 52 of the list II of the Seventh Schedule to the Constitution of India and since the present State enactment relating to levy of Entry Tax has been enacted by the legislature of the State of MP in exercise of its legislative powers under the said entry 52 only and also uses the same expression 'consumption, use or sale therein' in the charging section, the interpretation of the said expression by Supreme Court has a direct bearing on the present issue involved in this case.
6. Learned senior counsel placed the reliance on the judgment of the Supreme Court in the case of Burmah Shell Oil Storage And Distributing Co of India Ltd Vs Belgaum Borough Municipality reported in AIR (1963) SC 906 held that the retention or repositioning of the goods in the local area concerned for ultimate consumption by the consumers in the local area. Constitution Bench Decision of the Supreme Court in the case of M/s Hiralal Thakorlal Dalal Vs Brocha Municipality & Others reported in (1976) 3 SCC 398 affirmed the decision of Burmah Shell's case
7. Learned senior counsel has also relied on another decision of the Apex Court in the case of ETO Vs Chandanmal Champalal & Co reported in 95 STC 5, where their Lordships' interpreted the words 'sale therein occurring in Entry 52 and held that the levy is confined only to the sale of goods within the local area and where the goods sold in the local area are not intended for use or consumption in the local area but are meant to be and are actually taken out of the local area for consumption or use elsewhere, no levy is permissible
8. Shri Choudhari learned senior counsel placed a decision of the Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-9- WP-57-2009 & 15 Ors.
Supreme Court passed in the case of Engineering & Locomotive Co Ltd Corporation reported in 86 STC 363 which is the case of the imposition of Octroi, the taxable event is the entry of goods which are meant to reach an ultimate user or consumer in the area. Mere physical entry to the Octroi limit would not attract a levy of Octroi. It is further submitted by the learned senior counsel that an analysis of the later decisions of the Supreme Court in the context of Entry 52 would go to show that the Apex Court has construed the expression 'consumption or use in the sense of conversion of the original commodity into new or different commodity or emergence of a new article and it has been held that if as a result of any process carried out in the local area, a commodity in question ceases to exist in its original form such that a new commodity comes into existence, it amounts to use or consumption of the commodity in local area Reference in this respect is made to the following decisions.
9. In the case of S.M. Ramlal Co Vs Secretary to Government of Punjab reported in (1995) 14 TLD 10 the Apex Court has explained the coupling of the three words consumption, use or sale while dealing with the question that when the wool purchased in Delhi was brought for dying at the factory in Faridabad and sent back to Delhi, could it be said that the wool was brought for use and was liable to Octroi, the Apex Court held that the expression "used" is not defined in the Act, in its ordinary meaning the word 'use' as a noun, is the act of employing a thing, putting into action or service, employing for or applying to a given purpose. But the word 'use' occurring in Entry 52 List-II of VIIth Schedule to the Constitution, sandwiched between consumption and sale, must take colour from the context in which it occurs. It is settled rule of interpretation that when two or more words which are susceptible or analogous meaning, are coupled together they are understood to be used in their cognate sense they take as it were, their colour from each other, i.e. more general is restricted to a sense analogous to the less general.
Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-10- WP-57-2009 & 15 Ors.
10. In the case of Mafatlal Industries vs Nadiad Nagar Palika & Another reported in 118 STC 494 as relied on by learned senior counsel for the petitioner, in the Apex court while dealing with the question as to when cloth pieces of 100 Meters in length were brought within the Octroi limits of Nadiad Town and were sent outside Octroi limits after cutting into smaller pieces of different sizes, whether the same could be used or consumed within the Octroi limits by cutting the pieces of 100 Meters in length into the smaller pieces, some utility was added since no different commercial commodity emerged, there was no use or consumption in the local area.
11. Shri P M Choudhari learned senior counsel further submitted that in view of the above case laws, it is clear that both the words use and consumption have to be read together and must be interpreted in the cognate sense. The words use & consumption would take their colour from each other and for use or consumption, the emergence of new or different commercial commodities is necessary. It is to be seen as to whether the Crude oil brought into the local area of M.P. by the petitioner company can be said to have been used or consumed in the local area, when the same is subjected to the process of refining and particularly when the process of refining has been excluded from the definition of the word manufacture. The expression manufacture has not been defined in the Entry Tax Act but has been defined in section 2(o) of the MPCT Act. The said definition of the word manufacture as defined in the Commercial Tax Act is applicable even for the purpose of the Entry Tax Act in view of the provisions of section 2(2) of the Entry Tax Act. Admittedly the process of refining oil has been excluded from the definition of word manufacture by notification No 18 dated 01/04/1995 (which was in force during the relevant period). It is further submitted by learned senior counsel that since the process of refining oil does not constitute a process of manufacture because of the exclusion of the process from the definition of the word Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-11- WP-57-2009 & 15 Ors.
manufacture, the 'Crude Oil' subjected to the process of refining and the resultant processed commodity- "Refined Oil" constitute the same commodity. Thus, the petitioner company entered and re-exported the same commodity by way of interstate sale or sales outside the State and to that extent, the crude oil cannot be said to be used or consumed in the local area. In the absence of manufacture, there is no emergence of new or different commercial commodities. By process of refining oil, the petitioner merely removes impurities in the Crude oil and the resultant commodity still remains the same i.e. Oil may be in its pure form after removal of impurities. By such a process of refining, no new commercial commodity comes into existence and Oil remains Oil.
12. Learned senior counsel further added in his submissions that in another decision of the Supreme Court in the case of Aqueous victuals Pvt Ltd Vs State of U.P. & Others reported in (1998) 5 SCC 474, where their Lordships dealing with the question as to whether the empty bottles filled with soft drinks re-exported after being emptied could be said to be used or consumed in the local area has again laid stress on 'retention or reposition of the commodity in the local area and has finally held that the bottles in question cannot be said to be used in the local area. In the case of Universal viscose Oil Products Vs Commissioner of Trade Tax reported in 30 VST 452 (All) the Apex court held that the process of cleaning does not amount to manufacture. By the process of cleaning no new commercial commodity came into being.
13. Learned senior counsel of the petitioner submitted that as would be clear from the analysis of the above judicial pronouncements, interpreting the expression 'consumption or use to constitute 'consumption or use', the emergence of new or different commercial commodities is essential. In the instant case, the revisional authority, on one hand, accepted that the process of refining oil has been excluded from the definition of manufacture under Notification No 18 dated 01-04-1995 and Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-12- WP-57-2009 & 15 Ors.
since the conversion of crude oil into refined oil cannot be said to be be manufacture, the benefit of exemption under Notification No 82 dated 06- 09-2001 to the Raw material viz, Crude oil is not available on account of non-satisfaction of the condition of the notification that such raw material i.e. crude oil is entered for use in the manufacture of Edible oil but on the other hand confirmed levy of entry tax on such crude oil only on the ground of use and consumption of such crude oil in the process of refined oil. It is further submitted by the learned senior counsel that the views of the authorities below are not only fallacious but even contrary to the above test laid down in the judicial pronouncements. Once it is accepted that the process does not constitute a process of manufacture, it cannot be said that there is any emergence of a new commodity as is judicially understood and if there is no emergence of new commodity consumption or use either. there cannot be any.
14. It is, therefore, submitted that in view of this factual and legal position, in the absence of any consumption or use of Crude oil in the local area, the petitioner is not liable to any Entry Tax on such crude oil entered and reexported out of the State of MP after its refining.
15. Shri Choudhari learned senior counsel relied on a recent judgment of the Hon‟ble Supreme Court dated 30.11.2023 passed in the case of Commissioner of Trade Tax V/s M/s Mishra Tea Blending and Packaging Industries, UP reported in (2024) 122 GSTR 113 in which it is held that the process of Tea blending does not amount to a process of manufacture. By relying on the above decision Learned senior counsel tried to distinguish the cases decided by the Hon‟ble Division Bench of this court in the matter of Tata Tea Limited Vs. CTO reported in (2015) 27 STJ 21. Shri Choudhari submitted that while deciding on a bunch of writ petitions relating to the issue of the process of Tea blending other bunch of Writ Petitions relating to the Refining of soyabean oil were also dismissed by the Division Bench of this High Court. The Hon‟ble Division bench by Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-13- WP-57-2009 & 15 Ors.
its common judgment held that the process of Tea Blending constitutes the process of manufacture and as such, the Tea entered within the state being different from the Tea sent outside the state, the entry of tea for the purpose of blending was liable to Entry Tax. For coming to the said conclusion, the Hon‟ble Division Bench has followed the Division Bench judgment in the case of Badrinarayan Vs. State of MP reported in (1988) 70 STC 12, where the earlier Division Bench in the context of an incentive notification had held that the process of tea blending amounted to the process of manufacturing. Further, the Hon‟ble Division Bench has also referred to and relied upon another Division Bench judgment in the case of Chandrabhan Brijmohan & Co. Vs. Addnl. Assistant commissioner of Sales Tax & Co reported in (1981) 1 CTJ 60 where their Lordships came to the conclusion that it does not appear for "consumption" or at any rate use a new product must emerge from the commodity entering the local area before it could be said to have been consumed or used within the local area. According to the Division Bench, consumption is a word of wide import and the word 'use' is wider than consumption and any kind of utilisation which is ordinarily understood as consumption or use of a commodity entering in local area will be made liable to tax the commodity liable to tax under the Entry Tax Act.
16. Learned senior counsel submitted that judgment in the case of Tata Tea Limited (supra) stands impliedly overruled by the later decision of the Supreme Court in the case of DUGAR TEA INDUSTRIES PRIVATE LIMITED Vs. STATE OF ASSAM & OTHERS (2017) 99 VST 280 where the Apex court following earlier judgment in the case of CIT Vs. Tara Agencies (2007) 292 ITR 444 (SC) has held that the process of Tea blending does not amount to a process of manufacture, In view of the later decision of the Supreme Court, the law laid down by the Division Bench in the case of Tata Tea Limited (supra) can no longer be said to be a good law, as such, the present matter deserves to be decided in the light of Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-14- WP-57-2009 & 15 Ors.
later decision in the case of Dugar Tea Limited (supra).
17. Learned senior counsel concluded arguments by submitting that even otherwise the decision of the Division Bench in the case of Tata Tea Limited (Supra) following the judgment in the case of Chandrabhan & Co. (supra), that for consumption or use, it is not necessary that a new product should emerge from the commodity entering the local area before it could be said to have been used or consumed within that local area, also requires reconsideration as such observation runs counter to the several decisions of Supreme court where in the context of cases on Octroi the Apex court has held that to constitute 'use' or 'consumption', the emergence of a new or different commercial commodity is necessary. The Hon'ble Supreme Court has in its very recent judgment dated 30. 11. 2023 M/s Mishra Tea Blending ( supra ) again held that the blending of lea does not amount to manufacture. The petitioners, therefore, most humbly submit that the judgment of this Hon'ble Court in the case of Tata Tea Limited (supra) again stand overruled and is no longer a good law and a binding judgment.
Submissions of respondents / State:
18. Shri Sudeep Bhargava learned Dy. The Advocate General has argued in support of the order passed by the assessment officer, appellate authority and revisional authority that the petitioner purchased the crude oil, brought within the State of M.P. and used it in manufacturing refined oil which is an altogether new commodity saleable in the market. Crude oil brought by the petitioner was used and consumed in making soyabean oil hence the entry tax was attracted, the issue raised by the petitioner is no more resp ingera as the same had already been decided by the Division Bench of this High Court in the case of Tata Tea Limited Vs. CTO reported in (2015) 27 STJ 21 which is not liable to be reopened by relying on the judgment M/s Mishra Tea Blending ( supra ) passed in the matter of the Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-15- WP-57-2009 & 15 Ors.
processing of tea blending, hence all the Writ Petitions devoid of merit and substance be dismissed.
Appreciation and conclusion:
19. The MP Entry Tax Act was enacted by the legislature of MP in the exercise of its legislative powers available to it under Entry No 52 of List II Seventh Schedule to the Constitution of India which reads as under-
"52. Taxes on Entry of Goods into a local area for consumption, use or sale therein".
20. For ready reference section 3 of the Entry Tax Act is reproduced below:-
Sec. 3: Incidence of taxation-
(1) There shall be levied an entry tax,- (a) on the entry in the course of business of a dealer of goods specified in Schedule
11. into each local area for consumption, use or sale therein:
and (b) on the entry in the course of business of a dealer of goods specified in Schedule - III into each local area for consumption or use of such goods but not for sale therein; and such tax shall be paid by every dealer liable to tax under the Vanijyik Kar Adhiniyam who has effected entry of such goods:
Provided that no tax under this sub-section shall be levied,-
(i) in respect of goods specified in Schedule - II other than the local goods, purchased from a registered dealer on which entry tax is payable or paid by the selling registered dealer;
(ii) in respect of goods specified in Schedule - II which after entry into a local area are sold outside the State or in the course of inter-State trade or commerce or the course of export out of the territory of India;
(iii) in respect of goods specified in Schedule - III imported from outside the State for consumption or use but which have been disposed of in any other manner;
(iv) in respect of goods exempted from entry tax under Section 10, and if tax on the entry of any goods specified in Schedule - 11 or Schedule III effected during any period has been deposited by a dealer into the Government treasury and subsequent to such entry the goods are disposed of in the manner described in clause (it) of this proviso, such dealer shall be entitled to a set off of the tax already paid by him in respect of such goods and such set off shall be adjusted towards the tax payable by him in such manner as may be prescribed.
Provided further that notwithstanding anything contained Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-16- WP-57-2009 & 15 Ors.
in this Act, where a dealer in the course of his business, purchases goods from a person or a dealer other than a registered dealer who has effected entry of such goods into a local area prior to such purchase, the entry tax shall be paid by the dealer who has purchased such goods.
Provided also that notwithstanding anything contained in this Act, where a dealer liable to pay tax under the Vanijyik Kar Adhiniyam in the course of his business into a local area, purchases goods specified in Schedule - III, other than goods which are local goods in relation to such local area, from another dealer of the same local area for consumption or use. the entry of such goods shall be deemed to have been effected into such local area by the dealer who has purchased such goods for the aforesaid purpose and entry tax shall be paid by such dealer.
Provided also that in respect of packing material "sale" shall mean the sale of packing material as such and shall not include its sale along with the goods packed or contained therein.
Section 3(1) carves out exceptions to the charging section and enumerates the circumstances in which no tax is leviable. Proviso (ii) provides for non-liability for Schedule II goods, which after their entry have been sold outside the state or in the course of interstate trade commerce or the course of export out of the territory of India. The said proviso is to protect the levy from being outside the scope of levy Entry 52 List 2 of the Seventh Schedule to the Constitution of India.
21. According to the petitioner, the revisional authority has not decided the principal issue regarding non-livability to Entry tax on any consumption or use of oil to the extent of transfer or sale of such oil to outside the state of MP, no entry tax is leviable in view of proviso (ii) to section 3(1) of Entry Tax Act because aliment of manufacturing is not being carried out by the petitioner. However, while rejecting the alternative submission of the petitioner regarding exemption under Notification No. 82 dated 06-09-2001, the revisional authority has specifically admitted that the process of refining crude oil does not constitute a process of the manufacturer in view of exclusion of said process from manufacture under Notification No. 18 dated 01-04-1995 issued by state government u/s 2(o) Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-17- WP-57-2009 & 15 Ors.
of MPCT Act, 1994. The present petition thus challenges the said revisional order and imposition of entry tax on entry of crude oil, which after refining has been sent out of MP. The crude oil entered within the local area of the state to the extent of sale of such oil after refining outside state of MP either by way of sale outside state or in the course of interstate trade or commerce in view of proviso (ii) to Section 3(1) of the Madhya Pradesh ke Sthaniya Kshetra Me Maal ke Pravesh Par Kar Adhiniyam, 1976 (MP Entity Tax Act for Short).
22. Thus, the legislature has the power to tax the entry of goods into a local area only when such goods are entered for consumption, use or sale in the local area. Needless to say, no entry tax can be levied on the mere entry of goods if the goods entered are not 'consumed, used or sold in the local area. There is no quarrel about the above proposition of the law. The sole contention of the petitioner is that since the process of refining has been excluded from the definition of the expression 'manufacture' as defined in section 2(0) of the MPCT Act by Notification No. A-5-1 -94-ST- V(18) dated 01-04-1995, hence in the absence of a manufacturing process being undertaken by the petitioner to produce refined soyabean oil, there is neither any use nor any consumption of the oil subjected to the process of refining. The definition of the word 'manufacture' along with Notification No. 18 dated 01-04-1995 is applicable under Entry Tax Act in view of provisions of Section 2(2) of the MP Entry Tax Act which adopts the expressions defined under MPCT Act but not defined under MP Entry Tax Act.
Section 2(2) of MP Entry Tax Act-
Sec. 2: Definitions (2) All those expressions, other than expression "goods" and "sale" which are used but are not defined in this Act and are defined in the [Vanijyik Kar Adhiniyam] shall have the meanings assigned to them in that Act.
Definition of manufacture in section 2(o) of MPCT Act - 2(o) Manufacture includes any process or manner of producing, collecting, extracting, preparing or making any Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-18- WP-57-2009 & 15 Ors.
goods, but does not include such manufacture or manufacturing process as may be notified.
The core issue which requires our anxious consideration is whether the petitioner is engaged in the manufacturing or refining of crude soya oil.
23. As per the definition of " manufacturing under Section 2(k), Factories Act, 1948 it means the process of (i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal or (ii) pumping oil, water, sewage or any other substance, or; (iii) generating, transforming or transmitting power or (iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; or (v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or (vi) preserving or storing any article in cold storage. In other words bringing into existence a new marketable commodity with a distinctive name, character or use, amounts to a manufacturing process, as held by the Supreme Court of India in the case of Triveni Engg. & Industries Ltd. v. CCE, reported in (2000) 7 SCC 29.
24. The expression „manufacturing purposes‟ is also defined in S. 106 of the Transfer of Property Act, 1882 it means purposes for making or fabricating articles or materials by physical labour or skill or by mechanical power, vendible and useful as such. Such making or fabricating does not merely mean a change in an already existing article or material but transforming it into a different article or material having a distinct name, character or use or fabricating a previously known article by a novel process, as held in the case Allenbury Engineers (P) Ltd. v. Ramkrishna Dalmia, (1973) 1 SCC 7 by the Apex court.
25. Section 2 (f) of The Central Excise Act, 1944 reads as under:-
"(f) "Manufacture" includes any process-
(i) incidental or ancillary to the completion of a manufactured Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-19- WP-57-2009 & 15 Ors.
product;
(ii) which is specified in relation to any goods in the section or Chapter notes of [The First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or] [(iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer ;] and the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacture on his own account;]"(Emphasis supplied) This definition is to be read with Section 3 of the Central Excise Act, 1944, to be read with the Central Excise Tariff Act, 1985. In a catena of decisions, the Hon'ble Supreme Court and the High Courts held that if no new, different and distinct article emerges having a distinct name, character and use, after the process applied upon the original product, there is no manufacturing at all and, the resultant product cannot be said to have emerged because of manufacture. Commercially new and distinct articles ought to emerge out of the process applied. To ascertain whether the manufacturing process has taken place or not, a test is to be applied, whether change or series of changes take the commodity to a point where commercially it can no longer be regarded as the original commodity, but, instead is recognized as a new and distinct article that has emerged as a result of processes then manufacture can be said to have taken place. This is the test to be applied to conclude whether the process applied to the product amounts to manufacturing or not.
26. In the case of Mamta Surgical Cotton Industries, Rajasthan vs Assistant Commissioner (Anti-Evasion), Bhilwara, Rajasthan reported in 2014 0 Supreme(SC) 50 the Apex court has held as under:-
34. The surgical cotton is made sterile and fit for surgical use and it is not put to the same use to which the unmanufactured cotton is put and vice versa. Therefore, when unmanufactured cotton Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-20- WP-57-2009 & 15 Ors.
undergoes a manufacturing process, a new product saleable into the market which is having a distinct identity, comes into existence which is known in the commercial market by a different name and use. Surgical cotton possesses higher utility than the cotton in its un- manufactured state.
35. It is trite to state that 'manufacture' can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use. While mere improvement in quality does not amount to manufacture, when the change or a series of changes transform the commodity such that commercially it can no longer be regarded as the original commodity but recognised as a new and distinct article. In the instant case, after going through the various steps that are carried out by the assessee for getting surgical cotton from raw cotton, we can certainly say that cotton has undergone a change into a new commercially identifiable commodity which has a different name, different character and different use. The process of transformation is not merely processing to improve the quality or superficial attributes of the raw cotton. The cotton looses its original form and it marketed as a commercially different and distinct product. This aspect of the matter is rightly noticed by the High Court by relying upon the decision of this Court in Empire Industries case (supra) wherein this Court has explained the meaning of the expression 'manufacture' as when the result of the treatment, labour and manipulation a new commercial commodity has emerged which has a distinctive new character and use.
36. Having carefully observed the process of transformation of raw cotton into surgical cotton and having noticed that there is a distinctive name, character and use of the new commodity, i.e., surgical cotton, we are of the considered opinion that surgical cotton is a separately identifiable and distinct commercial commodity manufactured out of raw cotton and therefore, ceases to be cotton under Entry 16 of the said notification.
27. Likewise in the preparation of soyabean oil the process of refining the soyabean crude oil involves degumming, deacidification, decolourisation and deodorization process. The addition of alkaline substances such as sodium carbonate to the heat causes deacidification. To remove pigments from the oil white clay is usually used. The petitioner on its official website has declared as a „manufacturer‟ of Physically refined soyabean oil and also disclosed it contains (i) permitted anti-oxidants (INS
319), (ii)Antifoaming agents (900a) and (iii) Vitamin A (25 IU per gram) & Vitamin D (4.5 IU per gram). The addition of the above ingredients by way of a mechanical process in crude soyabean oil amounts to the Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-21- WP-57-2009 & 15 Ors.
manufacturing process. The process to get the finished product called refined soyabean oil is described in the form of a chart as under:-
28. The Apex court has considered a similar process applied in the manufacturing of surgical cotton from raw cotton in the case of Mamta Surgical Cotton Industries (supra). Para 29 is as under
29. Having noticed the relevant Entries, the definition of 'manufacture' and judicial precedents, we would now notice, (a) the process adopted by the assessee for the purpose of converting raw cotton into surgical cotton and (b) the utility and commercial use of surgical cotton in contrast to cotton.
Process of conversion of cotton into surgical cotton
30. The Project report on Surgical Absorbent Cotton, December Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-22- WP-57-2009 & 15 Ors.
2010 (pg. 3 and 4) prepared by MSME - Development Institute, Ministry of Micro, Small & Medium Enterprises, Government of India provides for the following steps in the manufacture of surgical cotton:
'a) Opening and cleaning of Raw Cotton:
Raw cotton received in bale or otherwise is opened in opener where it is loosened and simultaneously dust/foreign particles are also removed. Loosened cotton is then put into a keir where chemicals such as caustic soda, soda ash, detergent, etc. are added along with adequate water and steam boiled for about 3-4 hours. Through this process, most of the natural waxes and oils are removed while remaining foreign matter softens and disintegrates. The treated cotton is transferred to washing tanks where it is washed thoroughly.
b) Bleaching:
Washed cotton is bleached to remove the brownish colour developed due to chemical treatment. Bleaching is done by using a bleaching agent such as sodium-hypochlorite or hydrogen peroxide. The bleaching process improves whiteness, and wetting properties and assists in the disintegration of any remaining foreign materials.
c) Removal of Chemicals:
The bleached cotton is thoroughly washed again to remove the chemicals. A small quantity of dilute hydrochloric acid or sulphuric acid is also added to neutralize excess alkali. If required, again wash with water. The water of cotton is removed with the help of a hydro- extractor. It is then sent to a wet-cotton opening machine.
d) Drying:
The cotton so obtained is dried by passing through a dryer or alternatively subjected to sun drying where provision for the dryer is not there.
e) Lapping:
The dried cotton is sent to the blower room where it is thoroughly opened and made into laps.
f) Carding:
The laps are then fed into a carding machine wherein cotton is warped around rollers in thin layers.
g) Rolling:
Cotton so obtained is compressed and rolled into suitable role size along with packaging paper.
h) Weighing and cutting:
The rolls are then weighed and cut according to required weight and sizes and labelled properly before packing in polythene sheets and heat sealed.'
29. After considering the above process of manufacturing the Apex court held that the surgical cotton is made sterile and fit for surgical use and it is not put to the same use to which the unmanufactured cotton is put and vice versa. Therefore, when unmanufactured cotton undergoes a manufacturing process, a new product saleable into the market which has a distinct identity, comes into existence and is known in the commercial Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-23- WP-57-2009 & 15 Ors.
market by a different name and use. Surgical cotton possesses higher utility than cotton in its un-manufactured state. We are of the considered view that in the case of making soyabean oil same analogy applies hence the learned revenue authorities have rightly held that it is the case of manufacturing soyabean oil.
30. In the case of Commercial Trade Tax V/s M/s Kumar Paints and Mills Store in Civil Appeal No.5937 of 2011, the Apex Court considered the question with respect to the product which underwent mixing of base paint with different colours did not result in the new product after undergoing the process of manufacturing as defined under the U.P. Trade Tax Act. The revenue department contended that the sale of paints which had undergone mixing through a computerized process amounts to manufacture thereby resulting in new products. After considering all the judgments dated 02.03.2023 up to the date, the word „manufacturer‟ must be understood in common parlance. This means the product of the article from the use of raw and real material, however, if the change made in the article is related to a new and different article, it would amount to manufacturing the dripping point or determination test, therefore, the result of the process (amounting to manufacture) must be the emergence of the commercially new commodity and not mere variation of existing one. Paragraphs Nos.7 and 8 are reproduced below:
7. In Mahalaxmi Stores (supra), this court relied on previous decisions such as Commissioner of Sales Tax Vs. Pio Food Packers (1980) Suppl. SCC 174, and Chowgule and Company(P) Limited Vs. Union of India (1981) 1 SCC 653 to state that the manufacturing process can vary and that the process of producing every type of variation, or finishing of goods, would not amount to 'manufacture' as contained in the statute unless it resulted in the emergence of a new commercial commodity.
8. In Sonhbadra, this court while deciding the facts of the case before it cited a large number of decisions rendered in the context of what was meant by 'manufacture.' This court specifically noticed in Union of India V. Delhi Cloth and General Mills (1963) Suppl. 1 SCR 586 that 'manufacture' meant bringing into existence a 'new' substance and did not mean merely to bring about some change in the substance.Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19
NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-24- WP-57-2009 & 15 Ors.
31. The case in hand, admittedly the petitioner brought Soyabean crude oil within the State and after the process manufactured the refined oil. According to the petitioner, the entry tax on oil entered into the State of M.P. and after refining sent to the outside State hence the entry tax is not leviable because there is neither any consumption nor use of oil. The petitioner claimed the non-liveability on the ground that the process of refining does not constitute the process of manufacturing oil because before and after refining it remains the same commodity. In the course of business, the petitioner purchased crude soya oil from other States and brought it within the State and after undergoing the process it became refined Soya oil, therefore, the authorities have rightly held that it was the raw product consumed and used in making refined Soya oil which is a saleable commodity. Refined soyabean oil is normally consumption in cooking the food which cannot be done from crude oil. The process of so- called refining has been explained in the aforesaid paragraphs with the help of the diagram clearly establishes that a big manufacturing plant is required to be installed for making Soyabean oil from crude Soya oil, therefore, the tax on entry of the goods into the local area has rightly been imposed for consumption/use or sale therein.
32. The petitioner is trying to avoid the payment of the entry tax solely on the ground that the petitioner is engaged in refining the crude Soya oil to Soyabean oil, no entry tax is leviable in view of Proviso 2 of Section 3(1) of the Entry Tax Act, only in case of consumption or use of oil by the Assessee. It is correct that the Revisional Authority while rejecting the aforesaid contention has held that the process of refining crude oil does not constitute a process of manufacture in view of the said exclusion of the process of refining under notification No.18 dated 01.04.1995 issued by the State under Section 2(o) of the MPCT Act, 1994.
33. As per Entry No.52 of List 2, VIIth Schedule of the Constitution of India, the tax on the entry of goods into the local area is leviable for Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 24-09-2024 15:21:19 NEUTRAL CITATION NO. 2024:MPHC-IND:25409
-25- WP-57-2009 & 15 Ors.
consumption, use or sale therein even if it is called by whatever name manufacturing or refining. In the case of the petitioner, a new product Refined Soyabean oil emerges after applying various processes to the crude Soyabean oil. The cued soya oil is used in making finished consumable soyabean oil. Refined soyabean oil is a new commodity that is packed in bottles and cans of different sizes for sale in the market after undergoing various processes as explained in the aforementioned paragraphs by way of the diagram. Therefore, there is a consumption/use in the local area before the sale of finished refined oil to other States by the petitioner. Even if the Revisional Authority has held that under notification No.18 dated 01.04.1995, the processing of refining of crude oil into refined soyabean oil cannot said to be manufacturing even then under notification No.82 dated 06.09.2001 it is leviable for the Entry tax.
34. In view of the above, we do not find any ground to interfere with the order of the Assessment Authority and the Revisional Authority, therefore, all the Writ Petitions are hereby dismissed.
35. Let a photocopy of this order be kept in all the aforesaid connected matters.
Certified copy as per rules.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
Divyansh
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 24-09-2024
15:21:19