Madras High Court
The State Of Tamil Nadu vs Dhanalakshmi Paper Mills Ltd on 22 January, 2019
Author: S.S.Sundar
Bench: S.S.Sundar, C.Saravanan
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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on : 02.01.2019
Pronounced on : 22.01.2019
CORAM:
THE HONOURABLE MR.JUSTICE S.S.SUNDAR
AND
THE HONOURABLE MR. JUSTICE C.SARAVANAN
Tax Case Revision No.1301 of 2006
The State of Tamil Nadu
represented by the
Deputy Commissioner (CT)
Madurai Division, Madurai. ... Petitioner
Vs.
Dhanalakshmi Paper Mills Ltd.,
Vilampatti,
Dindigul District. ... Respondent
PRAYER: Revision Petition filed under Section 38(1) of the Act, to revise the
order of the Sales Tax Appellate Tribunal (AB) Madurai dated 30.01.2000 in
Madurai Tribunal Appeal Nos.251 of 2000 and 252 of 2000.
For Petitioner : Mr.R.Sethuraman, Spl. G.P.
For Respondents : No Appearance
*****
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ORDER
(Order of the Court was made by C.SARAVANAN, J.) The revision case filed against the common impugned order dated 13.1.2000 passed by the Tamil Nadu State Sales Tax Appellate Tribunal, Madurai in M.T.A Nos. 251-252 of 2000 in respect of assessment years 1994-95 and 1995-1996.
2.Though the notice to the respondent has been served, there is no representation on behalf of the respondent. Therefore, the case is being taken up without the assistance of the respondent.
3.By the impugned order, the Appellate Tribunal has set side the order passed by the Appellate Asst. Commissioner vide common order dated 22.2.2000 in A.P. No.579/97-(94-95) and A.P. No. 658/97 (95-96) and allowed the appeal filed by the respondent.
4.In the impugned order, the Appellate Tribunal has implied that as against purchase of raw material against Form XVII, it can be assumed that Depot sales and Consignment Sale outside the State was marginal and therefore there was no violation and that the issue was squarely covered by http://www.judis.nic.in 3 the decision of the Punjab and Haryana court State of Haryana Vs. Ambika Oil and Soap Industries 1996(103) STC 190.
5.The petitioner has raised following questions of law in the present revision petition filed under Section 38(1) of the Tamil Nadu General Sales Tax Act,1959:-
i) Whether in the facts and circumstances, the Tribunal has erred in law in reversing the finding of the Appellate authority when the evidence in record is so clear that the dealer after purchasing the raw materials by use of Form XVII had sent the goods manufactured on branch transfer and thus attracting the provisions of section (4) of section 3 of the Tamil Nadu General Sales Tax Act, 1959?
ii) Whether the order of the Tribunal is sustainable in law when there is no iota of evidence that the purchases made by use of form XVII had not at all been used in the manufacture of finished goods sent on branch transfer outside the State?
iii) Whether the stand of Tribunal that even in the absence of any stock account, no formula could be applied for arriving at the turn over under section 3(4) of the Act is not contrary to law?
iv) Whether the deletion of consequent penalty levied under section 12(3)(b) of the Act is correct?
6.Though the petitioner has raised above the question of law in the facts of the present case, we deem it fit if the question of law is rephrased as follows:-
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i) Whether the respondent-dealer was liable to pay tax under Section 3(4) of the TNGST Act, 1959 where such dealer had a mixed procurement of raw material both at concessional rate of tax under Section 3(3) of the said Act against Form XVII and on payment of tax and against Form C for manufacture of taxable good where despatches of the goods so manufactured were to a place outside the State either by way branch transfer or by transfer to an agent, for sale, or in any other manner, except as a direct result of sale or purchase in the course of inter-State trade or commerce.
ii) Whether the respondent was liable to penalty under Section 12(3)(b) of the said Act.
7.The respondent a manufacturer of paper had purchased raw materials such as used paper, chemicals including pulp against Form XVII at concessional rate of tax under Section 3(3) of the Tamil Nadu General Sales Act, and utilized the same along with raw materials procured against Form C and procurement from overseas suppliers and from other suppliers without concession/exemption.
8.All the inputs were to be used commonly for manufacture of the final product.
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9.The Deputy Commercial Tax Officer as the Original Authority vide Order dated 15.9.97 in T.N.G.S.T. Asst.No.529423/94-95 and Order dated 14.11.97 in T.N.G.S.T. Asst.No.5300211/95-96 confirmed the demand of tax on the respondent for violation of conditions of Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 and imposed penalty under Section 12(3)(b) of the Act which was affirmed by the Appellate Commissioner.
10.Though, the impugned order originates from two separate Orders of the Dy. Commercial Tax Officers vide Order dated 15.9.97 in T.N.G.S.T. Asst.No.529423/94-95 and Order dated 14.11.97 in T.N.G.S.T. Asst.No.5300211/95-96, only Order dated 15.9.97 in T.N.G.S.T. Asst.No. 529423/94-95 has been filed along with the above revision petition.
11.Be that as it, after labouring hard, we have discerned the facts and figures to dispose the present Tax Case Revision Petition.
12.From the Appellate Tribunals’ order and the common order of the Appellate Assistant Commissioner, following figures were culled out to ascertain exact nature of dispute:
http://www.judis.nic.in 6 A.Y 1994-95 1995-96 Purchase against Form 35,18,627 4,17,91,752* XVII as concessional rate of tax Other Purchase 8,29,65,627 10,34,13,789 Depot and Consignment 2,85,27,047 4,49,92,876 Sale in other states.
Total 11,50.11,301 19,01,98,417
Total Sale as per the 23,87,47,776 26,71,80,757
order of the Dy.
Commissioner of
Commercial Taxes.
(*As per the Appellate Asst. Commissioner’s Order Rs.75,04,662)
13.For the Assessment Year 94-95, it is noticed that differential tax, additional tax and surcharge were levied under Section 3(4) and penalty was imposed under Section 12(3)(b) of the Act vide Order dated 15.9.97 in T.N.G.S.T. Asst.No.529423/94-95. Details of the order are as under:-
Asst. Year Declared by Determined Tax . Surch- Addlt. Total Penalty the by the Dy.
respondent Commercial arge. Tax.
Tax Office.
1994-95 34,91,771 35,18,795 541 81 608 1230 1,845
Difference 27, 024/-
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14.In the said order it was held that the petitioner had violated the requirements of Section 3(4) of the Act since no separate account was maintained in so far as procurement of goods against Form XVII was concerned and therefore the respondent was held liable to differential tax, surcharge and additional tax and penalty.
15.The Learned Special Government Pleader for the petitioner filed a copy of the decision rendered in the case of State of Tamil Nadu Vs Tvl Baron Power Ltd in Tax Cases (Revision) No.44 of 2017 dated 16.11.2017 in support of the above revision cases and therefore submitted that the revision petition be allowed.
16.We have perused the orders and the provisions of the Tamil Nadu General Sales Tax Act, 1959 and the decision of the Punjab and Haryana High Court referred to supra and the decision of the this court in Tvl.Baron Power Ltd cited by the Learned Special Government Pleader and other decisions which we chanced to see.
17.It would be useful to refer to Section 3 (4) of the Act which reads as under:-
http://www.judis.nic.in 8 “3.LEVY OF TAXES ON SALES OR PURCHASES OF GOODS.- (4)Where any dealer, after availing the concessional rate of tax under sub-section (3), does not sell the goods so manufactured, but despatches them to a place outside the State either by branch transfer or by transfer to an agent, by whatever name called, for sale, or in any other manner, except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay, in addition to the concessional rate of tax already paid under sub-section (3) tax at one per cent on the value of the goods so purchased.”
18.Section 3 (4) stipulates that a dealer shall pay in addition to the concessional rate of tax already paid under sub-section (3), a tax at 1% on the value of the goods so purchased where after availing concessional rate of tax under sub-section (3), dealer does not sell the goods so manufactured within the state, but dispatches them to a place outside the state either by way of branch transfer or by transfer to an consignment agent, by whatever name called, for sale, or in any other manner, except as a direct result of sale or purchase in the course of interstate trade or commerce. The mandate of section 3(3) read with Section 3 (4) makes it clear that the concession is given to a manufacturer to procure raw material for manufacture of the goods for sale of manufacture of goods either within the State or by way of sale or purchase in the course of inter—state trade or commerce.
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19.The decision of this court in Tvl.Baron Power Ltd cited by the Learned Special Government Pleader though rendered in the context of section 3 (4) of the Act was specifically in the context of export turnover out of goods manufactured out of goods procured against Form XVII at concessional rate of tax.
21.The court there referred to the decision of the Honourable Supreme Court in Printers (Mysore) Ltd Versus Assistant Commercial Tax Officer (1994) 2 SCC 434 wherein it was observed that Section 3 (4) will have no application since situs of the export sales was the State of Tamil Nadu and therefore its operation was excluded for exigibility of tax. The court after referring to several other decisions including the decision rendered in Tube Investment of India Ltd versus State of Tamil Nadu (2010) 36 VST 67 concluded that the revision petition filed by the state was not maintainable.
22.Therefore, the said judgment of the Court in Tvl.Baron Power Ltd cited by the Learned Special Government Pleader is not relevant to decide the case.
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23.In Ambika Oil and Soap Industries case cited in the impugned order, the Court upheld the order of the Appellate Tribunal holding that there was no question of law involved and held as under held :-
“We are of the opinion that the order of the Tribunal dated 19.1.1987 is correct and the/Assessing Authority has only been called upon to find out how much oil and khal would have been manufactured out of the quantity purchased from within the State and imported from outside the State and further whether the quantity exported could have been produced out of the total quantity of cotton seeds imported from outside the State. Before the dealer can be held liable for violating the declarations furnished under Section 24 of the Act, it is necessary for the Assessing Authority to examine what the Tribunal had directed it to do. The Tribunal was thus right in holding that no question of law arises from its order dated 19.1.1987.”
24.The reasoning adopted by the Hon’ble Punjab and Haryana High Court in the above case is relevant to answer the question raised in the present case.
25.From the facts and figures culled out and facts narrated it is evident that there were different types of procurements of raw material both at concessional rate of tax against Form XVIII under Section 3(3) of the Act, on payment of tax and against C Form in the manufacture of common final product.
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26.Section 3(4) of the fact has not factored the above situation. It contemplates only one type of procurement namely procurement against Form XVII and different types of removal/ dispatches.
27.In fact, in the context of Modvat Credit under the provisions of the Central Excise Rules, 1944 which was later replaced by the Cenvat Credit Rules, 2001, 2002 and 2004 and made applicable to both manufacture and provision of service , it was mandatory for a manufacturer or the service providers as the case may be to maintain separate accounts and restrict the credit, if they were engaged in clearance of exempted goods and/or provision of exempted service and in clearance of dutiable good and/or provision of taxable service.
28.Failure to maintain separate account and inventory and to restrict credit attracted payment of amount on the percentage of value of the exempted goods or exempted service.
29.However, under the provision of TNGST Act,1959 and Rules made thereunder, there are no restriction prescribed where there is a mix up of the raw materials from different sources for manufacture of product for clearances/dispatches. There is also no such requirement to maintain separate accounts under Section 3(4) of the TNGST Act,1959. http://www.judis.nic.in 12
30.In this case admittedly, there were branch transfer, sales through consignment agents from the depot, consignment agents within the state and by way of interstate sale etc.
31.However, there are different procurements apart from procurements against Form XVII and the respondent dispatched the goods to a place outside the State either by branch transfer or by transfer to an agent for sale. The dealer has also dispatched the goods so manufactured in the course of inter-State trade or commerce also.
32.Where there were mixed procurements consisting of both at concessional rate of tax and on payment of tax as in the present case, payment of additional tax at 1% is not contemplated on the entire value of the goods procured at concessional rate of tax under Section 3(4) of the Act. Section 3(4) of the Act does not contemplate payment of additional tax on the value of the goods purchased against Form XVII when there are mixed procurement. .
33.Payment of additional tax at 1% on the value of the goods procured under Section 3(3) at concessional rate of tax under Section 3 (4) of the Act is attracted only where there were no other procurement other than procurement at concessional rate of tax against Form XVII. http://www.judis.nic.in 13
34.At the same time, it would suffice, if the respondent is asked to pay proportionate tax at 1% on the proportionate value of the raw materials procured at concessional rate of duty and used in the manufacture of goods cleared outside the State for sale either by way of branch transfer or through an consignment agent. This would satisfy the requirement of Section 3(4) of the Act. The questions of law is thus answered accordingly. Penalty under Section 12 (3)(b) applies only where there is submission of incorrect or incomplete return. Therefore penalty is not leviable as question of law is being answered by this order.
35.In view of the above observations, the order of the Appellate Tribunal it is set aside and the case is remitted back to the Original Authority to pass a speaking order on merits in terms of this order.
36.The Original Authority shall pass a speaking order within a period of 8 weeks from the date of communication of this order after issuing appropriate notice to the respondent after giving the respondent sufficient time to respond. Needless to state, in case the respondent decides to participate in the remand proceeding , the Original Authority shall hear the respondent before passing a speaking order. http://www.judis.nic.in 14 S.S.SUNDAR,J.
AND C.SARAVANAN,J.
Arul
37.The Tax case revision is disposed of with the above observation. No cost.
[S.S.S.R, J.] [C.S.N., J.]
22.01.2019
Index : Yes / No
Internet : Yes / No
Arul
Pre-delivery order
Tax Case Revision No.1301 of 2006
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