Madras High Court
Britannia Industries Limited vs The State Of Tamil Nadu on 27 September, 2012
Author: K.Ravichandrabaabu
Bench: Chitra Venkataraman, K.Ravichandrabaabu
In the High Court of Judicature at Madras Dated: 27.09.2012 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Mr.JUSTICE K.RAVICHANDRABAABU Tax Case (Revision) Nos. 2027 and 2028 of 2008 Britannia Industries Limited MTH Road, Padi, Chennai .. Petitioner in both the cases Vs. The State of Tamil Nadu rep. By the Assistant Commissioner (CT) Zone III, III Floor, Greams Road Chennai .. Respondent in both the cases Tax Case Revisions to revise the order of the Sales Tax Appellate Tribunal, (Main Bench), Chennai dated 31.7.2008 in T.A. No. 170 of 2004 and 174 of 2004 respectively. For Petitioner : Mr.N.Sriprakash For Respondent : Mr.J.Aaditya Reddy, Govt. Advocate ------- ORDER
(Order of the Court was delivered by K.RAVICHANDRABAABU,J.) These Tax Case Revisions filed by the assessee are in respect of assessment years 1999-2000 and 2000 01. The following are the substantial questions of law raised in common in both these cases:-
"1. Whether the Tribunal has erred in law in failing to see that the words "used for cattle feed" in Serial No. 57(V) of Part B of the First Schedule to the TNGST Act only descriptive of the word wheat bran and did not require evidence of actual use by the purchase?
2. Whether the Tribunal has committed an error in law in failing to see that Serial No. 62 of Part B of the First Schedule to the Act only deal with salt unfit for human consumption or denatured salt?"
2. In so far as the first question of law in respect of the item wheat bran is concerned, the Tribunal remitted the matter back to the Assessing Officer to record a finding as to whether wheat bran sold by the assessee was a wheat bran used for cattle feed. Subsequent to the said order of remand passed by the Tribunal, it is seen that the Assessing Authority passed an assessment order on 30.11.2009 thereby granting exemption to the said item wheat bran. Hence, the assessee has no grievance in so far as the issue with regard to wheat bran is concerned. Accordingly, there is no necessity for us to answer the first question of law raised in both these revisions.
3. In so far as the second question of law with regard to the other item viz., common salt is concerned, the case of the assessee is that they purchased common salt to be used in the manufacture of biscuits and other items by them. The claim of the assessee is that the common salt purchased by them and used in the manufacture of biscuits and other items, is an exempted item under Entry 7 of Part B of the Third Schedule of the Tamil Nadu General Sales Tax Act and therefore, they are not liable to pay tax in respect of such item.
4. On the other hand, it is the case of the Revenue that the assessee is liable to pay tax as the usage of common salt by them in the manufacturing of biscuits and other items would fall under Entry 62 of Part B of the First Schedule of the Tamil Nadu General Sales Tax Act as the salt is used for industrial purpose. According to the Revenue, since it is a salt for industrial use, the same would fall under Entry 62 of Part B of the First Schedule and consequently the assessee is liable to pay tax. Therefore, the assessment order was passed by the Assessing Officer rejecting the claim of the assessee seeking for exemption under Entry 7 of Part B of the third Schedule in respect of the common salt used by them and levying tax and penalty under Section 12(3)(b) of the Act. Challenging the said order of assessment passed by the Assessing Authority, the assessee filed an appeal before the first Appellate Authority, who in turn by an order dated 3.3.2004 confirmed the order of assessment by agreeing with the findings of the Assessing Authority, that the common salt used by the assessee would fall under Entry 62 of Part B of the First Schedule as the same is the salt used for industrial purpose. Further aggrieved by the said order of the first Appellate Authority, the assessee preferred an appeal before the Sales Tax Appellate Tribunal. The Tribunal also confirmed the order of the Assessing Authority as confirmed by the first Appellate Authority by holding that the common salt purchased and used by the assessee for industrial purpose would only fall under Entry 62 of Part B of the First Schedule and would not attract exemption under Entry 7 of Part B of the Third Schedule as claimed by the assessee.
5. The Tribunal also viewed that if the Government wanted to give exemption to the commodity viz, common salt meant for human consumption then there would not be a rider clause in Entry No. 7 as "other than salt for industrial use'. Thus, the Tribunal came to the conclusion that the common salt used for industrial purpose would match with the Entry 62 of Part B of the First Schedule. Accordingly, the Tribunal has agreed with the findings of the authorities below. The assessee thus aggrieved by the concurrent findings of all the forums below, has filed the present revisions before this Court by raising common substantial questions of law as stated supra.
6. Before going into the merits of the matter, we are placed with a fact that in the case of the very same assessee, the very same Tribunal in respect of the very same issue with regard to the common salt purchased and used, had given a finding in respect of earlier assessment years viz., 1997-98 and 1998-99 in STA.NOs. 503 and 502 of 2002 dated 25.7.2006 by holding that the common salt used by the assessee is nothing but a salt consumable only for human use and therefore, Entry 7 of Part B of the III Schedule alone will squarely be applicable. The Tribunal had also found in the said decision that who is using the salt is immaterial and the test is to see for what purpose it has been used. Consequently, the Tribunal has accepted the plea put forth by the assessee seeking for exemption under Entry 7 of Part B of the Third Schedule and dismissed the State appeals preferred in those cases.
7. The admitted position is that the Revenue has accepted the said decision of the Tribunal made in STA.NOs. 503 and 502 of 2002 dated 25.7.2006, since no further appeal has been preferred against the said order. Admittedly, the commodity in question viz., "the common salt", purchased and used by the assessee in both the cases, in respect of assessment years 1997-98 and 1998-99 and in respect of the present assessment years is one and the same and there is no change in its character. No change of circumstances is also pleaded by the Revenue by placing any material before us to take a different view to reject the claim of the assessee for granting exemption under Entry 7 of Part B of the Third Schedule. At this juncture, it is useful to refer to the decision of the Apex Court reported in 20 VST 680 MUNICIPAL CORPN. OF THANE v. VIDYUT METALLICS wherein while considering the question of 'res judicata' in the matter of similar nature, the Apex Court has observed that it would indeed be very difficult to hold that such a decision would not continue to operate in subsequent years unless it is shown that there are changed circumstances or the goods imported by the company in subsequent years were different than the ones which were imported earlier and in respect of which decision had been arrived at by the court. Thus by pointing out that the corporation therein has not brought any such contention or any material before the Court to take a different view, the Apex Court has held that the benefit of the earlier decision given by the High Court was right. Here also, by applying the said principle laid down by the Honourable Apex Court, we find that there are no materials placed before this Court that the commodity which is the subject matter in both the occasions viz., for the assessment years 1997-98 and 1998-99 and for the present assessment years is different and distinct one. There are no change of circumstances also. On the other hand it is admitted that the commodity purchased and used by the assessee herein is only a 'common salt'. Therefore, having accepted the decision rendered by the Tribunal in respect of the very same commodity and treated it as an exempted goods under Entry 7 of Part B of the Third Schedule, we find no reason as to why the State has to take different view, especially, when there was no change of circumstances or the commodity used in these two sets of assessment years.
8. In another decision reported in 2006(9) SCC 341 SHREE RAM MULTI TECH. LTD v. CCE, the Honourable Supreme Court considered the question of 'res judicata' in classification dispute. In that case, the appellant before the Supreme Court is the manufacturer of "tarpaulin" and classified the same under sub-heading 6306.00 of Central Excise Tariff Act, 1985. Such claim of the appellant therein was rejected by the Revenue and thereby classified the said item under sub Heading 3926.90. The appellant therein challenged the same before the Tribunal. The appellant's case was rejected by the Tribunal by holding that the classification of "tarpaulin" was already concluded by its earlier decision reported in (2003) 153 ELT 336 GUJARAT RAFFIA INDUSTRIES LIMITED v. CCE, by classifying it under Sub Heading 3926.90. Aggrieved against such order the appellant approached the Apex Court. While considering the entitlement of the appellant therein to challenge the classification, especially when they were parties to earlier proceedings, the Apex Court at para 9 held as follows :-
"On going through the decision in Gujarat Raffia Industries Limited, we find that the appellant had filed an intervention application in pursuance of the directions issued by the High Court of Gujarat. The contentions raised by the appellant were rejected and the "tarpaulin" manufactured by the appellant was held to be classifiable under Sub heading 3926.90. The appellant did not challenge the aforesaid decision and the said decision has become final against the appellant. In view of this, counsel for the appellant is not in a position to challenge the classification that the "tarpaulin" manufactured by the appellant was not classifiable under sub heading 3926.90."
Applying the said reasoning of the Apex Court and the finding that the Revenue being a party to the earlier decision of the Tribunal in STA.Nos. 503 and 502 of 2002 of 25.7.2006, in respect of the very same classification dispute and having allowed the same to become final, it is not justified in contending otherwise in this case especially in the absence of any change or circumstances.
9. Apart from this consideration, even on merits, we find that the Revenue is not justified in treating the common salt, purchased and used by the assessee under Entry 62 of Part B of the First Schedule.
10. For the sake of convenience, the Entry 62 of Part B of the First Schedule as well as Entry 7 of Part B of the Third Schedule are extracted hereunder:-
Entry 62 in Part B of First Schedule Salt for industrial use Entry 7 in Part B of the Third Schedule Common salt (Sodium Chloride) including iodised or vitaminized salt for human consumption, other than salt for industrial use.
11. A bare perusal of the Entry 62 in Part B of the First Schedule would only show that what is placed therein is the "salt for industrial use", whereas, Entry 7 of Part B of the Third Schedule shows " the common salt (sodium chloride) other than the salt for industrial use". Thus, by a mere reading of these two entries, a distinction can certainly be made between the words 'salt for industrial use' and 'common salt other than the salt for industrial use'. If the intention of the legislature is to bring the common salt used for industrial purpose also under Entry 62 of Part B of the First Schedule, then they would have not avoided the word 'common salt' in such entry. On the other hand the word used under Entry 62 is only 'salt' for industrial use and not 'common salt' for industrial use. Likewise exemption granted to the item under Entry 7 of Part B of the Third Schedule, is 'common salt (sodium chloride) other than the salt for industrial use'. It is to be noted here that what is excluded from exemption is only the 'salt for industrial use' and not the 'common salt'. Therefore, the intention is very clear in making the distinction between the common salt as contemplated under Entry 7 of Part B of the Third Schedule and the salt used for industrial purpose as contemplated under Entry 62 of Part B of the First Schedule. It is not the case of the Revenue that the purchase made by the assessee is not a common salt. Their only contention is that though the assessee purchased common salt, they have used it for industrial purpose, which would fall under Entry 62 of Part B of the First Schedule and therefore they cannot seek exemption as per Entry 7 of Part B of the Third Schedule.
12. We are unable to agree with the contention raised by the Revenue and conclusions arrived at by the authorities below for the reasons stated herein. The Tribunal rejected the claim of the assessee only by assuming that the assessee has used the common salt for industrial purpose and therefore, the said salt matches with the Entry 62 of Part B of the First Schedule. The Tribunal has not noted the distinction between the "salt" referable to Entry 62 of Part B of the First Schedule and "common salt" referable to Entry 7 of Part B of the Third Schedule.
13. Learned Government Advocate appearing for the Revenue referred to the decision reported in AIR 2003P&H229 BALLARPUR INDUSTRIES LIMITED AND ANR v. STATE OF HARYANA AND ORS in support of his contention that the common salt purchased by the assessee would fall only under Entry 62 of Part B of the First Schedule. In the said decision the Punjab and Haryana High Court observed that even if for the sake of presumption it is accepted that common edible salt and the common salt used for industrial purposes are one and the same thing, then picking up the industrial salt for the levy of octroi cannot be considered to be without any reasonable basis because common edible salt has to reach every common man rich or poor whereas the common salt used for industrial purposes would be used for gaining profits. Thus, by observing so the Punjab and Haryana High court has found that industry is in a better position to pay which is a relevant consideration in all taxing statutes. There is no quarrel with regard to the finding of the Punjab and Haryana High Court which is rendered only on considering the question of levying of octroi in respect of common salt between common man and industry. That is why, the Punjab and Haryana High Court has observed that industry is in a better position to pay octroi than a comman man. In our considered view, such analogy cannot be applied in the case of classification of goods. The character and the nature of the goods are to be seen for classifying the same in order to see under which entry it would fall for taxation. The question before the Punjab and Haryana High Court was more on Article 14 of the Constitution of India and by reason of exemption granted, payment of octroi duty on common salt brought in for human consumption. As the question involved in this case is totally a different one, we find no justification on the part of the Revenue to rely on the decision of the Punjab and Haryana High Court.
14. In the light of the above, we have no hesitation in accepting the case of the assessee. Consequently, the second question of law is answered in favour of the assessee and the above Tax Cases (Revisions) are allowed. No costs.
bg To
1. The Assistant Commissioner (CT) Zone III, III Floor, Greams Road, Chennai
2.The Sales Tax Appellate Tribunal, (Main Bench), Chennai