Kerala High Court
State Of Kerala vs M/S.Indian Oil Corporation Ltd on 9 January, 2020
Equivalent citations: AIRONLINE 2020 KER 170
Author: C.K.Abdul Rehim
Bench: C.K.Abdul Rehim, Anu Sivaraman
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN
THURSDAY, THE 09TH DAY OF JANUARY 2020 / 19TH POUSHA, 1941
ST.Rev..No.8 OF 2014
AGAINST THE ORDER IN TA 34/2012 DATED 30-08-2013 OF THE KERALA
AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL,
ADDITIONAL BENCH, ERNAKULAM
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REVISION PETITIONER/RESPONDENT/REVENUE :-
STATE OF KERALA
BY SRI.V.K.SHAMSUDHEEN, SR.GP
RESPONDENT/APPELLANT/ASSESSEE :-
M/S.INDIAN OIL CORPORATION LTD,
ERNAKULAM - 682 011.
BY ADV. SRI.JOSE JOSEPH
THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON
11.11.2019, THE COURT ON 9.1.2020 PASSED THE FOLLOWING:
ST.Rev..No.8 OF 2014
-: 2 :-
C.K.ABDUL REHIM, J.
&
ANU SIVARAMAN, J.
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S.T.Rev. No.8 of 2014
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Dated this the 9th day of January 2020
ORDER
Anu Sivaraman, J.
This Sales Tax Revision Petition is filed by the Revenue against the order of the Sales Tax Appellate Tribunal in T.A.No.34/2012. The respondent assessee is a registered dealer engaged in the business of petroleum products. The assessment for the year 2000-'01 was completed by accepting the claim of the assessee for concessional rate at 4% per annum for the turnover representing the sale of petroleum products to M/s.BSES Kerala Power Ltd. It is submitted that as per SRO No.1091/1999, sale to power generating undertakings in the joint sector are eligible for concessional rate of tax at 4%.
2. Similarly the claim of concessional rate of tax at 3% was allowed for turnover representing sale of furnace oil, lubricant etc. as industrial raw material/component parts sold to industrial units for use in production. Annexure A, dated 14.3.2008 is the order of assessment passed by the Assistant Commissioner. Subsequently, ST.Rev..No.8 OF 2014 -: 3 :- on verification of records, it was found that M/s.BSES Kerala Power Ltd. and Kasargod Power Corporation cannot be treated as a power generating undertakings in the joint sector and that concessional rate of tax is not applicable with respect to sale made to them. Further, it was found that the claim of concessional rate of tax at 3% for sale of furnace oil, lubricant etc. cannot be allowed since those commodities are not used as industrial raw materials, but as fuel. The Deputy Commissioner of Commercial Tax, Ernakulam set aside the assessment order by invoking the suo motu revisional power, under Section 35 of the Kerala General Sales Tax Act (for short, 'the KGST Act') by Annexure B proceedings, dated 29.2.2012.
3. The relevant finding in Annexure B is that, the guidelines issued by the Government of India about formation and functioning of joint sector undertakings stipulates that, the distribution of equity ownership should be 26% by the Government, 25% by private enterprises and 49% by public and financial institutions. It is stated that BSES Kerala Power Ltd. is a company registered under the Companies Act, 1956 and is co-promoted by Reliance Energy Limited and Kerala State Industrial Development Corporation (KSIDC). The Reliance Energy Limited holds 86.32% ST.Rev..No.8 OF 2014 -: 4 :- of the share capital while the KSIDC holds 13.68%. It was therefore concluded that BSES Kerala Power Ltd. is not a company under the joint sector and that as such, the concessional rate of tax as provided under SRO No.1091/1999 is not available to the assessee. The assessment completed was therefore set aside and the matter was remitted back to the assessing authority to complete fresh assessment in accordance with the findings of the Deputy Commissioner (Appeals).
4. The assessee took up the matter in appeal before the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal, Additional Bench, Ernakulam by filing T.A.No.34/2012. The appeal was with regard to the rejection of the claim for concessional rate of tax for turnover representing sale to M/s.BSES Kerala Power Ltd. and the issue of concessional rate claimed for furnace oil, lubricant etc. sold under Form 18 Declarations. The appeal was allowed by order dated 30.8.2013. The findings of the Tribunal in paragraph 5 of the said order was as follows :-
"5. We have considered the rival contentions. The first issue is with regard to disallowance of concessional rate of tax at 4% to the assessee as per SRO No.1091/99. For the same issue in respect of the same assessee for the years 2005-2006, this Tribunal in T.A.No.9/2012 held that since the appellant has fulfilled the requirements of the ST.Rev..No.8 OF 2014 -: 5 :- notification SRO No.319/2005 (earlier notification SRO No.1091/99), denial of concessional rate of tax claimed by the appellant is legally valid. The assessing authority was directed to accept the certificates filed by the appellant and levy tax at 4% only on the turnover of sales effected to BSES being a joint sector undertaking. The above decision of the Tribunal is squarely applicable in assessee's case. In the instant case, the original assessment of the assessee for the year 2000-2001 was completed by the assessing officer by levying tax at 4% on the sales turnover of petroleum products to BSES accepting the declaration submitted in Annexure 1 to SRO No.1091/99. However, the Deputy Commissioner under Section 35 of the KGST Act has set aside the order of the assessing authority. In view of the decision of this Tribunal in T.A.No.9/2012 dated 29th June 2013, we set aside the order of the Deputy Commissioner and restore the order of the assessing officer.
The next issue is with regard to disallowance of reduced rate of tax as per Form 18 declarations filed by the assessee. On further verification of records and considering the nature of products manufactured, it is revealed that the products sold were not industrial raw materials component part or packing materials but only consumables and thus taxable at 24%. Therefore, the incorrect rate of tax adopted by the assessing officer had resulted in a short levy of Rs.10,14,155/- and the assessment thus completed is detrimental to revenue. Therefore, the Deputy Commissioner has, by invoking his powers under Section 35 of the KGST Act, set aside the order of the assessing authority. The contention of the assessee is that in view of the decision of the High Court of Kerala in Essar Oil Ltd Vs. State of Kerala reported in 37 VST 192, they are eligible for ST.Rev..No.8 OF 2014 -: 6 :- concessional rate of tax on the basis of Form 18 declarations filed by them. It is contended that the assessing authority has rightly allowed the claim of the assessee. We find force in the contentions raised by the assessee. In Essar Oil Ltd. Vs. State of Kerala reported in 37 VST 192, the Honourable High Court of Kerala has held that the selling dealer is not obliged to ensure use of goods by the purchasing dealer. In the instant case, the assessee has filed valid Form 18 declarations and the assessing authority is bound to give concessional rate of tax. This Tribunal in T.A.No.60/2010 to 63/2010 dated 31st May 2013 has dealt with similar issues in respect of the same assessee and has allowed the claim of the assessee. Therefore, the order of the Deputy Commissioner under Section 35 of the KGST Act is not sustainable. We, therefore, set aside the order of the Deputy Commissioner in this case."
5. Learned Senior Government Pleader appearing for the Revenue would contend that in the absence of any finding that the purchaser, i.e., BSES Kerala Power Ltd., was a company in the joint sector, the finding of the Tribunal that the assessee has entitled to concessional rate of tax for sale to such an entity was completely unsustainable. It is contended that the question whether the entity to which the sale had been made answered the definition of joint sector company ought to have been considered on merits by the Tribunal and the action of the Tribunal in having followed a decision in an earlier matter was completely unsustainable. It is contended that the specific entry in Schedule III of SRO 1091/99 ST.Rev..No.8 OF 2014 -: 7 :- would make it clear that the sale made to the power generating undertakings in the joint sector with capacity above 25 Kilo Watts and in respect of goods for use in generation and distribution of power would be entitled to the reduced rate of tax of 4% and that in case the purchaser does not strictly answer the requirements of a joint sector undertaking, the claim for concessional rate of tax would be misconceived.
6. It is submitted that the finding of the Deputy Commissioner was legal and valid. It is further contended that in the Lok Sabha Debates of the Eleventh Session of the Thirteenth Lok Sabha, where BSES Kerala Power Ltd. was included in the list of private sector projects financed by the Power Finance Corporation is also relied upon by the learned Senior Government Pleader to contend that BSES Kerala Power Ltd. is a private sector undertaking and the sale made to it would not make the assessee eligible for concessional rate of tax.
7. With regard to the rate of tax of furnace oil/lubricant etc., it is contended that the said products are not utilised as raw materials and are used only as fuel by the purchasing industrial undertakings. Relying on a decision of the Apex Court in Coastal Chemicals Ltd. v. Commercial Tax Officer, A.P. and others ST.Rev..No.8 OF 2014 -: 8 :- [(1999) 8 SCC 465], the learned Senior Government Pleader contended that the material used as fuel is not consumed for the manufacture of other goods and that to justify the claim for reduction in the rate of tax it must be shown that the material for which concession is sought is used as raw material for the production of the end material and not merely as fuel. In Coastal Chemicals Ltd., the Apex Court held that where the provision provided for concessional rate in respect of component parts, natural gas which is used as fuel cannot be held to be entitled for the said concessional rate. Relying on the decision of the Apex Court in CST v. Thomas Stephen & Co. Ltd. [(1988) 2 SCC 264] it was held that fuel is not consumed for the production of other goods and that cashew shells used as fuel would not be a raw material.
8. The learned counsel for the respondent assessee, on the other hand, would contend that, the guidelines for formation and functioning of joint sector companies issued by the Government of India is completely inapplicable in the matter of deciding whether the purchaser is a joint sector undertaking for the purpose of SRO 1091/99 or not. It is submitted that it is an admitted fact that the shares of M/s.BSES Kerala Power Ltd. Is held jointly by the ST.Rev..No.8 OF 2014 -: 9 :- Reliance Energy Limited and the KSIDC, which is admittedly a public sector undertaking. It is stated that the proportion of the shares or the existence of Government share capital is not determinative of the status of a joint sector undertaking, for the purpose of claiming concessional rate of tax under SRO 1091/99 and that in view of the admitted fact situation, it cannot be denied that the BSES Kerala Power Limited is a joint sector undertaking. It is further contended that the issue had been considered in respect of the previous years by the Tribunal itself in T.A.No.9/2012 and it was held that the appellant fulfilled the requirement of the notification SRO 319/2005 and that the claim for concessional rate of tax was therefore legally valid and sustainable. It is submitted by the learned counsel for the respondent that the said issue was already taken up by the Revenue before this Court and this Court in S.T.Rev.No.1/2014 had dealt with the question whether BSES Kerala Power Ltd. would be a public sector undertaking in the joint sector in terms of Clause 2 of SRO 319/2005. It was found that the SRO was framed with BSES Kerala Power Ltd. in mind, which was the sole venture in the joint sector engaged in power generation. The interference with the impugned order of the Tribunal under Section 41 of the KGST Act was therefore declined and the revision ST.Rev..No.8 OF 2014 -: 10 :- is dismissed. Relying on a decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. [(2019) 416 ITR 613 (SC)] the learned counsel for the respondent would contend that even where the dismissal of a revision by a non-speaking order, the order which was challenged in the revision would stand affirmed and the law declared would be binding on the Tribunal.
9. With regard to the question as to lubricants being treated as raw material, learned counsel for the respondent places reliance on the decisions of this Court in Essar Oil Limited v. Intelligence Officer (Investigation Branch), Department of Commercial Taxes, Koch and others [(2011) 37 VST 192 (Ker)] and The Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Bharat Refineries Limited, Madras [STC Vol.42 (Ker.) 225]. It is contended that the sale was made on the basis of a valid declaration as provided in the proviso to sub-section (3) of Section 5 in Form No.18. It is therefore contended that the burden to show that the material was actually used in the manufacture of the end product is on the purchaser. It is stated that in view of the fact that the assessee had acted only in accordance with the declaration given by the purchaser, it would be the burden of the purchaser to prove as to the use that the ST.Rev..No.8 OF 2014 -: 11 :- material is put to, and in such circumstances, the assessee cannot be denied the benefit which has been availed on the basis of such declaration.
10. We have considered the contentions advanced. With regard to the finding that BSES Kerala Power Ltd. is a joint sector undertaking, the issue was decided in favour of the assessee by the Tribunal in respect of the assessment year 2005-'06. It was held by the Tribunal in T.A.No.9/2012, in respect of the said assessment year that, the assessee fulfilled the requirements of the notification, i.e., SRO 319/2005, which succeeded SRO No.1091/ 1999 and that as such, concessional rate of tax could not be denied to the assessee. The Revenue took up the matter in revision. S.T.Rev.No.1/2014 was dismissed by order dated 18.1.2017 stating that there is no ground warranting interference with the impugned order in revision. Though it appears from the order in S.T.Revision that it was on the concession made by the Senior Government Pleader that the revision was rejected, the rejection of the revision amounts to upholding of the order of the Tribunal. Therefore, the Tribunal was justified in having followed its own decision in T.A.No.9/2012. In the above circumstances, it cannot be said that the Appellate Tribunal has erroneously decided or failed to decide ST.Rev..No.8 OF 2014 -: 12 :- any question of law. The challenge on that ground therefore must fail.
11. With regard to the question of the use of goods for which concessional rate is claimed as raw material, a Division Bench of this Court in Essar Oil Limited v. Intelligence Officer (Investigation Branch), Department of Commercial Taxes, Koch and others [(2011) 37 VST 192 (Ker)] held that there is nothing in law by which the vendor/assessee can ascertain the use for which the goods are likely to put except the information, if any, furnished by the purchaser. In the absence of any provision which obliges the purchaser to give any information to the vendor as to the purpose for which the goods are being purchased, it would be for the Revenue to proceed against the purchaser in case they have a contention that the product purchased is not consumed for the production of the end material, but is only used as fuel. Relying on the decision in Bharat Refineries Limited's case supra, it was found that the scheme of the Kerala General Sales Tax Act, the Rules and Form No.18 should lead to a similar conclusion that once the declaration in the prescribed statutory form is obtained from the purchasing dealer and furnished to the authorities, the selling dealer satisfies the requirements of the statute and he is entitled to ST.Rev..No.8 OF 2014 -: 13 :- claim the concessional rate of tax, where applicable. If the purchaser misrepresents or subsequently uses the raw material for some other purpose, this Court held that the legislative wrath would fall on the purchasing dealer and that appropriate action would therefore have to follow as against him.
12. In the instant case as well, it is the specific case that the sale was made on the basis of the declaration furnished by the purchasing dealer. In the above view of the matter, the finding by the Tribunal to the effect that the petitioner cannot be held to be disentitled to the concessional rate of tax as claimed by him on the basis of a declaration provided by the purchasing dealer cannot be found to be perverse or an incorrect decision.
In view of the foregoing discussion, we find that the order of the Tribunal is not liable to be interfered with in revision. The revision petition therefore fails and is accordingly dismissed.
Sd/-
C.K.ABDUL REHIM JUDGE Sd/-
ANU SIVARAMAN JUDGE Jvt/21.11.2019 ST.Rev..No.8 OF 2014 -: 14 :- APPENDIX PETITIONER'S ANNEXURES :-
ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 14.03.2008 PASSED BY ASSISTANT COMMISSIONER, ERNAKULAM.
ANNEXURE B TRUE COPY OF THE ORDER DATED 29.02.2012 PASSED BY THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, ERNAKULAM.
ANNEXURE C CERTIFIED COPY OF THE APPELLATE ORDER DATED 30.08.2013 PASSED BY THE TRIBUNAL IN TA NO.
34/2012.
//TRUE COPY// P.A. TO JUDGE