Madras High Court
Siggil India Limited (Formerly The ... vs The Commercial Tax Officer And Anr. on 10 October, 1995
Equivalent citations: (1996)1MLJ98
Author: Shivaraj Patil
Bench: Shivaraj Patil
ORDER Shivaraj Patil, J.
1. The petitioner has sought for issuing a writ of declaration under Article 226 of the Constitution of India, declaring that Serial No. 25, Part E of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 is ultra vires Section 3(2) of the Act, and in any view void and unenforceable being ultra vires ArticleS 14, 19(l)(g) and 301 of the Constitution of India.
2. The petitioner states that it is a company incorporated under the Companies Act, 1956. They have factories in Tamil Nadu at Manali and Tuticorion, and at Vizagapattinam in Andhra Pradesh. The factories in Tamil Nadu are adjacent to Madras Fertilizers Limited, Manali and Southern Petro Chemical Industries Corporation Limited, Tuticorin respectively. They purchase carbon dioxide (co2) from these two suppliers which is a by produce in the course of manufacture of fertilizers. Carbon-di-oxide purchased are received in compressed form at a pressure of 150 to 200 P.S.I. (Pounda/Sq. inch) as against normal atmospheric pressure of 14 to 15 P.S.I. The gas is passed through a pottassium permanganate scrubber and then through sodium carbonate solution and finally given a waterwash. Thus impurities such as over flow traces and contaminations are removed in the process. The gas is then passed on through the compressor to inter cooler where it is cooled with water and sent to the trap for removal of moisture and oil. This is repeated for second time and sent to a de-humidifier which is an alumina gel dryer which removes moisture from the gas. Finally it is passed through activated carbon to remove all the final traces of odour. Before it is taken for filling in cylinders. The analysis of the products received and issued are as follows:
__________________________________________________________________________________ Carbon-di-oxide (CO2) supplied by Southern Petro- Madras Fertilizers Chemical Indus- Ltd.
tries Corpn. Ltd.
Co2 (Carbon-di-oxide) 99.20% 99.00%
H2 (Hydrogen) 0.75%
N2 (Nitrogen) 0.46% 0.25%
Oxygen & Argon 0.044%
Moisture 0.08%
Co2 as processed by SIGGIL,
the petitioners herein
Co2 (Carbon-di-oxide) 99.8%
Acid and Sulphuric dioxide passes through test.
Phosphine and Hydrogen -do-
Moisture 0.176%
__________________________________________________________________________________
3. It is submitted that after processing, the petitioner effected re-sales of the produce Carbon-di-oxide (Co2) and the same is sold as compressed liquified carbon-di-oxide. The above table may show that the Southern Petro Chemical Industries Corporation Limited and Madras Fertilizers Limited had supplied carbon-di-oxide and the petitioners merely removed certain impurities, but there is a substantial and almost total identity in the carbon-di-oxide (Co2) content. In fact, even after processing, the petitioners cannot secure 100% pure carbon-di-oxide. In this regard the processing is done by the petitioners to bring the case to I.S.I. standard for supply to aerated water and other industries.
4. This being the position the authorities like the first respondent purported to impose a single point tax-under item 106 of the first schedule a both at the hands of the Madras Fertilizers Limited and Southern Petro Chemical Industries Corporation Limited, as well as at the hands of the petitioner, stating that by virtue of the treatment like improving the gas they became different goods. According to the petitioners the authorities imposed a fresh tax notwithstanding the tax paid by the suppliers, In the light of the several demands raised the petitioners filed W.P. No. 2 of 1988 and ultimately a writ of mandamus as prayed for was issued on 16.8.1989. Inspite of the said order the authority proceeded in imposing a multi stage tax, which unfortunately was confirmed by the Sales Tax Appellate Tribunal in T.A. No. 779 of 1988 dated 23.12.1989 in respect of the assessment year 1985-86. Thereafter the petitioners filed revisions under Section 38 of the Tamil Nadu General Sales Tax Act 1959 (for short, the Act) which was ultimately decided in South India Carbonic Gas Industries Limited v. State of Tamil Nadu 80 S.T.C. 30, as the petitioners were the known. In view of this position, the authorities were disabled from imposing two stage taxation. This Court held that Carbon-di-oxide at the hands of the petitioners was not a different commodity and commercially was the same. There was no change in the identity of the commodity at the hands of the petitioners.
5. When things stood thus, by the Tamil Nadu General Sales Tax (Amendment) Act, 1993 (Act 24 of 1993) the fist schedule was re-cast. The second respondent classified Carbon-di-oxide in Serial No. 25, Part E of the first schedule, which in the present form reads as follows:
_______________________________________________________________________________ S. No. Description of the goods Point of Rate of Effective Levy tax from _______________________________________________________________________________
(i) Gases (other than those At the 12 12.03.93 specified elsewhere in point of first sale this Schedule) in all its forms. in the State.
(ii) Purified and processed gazes
in all its forms -do- 12 12.03.93
_______________________________________________________________________________ Thus even the benefit of concession under Section 3(3) of the Act was denied, with the result the suppliers were charged to tax at 12% besides surcharge and additional tax and equivalent amount was again charged on the resale by the petitioners, treating the two stages of sale as two independent points of tax and as two different goods. The petitioners' representations in this regard were of no use.
6. The petitioners state that by L.A. No. 7 of 1995 the second respondent has conceded the availability of Section 3(3) of the Act so that the gas received will be treated as raw-material as if there was manufacture of another gas falling under the first schedule. The petitioners have been availing Section 3(3) of the Act on the assurance that the amendment is effective from 1.4.1995 without prejudice to their rights.
7. In the writ petition the petitioners are questioning the validity of two stage taxation on the same goods on the grounds that,
(i) As per data analysis indicated and found by this Court in South India Carbonic Gas Industries Limited v. State of Tamil Nadu 80 S.T.C. 30, it cannot be contended that carbon-di-oxide bought by the petitioners and marketed by them are two different goods liable for tax at two different stages, and that this Court has held that they are the same goods. Hence the imposition of two stage taxation on the same goods is ex-facie arbitrary and unreasonable;
(ii) The entire scheme of the Act is to ensure a single stage taxation. Even now Section 3(2) provides for charge at single point only at the point prescribed in the first schedule. The first schedule should carry out the charging provision of Section 3(2) of the Act. The schedule cannot distort or override the scheme of taxation. In this view serial No. 25, Part E of the first schedule is repugnant to the single point taxation contained in the Act and ultra vires Section 3(2) of the Act, and accordingly it is liable to be struck down,
(iii) Levy under serial No. 25, Part E of the first schedule, at two or more stages, is clear case of discriminatory imposition and ex-facie arbitrary, violative of Articles 14 and 19(1)(g) of the Constitution of India;
(iv) Even though the proposed amendment of Section 3(3) of the Act form 1.4.1995 would provide some measure of relief, it does not totally undo the hardship and arbitrariness inherent in the multistage taxation provided by the impinged entry;
(v) The petitioners further state that in any view it may be possible to read down the provisions of Serial No. 25, Part E of the first schedule to say that as long as carbon-di-oxide in any form had suffered single point tax under the said serial No. Part E, there is no authority for further levy. In this view it is possible to hold that the authorities have no jurisdiction to impose two taxes under the same item No. 25, Part E of the first schedule; and
(vi) Even the authorities constituted under the Central Excise and Salt Act, 1944 have taken the view that he carbon-di-oxide marketed by the petitioners are not different from carbon-di-oxide purchased from Southern Petro Chemical Industries Corporation Limited and Madras Fertilizers Limited. Hence two levies cannot be justified merely because the petitioners trade in the goods even without processing or manufacture.
8. A counter-affidavit is filed on behalf of the respondents resisting the writ petition stating that the petitioner is a registered dealer under the Act on the file of the first respondent. It is dealing in carbon-dioxide gas. It purchases carbon-di-oxide gas from M/Section Madras Fertilisers Limited, Manali and SPIC Limited, Tuticorin in a compressed form. The gas is purified and processed and sold locally and in the course of inter-state trade. The gases in all its forms is taxable at 12% sigle point at the point of first sale in the State under Item 25(i) of Part E to the first schedule to the Act as amended by Act 24 of 1993 with effect from 12.3.1993 purified and processed gases in all its forms is again taxable at 12% single point at the point of first sale in the State under entry 25(ii) of Part E of the first schedule with effect from 12.3.1993. The petitioner purchases impure gas from the above dealers. The impurities are removed and the gas is purified by the petitioner by chemical process. The process involved in the purification is detailed by the petitioner in para 2 of the petition. The purified gas is filled up in cylinders and sold by the petitioners.
9. It is further submitted that the petitioners have collected tax at 12% on their sales of purified carbon-di-oxide gas under Serial No. 25(ii) of Part E of he first schedule. The petitioners have cited South India Carbonic Gas Industries Limited v. State of Tamil Nadu 80 S.T.C. 30 in support of their contention that serial No. 25, Part E of the first schedule is ultra vires Section 3(2) of the Act. This view is not correct. The decision relied on by the petitioners related to old entry 106 of the first schedule to the Act referring to gases (other than that is specified in item 159) in compressed, liquified or solidified form brought to tax at 10%S.P.atthepointoffirstsaleinthetate.Itern 159 of the first schedule related to fuel gas which was taxable at 8% S P. at the point of first sale. Therefore, item No. 106 referred to gases other that the fuel gas. Thus there was only one entry in item 106 relating to the gases whether they were pure or impure in compressed, liquified or solidified form. Hence, this Court interpreted item 106 stating that both pure and impure gases would fall under that entry.
10. It is further submitted that after the amendment of the first schedule by Act 24 of 1993, the State Legislature introduced entry 25(ii) to the first schedule which mentions under item (i) gases in all its forms and in items (ii) purified and processed gases in all its forms. The legislature has therefore expressly brought to tax impure gases at the point of first sale at 12% and purified gases again at the point of first sale at 12% s.p. with effect from 12.3.1993. Thus the Legislature itself has differentiated the pure and impure gases as different commercial commodities liable to single point taxation and it is within the competence of the State Legislature under entry 54 List II of the 7th Schedule to the Constitution. This being the position, the contention of violation of Section 3(2) of the Act is baseless and untenable. Equally there can be no violation of Articles 14, 19(1)(g) and 301 of the Constitution in a tax law as contended by the petitioners.
11. The respondents also pointed out to and relied on the decision of the Supreme Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra 37 S.T.C. 319. In the said decision it is declared that entry (iv) in Section 14 of the Central Sales Tax Act, 1956 was meant to enumerate separately taxable goods and not just to illustrate what was just one taxable substance. Each sub-item in an entry is a separate taxable commodity for the purpose of sales tax and each of them forms a separate species for each series of sales although they may all belong to genus 'iron and steel'. Mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object is to tax sale of each commercial commodity and not the sale of the substance out of which they are made. Each commercial commodity becomes a separate object of taxation in a serious of sales of that commercial commodity so long as it retains its identity as that commodity. In view of the said judgment of the Supreme Court aforementioned the contentions of the petitioners raised in the writ petition are untenable. Hence the writ petition may be dismissed.
12. Shri C. Natarajan, the learned Counsel for the petitioner in the argument reiterated the grounds raised in the writ petition, and placed much reliance on two decisions viz., South India Carbonic Gas Industries Limited v. State of Tamil Nadu 80 S.T.C. 30 and Aphali Pharmaceuticals Limited v. State of Maharashtra 81 S.T.C. 113 to contend that purchases of carbon-di-oxide gas Of 99.2% purity, and sale of that gas after bringing it to 99.8% purity, the commodity remains the same. The tax paid of purchase and sales need not be taxed again based on difference in purity. Referring to entry 106 in Schedule I of the Act and to state that the expressions in the schedule cannot control or prevail against the express enactment and in case of any inconsistency between the schedule and the enactment, the enactment is to prevail, and if any part of the schedule cannot be made correspond, it must yield to the Act respectively.
13. Mr. A.K. Gopinath, learned Government Advocate argued in support and justification of the stand of the respondents as taken in the counter affidavit. He submitted that the ratio in the case of the State of Tamil Nadu v. Pyare Lal Malhotra 37 S.T.C. 319, aptly and fully supports the case of the respondents in all aspects.
14. I have considered the submissions of the leaned counsel for the parties.
15. Entry 106 of the first schedule to the Act prior to the amendment simply read 'gases'. There was nothing to suggest with reference to difference in purity. The gases could be subjected to tax once over bringing under the same entry. The Division Bench of this Court in South India Carbonic Gas Industries Limited v. State of Tamil Nadu 80 S.T.C. 30 allowing the writ petition, held having regard to entry 106 as it was then, that when the carbon-di-oxide remained carbon-di-oxide at the hands of the petitioners, notwithstanding the removal of certain impurities, there was nothing to show that this was treated as a different commodity in commercial circles. The Department could not subject the second sales of carbon-di-oxide by the petitioners to tax bringing them under entry 106 of the first schedule to the Act.
16. But after the amendment, by Amendment Act 24 of 1993 with effect from 12.3.1993, the relevant entry is entry 25, Part E of schedule I to the Act which reads thus:
_______________________________________________________________________________ S. No. Description of the goods Point of Rate of Effective Levy tax from _______________________________________________________________________________
(i) Gases (other than those At the 12 12.03.93 specified elsewhere in point of first sale this Schedule) in all its forms. in the State.
(ii) Purified and processed gazes
in all its forms -do- 12 12.03.93
_______________________________________________________________________________ It is clear from the above entry 25 that unlike in entry 106 tw3o classes of gases other than those specified i.e., (i) gases other than those specified elsewhere in the schedule, in all its forms; and (ii) purified and processed gases in all its forms. This change of specifying two classes of gases is brought about by he Amendment Act of the Legislature. The Judgment of this Court in South India Carbonic Gas Industries Limited v. State of Tamil Nadu 80 S.T.C. 30 does not help the petitioner in view of the amendment. As already stated above, that was a case where no differentiation of gases in terms of purity was there. On facts of that case, it was not established that the goods were different commercial commodities.
17. The Supreme Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra 37 S.T.C. 319 has stated thus:
If the object was to make iron and steel taxable as a substance, the entry could have been; "Goods of iron and steel". Perhaps even this could not have been clear enough. The entry, to clearly have that meaning, would have to be: Iron and steel irrespective of change of form or shape or character of goods made out of them." This is the very unusual meaning which the respondents would like us to adopt. If that was the meaning, sales tax law which normally taxes sales of goods o a law which taxes sales of substances out of which goods are made. We, however, prefer the more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item. This means that each item so specified forms a separate species for each series of sales although they may all belong to the genus: "iron and steel". Hence, if iron and steel "plates" are melted and converted into "wire" and then sold in the market, such wire would only be taxable once so long as it retains its identity as commercial goods belonging to the category "wire" made of either iron or steel. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object appears to us to be to tax sales of goods of each variety and not the sale of the substance out of which they are made.
18. It becomes clear from the judgment of the Supreme Court in the case of Pyare Lal Molhotra 37 S.T.C. 319, that the ordinary meaning to be assigned to a taxable item in a list of specified items is that each item so specified can be considered as a distinct taxable item for purposes of single point taxation in a series of sales unless the contrary is shown. Mere fact that the substance out of which it is made has been taxed in some other form when it was sold as a separate commercial commodity, does not make any difference for the purposes of the law of sales tax. Because in such cases the object is to tax sale of each commercial commodity and not the sale of the substance or raw material out of which they are made. Each commercial commodity becomes a separate object of taxation in series of sales of that commercial commodity so long as it retains its identity as that commodity.
19. In the light of what is laid down by the Supreme Court, the contentions of the learned Counsel for the petitioner cannot be accepted, as the said case of the Supreme Court covers the case against the petitioner.
20. The judgment in Aphali Pharmaceuticals Limited v. State of Maharashtra 81 S.T.C. 113, relied on by the petitioner also does not advance the case of the petitioner in any way as there is no question of any schedule controlling or prevailing against the express enactment as regards the case on hand on the facts which are not in dispute.
21. It was competent to the Legislature to specify the two classes of gases bringing them under entry 25, Part E as is clear from the judgment of the Supreme Court in Pyare Lal Molhotra 37 S.T.C. 319, aforementioned. Hence, the contention of the learned Counsel for the petitioner that the said entry is ultra vires Articles 14, 19(1)(g) and 301 of the Constitution cannot be accepted.
22. In the result, for the reasons stated this writ petition being devoid of merit, is liable to be dismissed. Accordingly it stands dismissed.