Rajasthan High Court - Jaipur
Paschimi Raj. Dugdh Utpadak Sahakari ... vs State Of Rajasthan And Anr. on 14 October, 2003
Equivalent citations: RLW2004(1)RAJ486, 2004(1)WLC639
JUDGMENT Balia, J.
1. We have heard the learned counsel for the parties.
2. This appeal is directed against the judgment of the learned Single Judge dated 10.4.2003, rejecting the writ petition filed by the petitioner on (he ground that he had an alternative remedy of filing appeal before the Deputy Commissioner, Commercial Taxes against the assessment order.
3. The appellant has urged before the learned Single Judge that in view of the fact that the superior Tribunal viz., the Rajasthan Tax Board has already decided the issue against the assessee in another case, the pursuit of the alternative remedy could have been a futile exercise and the matter would again come to the High Court by going through the appeal in a mechanical manner, therefore, the alternative remedy, in the present case, is not an efficacious remedy. In this connection, he drew attention to the decision of the Rajasthan Tax Board rendered in Udaipur Dugdh Utpadak Sahakari Sangh Ltd., Udaipur v. Commercial Taxes Officer, Special Circle, Udaipur (1).
4. The case of the petitioner is that he has purchased skimmed milk as a material for processing the milk to different fat contents for sale and manufacture of milk products like butter milk, butter and Ghee as stated in his certificate of registration. He has purchased the skimmed milk by giving the declaration under Form ST-17 on the basis of the material entered into his certificate of registration as a raw material as well as for processing the milk for sale by paying the tax at concessional rate of 4%. As per the original assessment order dated 31.10.1999 for the assessment year in question, the Assessing Officer accepted his claim and did not levy any additional tax on such purchase.
5. However, relying on the decision of the Tax Board referred to above, reassessment proceedings were initiated by issuing notice on 24.10.2002 under Section 30 of the Rajasthan Sales Tax Act, 1994 (hereinafter referred to as the Act, 1994) and by order dated 25.2.2003, following the decision in Udaipur Dugdh Utpadak Sahakari Sangh Ltd., Udaipur v. Commercial Taxes Officer, Special Circle, Udaipur, (supra), the Commercial Tax Officer, Jodhpur has held that the process of mixing the skimmed milk powder with milk cannot be considered as a manufacture as it does not result in bringing into existence any new commercially different product and therefore, he is not entitled to purchase the skimmed milk as raw material at a concessional rate on the basis by furnishing Form No. ST-17.
6. In the facts and circumstances of the case, we are of the opinion that the existence of alternative remedy ought not to come in the way of entertaining the plea of the petitioner on merit as demonstrably the very foundation of initiating of reassessment and consequent reassessment has been founded solely on that premise. In ordinary course of proceedings the authorities below Tax Board are expected to follow the same decision as a matter of judicial propriety. In view of the decision of the Tax Board, the highest tribunal under the Sales Tax statute, the contention of the petitioner about manufacture that it would bring into existence a new commercially different commodity would have been a futile exercise particularly, keeping in view that the ultimate remedy of the petitioner was to come again to this Court against the order of the Board also. We are further informed that decision in Udaipur Dugdh Utpadak Sahakari Sangh is also pending consideration before this court raising the same issue. Moreover, in our opinion, on the basis of the statement made before us, it is apparent that the case needs only interpretation of the provisions of Section 10 of the Act, 1994 in the light of cognate provisions. Without going into other issues, the question needs to be decided by this Court to set at rest ambiguity, if any, in interpreting the provisions so that future multiple litigation on the issue can be curtailed.
7. We, therefore, deem it just and proper to decide the appeal by considering the contentions on merits and not to rest our decision only on the availability of alternative remedy.
8. The contention of the appellant-petitioner is that by applying the process of mixing skimmed milk with natural milk not only milk with different fat contents are brought into existence which are commercially different products than natural milk, he is also manufacturing other milk products like curd, butter milk, butter or Ghee, which in no sense could be said to be commercially same as milk in any sense of the term. It has also been urged that so far as availing purchase of skimmed milk at concessional rate of 4% by furnishing declaration in ST 17 form is concerned, even if bringing into existence of milk of different fat contents, does not amount to manufacture, under Section 10(3) purchase goods for processing the goods for sale, otherwise than as raw material for manufacture, sales or purchase tax exceeding 4% cannot be levied. Therefore, neither there was ny material on the basis of which opinion could be formed about escapement of tax, when the assessee has purchased the goods in question by paying tax @ 4%, nor any assessment of tax could be made at rate exceeding 4% on purchase of skimmed milk by the assessee which has been used in processing the natural milk for sale. Even in respect of purchase skimmed milk, so long as skimmed milk has been used in relation to end products like curd, butter milk (Lassi), butter and Ghee, it has certainly been used as raw material in manufacture of such goods in state for sale. Hence to that extent, the skimmed milk ought to have been treated as raw material to be treated under Section 10 (1) as such.
9. On the other hand, the learned counsel for the Revenue had urged that bringing into existence milk of different fat contents does not bring into existence any different commercial commodity so as to treat skimmed milk as raw material. Milk of different fat contents commercially skill, is known and traded as milk nor for taxing purposes it is recognised a different commodity. Therefore, the contention of petitioner cannot be sustained. He also urged that concession under Section 10 cannot be availed only on preserving activity independent of manufacturing activity hence the other contention of the petitioner appellant also cannot be accepted. Lastly, he contended that skimmed milk is not used directly in manufacture of curd, Lassi, butter and Ghee the other milk products which brings into existence milk. For the manufacture of milk products, milk is the raw material, but not the skimmed milk. It loses its identity as raw material as soon as intermediary product milk is brought into existence for further processing.
10. In the Act, 1994 under Section 2(27), the term 'manufacture' has been defined to include every processing of goods which brings into existence a commercially different and distinct commodity but shall not include such processing as may be notified by the State Govt.
11. There is departure from the definition of 'manufacture' as given in the Act of 1954.
12. Under the Act of 1954, the definition of 'manufacture' as it originally stood w.e.f. 25.3.1962 is as under:-
"manufacture" includes any process or manner of producing, collecting, extractions, preparing or making any goods; but does not include such manufacturers or manufacturing processes as may be notified by the State Government."
13. This definition was wide enough to cover the processing of goods.
14. The distinction is clear that whereas in the Act of 1954, the emphasis was on process of goods and every process was included in the definition of 'manufacture', the definitions under the Act, 1994 is restricted to only such processes which bring into existence a commercially different and distinct commodity that can be treated as 'manufacture' for the purposes of the Act.
15. "Raw material" under Section 2(34) is defined to mean goods used as an ingredient in any manufactured goods and includes fuel and lubricant required for processing.
16. Thus, the raw materials for the purpose of the Act meant only those goods which are used as ingredients or the processing materials viz. fuel and lubricant which are required in manufacture of goods. Articles used for making the commodity salable would not come within the definition of 'raw materials' under the Act, 1994 unless such processing brought into existence a commercially different and distinct commodity.
17. Section 4 provided for the rates to be prescribed by State by notification at which tax is to be levied on the sale or purchase of the goods on which the incident of tax were to fall by dint of Section 3 of the Act, 1994. It is for the State Govt. subject to other provisions of the Act and provisions of the Central Sales Tax Act, to prescribe rate or rates on different commodities. The maximum rate upto which State could prescribe rate of tax is 50%.
18. Section 10 provides for Concession of tax on raw material and processing articles. It reads as under:-
"10. Levy of tax on raw material and processing articles.-(1) Notwithstanding anything contained in Section 4, but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture in the State of goods for sale by him within the State or in the course of inter- State trade or commerce or in the course of export outside the territory of India shall be at such concessional rate as may be notified by the State Government.
(2) Where after affording reasonable opportunity of being heard it is determined that a registered dealer has paid tax at a concessional rate under Sub-section (1) and the goods are not utilised by him for the purpose specified in the said sub- section, he shall be liable to pay the difference in the amount of tax which would have been liable at full rate and the amount of tax paid under Sub-section (1) with interest at the rate of two per cent per month.
(3) Notwithstanding anything contained in section, and subject to such conditions and restrictions as may be prescribed, sale to or purchase by a registered dealer of articles (other than raw material) specified in the certificate of registration of the registered dealer purchasing the articles and required by him for use in the manufacture or processing of goods for sale or in mining or in generation or distribution of electricity shall, unless the articles are taxable at the lower rate, be liable to tax at four per cent on the condition that the dealer selling the articles shall furnish to the assessing authority in the prescribed manner, a prescribed declaration duly filled and signed by the registered dealer to whom the articles are sold.
(4) Where after affording reasonable opportunity of being heard, it is decided that the articles purchased under Sub-section (3) are utilised by the purchasing dealer for any purpose other than those specified in the said sub-section or while purchasing any articles he represents wrongly that such articles are covered by his certificate of registration as specified in Sub-section (3), he shall be liable to pay the different between the amount of tax which would have been leviable on the purchase price of such articles at the full rate and the amount of tax paid under Sub-section (3) of this section, with interest at the rate of two per cent per month."
19. Section 10 envisages concession in rate of tax not on any commodity as such, but on the basis of use of commodity.
20. Section 10 of the Act of 1994 makes a significant departure from the scheme of such concession which existed under Section 5-C of Act, 1954. While Section 5-C of old Act provided concessional rate on sale or purchase of goods as raw materials, Section 10 has extended the concession separately on raw materials and material (other than raw material) used for manufacturing or the articles used for processing goods for sale. This distinction is manifest from separate provisions made in Sub-section (1) and Sub-section (3) of Section 10 reproduced hereinabove.
21. Sub-section (i) envisages that State shall provide by notification, concessional rate of tax on sell or purchase of raw materials for manufacture of goods within State for sale; whether intra-state or inter-state or in the course of export, at such concessional rate as may be notified by the State Govt.
22. Vide another non-obstinate clause under Sub-section (3), the Statute provided as an exception to Section 4, the maximum rate to be charged on the sale or purchase by a dealer of such articles (other than raw materials) which are to be used by him not only in the manufacture of goods but also for processing of goods for sale or in mining or in generation or distribution of electricity. Such tax shall not to exceed 4%. The said sub-sec, says that unless the articles are taxable at the lower rate, it be liable to tax at 4% on the condition that the dealer selling the articles shall furnish to the assessing officer in the prescribed manner, a prescribed declaration duly filled and signed by the registered dealer to whom the articles are sold.
23. It is significant that under Sub-section (1) of Section 10, the concession in rate of tax is envisaged in respect of sale to or purchase by a registered dealer of raw materials, that is the goods as defined under Section 2(34) of the Act of 1994 as raw material viz. ingredients of end product or fuel and lubricants. How much concession of rate is to be charged is left to the State Government to be notified.
24. Thus, the statutory policy is clear that the concessional rates are applicable not only to the purchase of raw materials used in manufacture of goods but also on purchase of articles other than raw materials used in processing of goods for sale as well as for manufacturing of goods which may otherwise not qualify as raw material. This is clear from the expression used in Sub-section (3) that sale to or purchase of articles (other than raw material). In other words, purchase of raw materials are subject to concessional rate of tax notified by the State Govt. under Sub-section (1) and sale or purchase of articles other than raw materials which are used in the manufacture of or processing of goods for sale or in mining or to distribution of electricity are subject to concessional rate not exceeding 4% under Sub-section (3).
25. In contrast to Sub-section (1), Sub-section (3) has been made applicable specifically to sale to or purchase by a registered dealer of articles other than raw material. This means that to avail concession in respect of any goods under Section 10(3), it is not necessary to be a part of manufacture as defined under the Act of 1994. It is not an essential condition that articles other than raw materials be also used only for manufacture of goods as defined under Section 2(34) of the Act of 1994. Concession under Section 10(3) is much wider. If the goods sold/purchased as raw material, obviously they refer to their user for manufacture as defied under Section 2(34). But the use of such goods falling under Section 10(3) covers many other range than manufacture, sale or purchase of any goods which are used for any of the activities referred to therein call for application of rate of tax or sale or purchase not more than 4%.
26. The expression "required by him for use in" quantifies each of the following activity independently:-
(i) in manufacture of goods or;
(ii) in processing goods for sale or; (iii) in mining or;
(iv) in generation of electricity or;
(v) in distribution of electricity.
27. Read in correct perspective it can well be said that any articles purchased by or sold to a registered dealer and used by him other than raw material in processing goods for sale is to be taxed, if rate of purchase is not below 4% at 4%.
28. Importantly, it has not been left to State in cases falling in Sub-section (3) to provide a separate lower rate. The concession is determined by Statute itself. If the ordinary rate prescribed under Section 4 on sale of such goods is less than 4%, tax at such lesser rate shall be chargeable. In case rate under Section 4 is more than 4%, the rate of tax shall not exceed 4%. Thus, maximum chargeable rate on sale of or purchase of article falling under Section 10 is 4% unless the rate otherwise applicable to such commodity is less than 4%.
29. Therefore, in a given case, even if the articles purchased by an assessee are not used as manufacture as raw materials but are used by him for processing the goods for sale, it cannot be subjected to tax exceeding 4% in view of Sub-section (3) of Section 10 of the Act, 1994.
30. As it appears that the concessional rate of raw material under Sub-section (1) has been notified at 4% and the rate of tax under Section 4 in respect of goods in question being more than 4%, whether skimmed milk is taxed as a raw material or as an article used in processing of milk for sale, it would not result in altering the determination of liability vis-a-vis the assessee in question, in view of the fact that the skimmed milk is used for processing the natural milk for sale being not in dispute at any stage. As a matter of fact, it appears from the assessment order itself that skimmed milk is used for processing the milk for marketing.
31. The conclusion is irresistible that the assessee is entitled to the concessional rate of tax, if not under Sub-section (1) of Section 10, under Sub-section (3) of Section 10 of the Act, 1994.
32. We may make it clear that so far as use of skimmed milk powder for processing the natural milk to standardize its fat contents at different levels and selling the milk of varied forms at different price may not amount to manufacture, as even after the processing, the commodity commercially known for marketing remains the same viz. milk and the subject of tax has also been identified as one commodity viz. 'milk' for tax also which is one of the relevant factor for determination whether a commercially distinct commodity will come into market by the dint of processing the natural milk to different fat contents; or invite different tax rates on different variety of milk so as to consider it commercially different commodity for the purposes of levy of tax also. At the same time, it cannot be doubted that the skimmed milk powder to the extent it is used for processing the milk to bring into existence other milk products like Ghee, Lassi about which reference has been made can be considered as raw materials. Merely because at intermediary stage of processing the product is sold in market with its different varieties though commercially not different commodity. Thus, the levy on the proportionate quantity of skimmed milk, to the extent it is used for the purpose of producing milk products with the help of other commodities can be considered as raw materials also.
33. However, that difference in this case would not result in altering the tax liability. It is not necessary in this particular case to go into the further details of this question as to what extent the skimmed milk has been used as raw materials and to what extent the milk has been used as an article other than raw materials for processing the milk for marketing.
34. In view of the aforesaid discussion, this appeal succeeds and is allowed. The judgment under appeal is set aside. The writ petition is allowed. The assessment order is also set aside and the Assessing Officer is directed to make a fresh assessment order in accordance with law in the light of the aforesaid principles.
35. There shall be no order as to costs.