Madhya Pradesh High Court
M/S Samata Foods Ltd. vs Assistant Commissioner Of Commr.Tax on 8 December, 2022
Author: Chief Justice
Bench: Ravi Malimath, Pranay Verma
1
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE RAVI MALIMATH,
CHIEF JUSTICE
&
HON'BLE SHRI JUSTICE PRANAY VERMA
ON THE 8th OF DECEMBER, 2022
WRIT PETITION No. 436 of 2005
BETWEEN:-
M/S SAMATA FOODS LTD. (NOW SAMATA FOODS
LTD) HAVING ITS REGISTERD OFFICE AT 22,
SANTHA BAZAR, INDORE THROUGH ITS
DIRECTOR, SHRI DELIP KUMAR S/O SHRI
SAMRATHMAL JAIN, AGED 45 YEARS AND
RESIDING AT 22, SANTHA BAZAR, INDORE
(MADHYA PRADESH)
.....PETITIONER
(SHRI P.M CHOUDHARY - SENIOR ADVOCATE WITH
SHRI ANAND PRABHAWALKAR AND SHRI MADHAV
KHANDELWAL- ADVOCATES)
AND
1. ASSISTANT COMMISSIONER OF
COMMERCIAL TAX, DIV-2, MOTI
BUNGLOW COMPOUND, M.G. ROAD,
INDORE (MADHYA PRADESH)
2. THE ADDITIONAL COMMISSIONER OF
COMMERCIAL TAX, INDORE CIRCLE
CHETAK CHAMBERS, INDORE (MADHYA
PRADESH)
3. THE COMMISSIONER OF COMMERCIAL
TAXES MOTI BUNGLOW COMPOUND, M.G.
ROAD, INDORE (MADHYA PRADESH)
Signature Not Verified
Signed by: SOURABH
YADAV
Signing time: 12/12/2022
1:34:55 PM
2
4. STATE OF MP THROUGH PRINCIPAL
SECRETARY COMMERCIAL TAX
DEPARTMENT, VALLABH BHAWAN,
BHOPAL (MADHYA PRADESH)
.....RESPONDENTS
(BY SHRI MANISH NAIR - DEPUTY ADVOCATE GENERAL)
This petition coming on for hearing this day, Hon'ble Shri Justice Ravi
Malimath, Chief Justice passed the following:
ORDER
The petitioner is a company registered under the Companies Act, 1956. It is also a registered dealer under the provisions of the M.P. Commercial Tax Act, Central Sales Tax Act and also the Entry Tax Act. It is engaged in a business of manufacture and sale of Aatta, Rawa, Maida and Wheat etc. It is being regularly assessed to Commercial Tax and Central Tax etc. Being a new Industrial undertaking, the petitioner was entitled to the facility of exemption from payment of tax in pursuance to the notification dated 06.10.1994 of the State Government. Accordingly, a certificate was issued to the said effect for the period from 28.10.1992 to 27.10.1999. It was also exempted from payment of Sales Tax, Commercial Tax and Central Sales Tax for the period from 18.10.1992 to 17.10.1997. The certificates were accordingly issued. The petitioner intended to undertake expansion of its existing industrial unit. For the said purpose, it was required to install necessary plant and machinery. Accordingly, there were purchases from outside the State of Madhya Pradesh. The expansion was undertaken by the petitioner in the existing unit with effect from April, 1999 and was completed on 26.10.2001, when the commercial production commenced. During the period of consideration from 01.04.1999 to 31.03.2000, purchases of plant and machinery for the purpose of expansion Signature Not Verified Signed by: SOURABH YADAV Signing time: 12/12/2022 1:34:55 PM 3 were effected. Consequently, the petitioner was filing the entry tax return claiming that the said plant and machinery was not liable to entry tax in view of the fact that they had not yet started the production, which is said to be in the course of business. However, the Assessing Authority rejected the contention of the petitioner regarding non-liability of the entry tax in respect of the plant and machinery and accordingly, passed an order dated 04.04.2003. Aggrieved by the said order, a revision was filed before the Additional Commissioner, Commercial Tax (hereinafter referred to as "the respondent No.2"). The revision was dismissed by the order dated 05.10.2004. Questioning the same, the instant petition is filed.
2.(a) Shri P.M. Choudhary, learned senior counsel appearing for the petitioner's counsel submits that the impugned order passed by the authority is inappropriate and liable to be set aside. That, the petitioner is not liable to pay entry tax. That, the charging Section in order to attract the entry tax would be Section 3(1) of the Entry Tax Act, 1976. The said provision prior to Amendment in 1997 read as follows:-
"(1) there shall be levied as Entry Tax:
(a) On the entry in the course of business of a dealer of goods specified in Schedule II, 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 as raw material or incidental goods or as packing material or in the execution of works contract but not for sale therein."
(b) After the amendment with effect from 01.10.1997, the aforesaid provision reads as follows:-
"(1) there shall be levied an Entry Tax:Signature Not Verified Signed by: SOURABH YADAV Signing time: 12/12/2022 1:34:55 PM 4
(a) on the entry in the course of business of a dealer of goods specified in schedule II, 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."
(c) Therefore, he contends that the order of the respondent No.2 holding that there is a difference between the amendment prior to 1997 and subsequent to 1997 may not be correct. The charging Section is to the effect that the petitioner would be liable to entry tax on the entry of goods during the course of business. That, admittedly the production of the petitioner started only on 26.10.2001. The relevant period is 01.04.1999 to 31.03.2000. Therefore, levy of entry tax under Section 3(1) is opposed to law. In support of his case, he relies on a Division Bench judgment of Jabalpur Bench of this Court in the case of Makson Nutrition Food (I) Pvt. Ltd Vs. Assistant Commissioner, Commercial Tax reported in (2015) 27 STJ 130 (MP) and a Division Bench judgment of Gwalior Bench of this Court in the case of Surya Roshni Ltd., Malanpur Vs. State of MP reported in (2013) 22 STJ 147 (MP).
3. On the other hand, learned Deputy Advocate General supports the impugned order by relying on the reply filed and contends that an exemption was granted to the petitioner in terms of Annexure P/2 for the period from 18.10.1992 to 17.10.1997. The exemption was for payment of entry tax. There is no exemption granted subsequent to the said period. Therefore, the petitioner cannot claim any relief. It is further contended that under Section 3(1)(b) of the M.P. Entry Tax Act, the taxability of goods specified in Schedule III of the Entry Tax Act is involved while with effect from 01.05.1999, the plant and machinery is no longer specified in Schedule III of the Act. The plant and machinery has been added in Signature Not Verified Signed by: SOURABH YADAV Signing time: 12/12/2022 1:34:55 PM 5 Schedule II as Entry No.54 vide Amendment Act, 1999. Therefore, the plant and machinery is taxable under Section 3(1)(a) of the M.P. Entry Tax Act being Schedule II goods with effect from 01.05.1999. Hence, it is pleaded that the contention of the petitioner cannot be accepted.
4. On hearing learned counsels we are of the view that the appropriate interference is called for.
5. The contention of the respondents with regard to the absence of the exemption post 17.10.1997 is not a relevant consideration for the determination of this Court. The plea of the petitioner is that the respondents are not liable to levy Entry Tax in view of the very definition of the Section. The same refers to the activities of the petitioner during the course of business. Therefore, the plea of the respondents that the exemption has expired, has no nexus with the facts involved nor with the contentions being advanced by the learned senior counsel appearing for the petitioner's counsel.
6.(a) So far the contention of the applicability of Section 3(1) is concerned, we are of the view that the Section is quite clear in itself. It really does not call for any interpretation. The charging Section would entail that the entry tax would be applicable during the course of business. The course of business would necessarily mean during production by the concerned unit. Admittedly, it is not even the case of the State that production had started earlier to 26.10.2001. Therefore, the contention that the course of business having commenced only after 26.10.2001 requires to be accepted. This interpretation can be found in the aforesaid two judgments as referred to by the learned senior counsel representing the petitioner's counsel.
Signature Not Verified Signed by: SOURABH YADAV Signing time: 12/12/2022 1:34:55 PM 6(b) In Makson Nutrition (supra), it was held in para 6, as follows:-
"6. We have considered the rival contentions and find that in the impugned assessment order, the Assessing Officer has based his finding only because of the order passed by the M.P. Commercial Tax Appellate Board vide Annexure P-4. This order pertains to payment of VAT for the work done by the petitioner on job work basis for M/s Cadbury India Ltd. However, the question involved in the present assessment proceedings was pertaining to levy of entry tax regarding entry on plant and machinery into a local area. The law governing such imposition of entry tax is entirely different, there are consistent judgments of this court including that of the Supreme Court which lays down the principles that if plant and machinery is brought into local area for expansion of business for construction and improvement of infrastructural facilities, the same cannot be subjected to payment of entry tax. This aspect of the matter has been completely over looked by the Assessing Officer and by incorrectly applying the law as done in Annexure P-4 the assessment was made. This cannot be approved by us. Accordingly, we have no option but to quash the impugned order."
(c) In Perfect Pottery Co. Ltd., Ratlam Vs. Commissioner of Sales Tax, Madhya Pradesh reported in (2005) 5 STJ 282 (MP), wherein a Division Bench of this Court has held as follows:-
"For determining the question of liability to purchase tax, it would make no difference whether the activity of construction is under token to make the building available for starting the business or for expansion of business or for maintenance or continuance of business. The activity of construction is a condition precedent not only for starting business of manufacture or its expansion but also for continuance of the business of manufacture and such activity of construction cannot be said to be the business of assessee so as to make him liable to pay tax on the purchase of building material used in such building activity."Signature Not Verified Signed by: SOURABH YADAV Signing time: 12/12/2022 1:34:55 PM 7
(d) In the case of Commissioner of Sales Tax, Madhya Pradesh Vs Satna Cement Works, Satna reported in (2005) 5 STJ 287 (MP), a Division Bench of this Court has held as follows:-
"That the building is expanded, it would only mean the building activity precedes the expansion of the business for which purpose the building is required. Therefore, the building materials, which were purchased for the construction of the building, cannot be said to be in the course of business of the assessee and the levy of purchase-tax on the purchase of building materials was not justified."
7. Learned Deputy Advocate General is unable to point out any judgment contrary to the one that are referred to hereinabove.
8. In view of the settled provisions of law, we are of the view that the impugned order becomes unsustainable.
9. Consequently, the writ petition is allowed. The impugned order dated 05.10.2004 passed by the respondent No.2 in Revision Case No.13/2004/ET/Indore is quashed. The tax, if any paid by the petitioner, is directed to be refunded to him. Rule made absolute.
(RAVI MALIMATH) (PRANAY VERMA)
CHIEF JUSTICE JUDGE
Sourabh
Signature Not Verified
Signed by: SOURABH
YADAV
Signing time: 12/12/2022
1:34:55 PM