Orissa High Court
OJC/7009/1996 on 15 May, 2019
O.J.C. No.7009 of 1996
15. 15.05.2019 Heard learned counsel for the petitioner and
learned counsel for the Revenue Department.
2. By way of this writ petition, the petitioner has
challenged the notices issued by the Sales Tax Officer,
Rourkela-II Circle, Panposh-opposite party no.2 under
Annexures-1, 1/A and 1/B to the petitioner.
3. Learned counsel for the petitioner states that the
issue involved in this writ petition is squarely covered by the
judgment passed by this Court in OJC No.4300 of 1996,
M/s. M.M. & Co. v. State of Orissa and others, dated
08.01.2002. For ready reference, the said judgment is
reproduced hereunder:
"At what rate sales tax is payable on the
sale of 'hand pump'? This is the core question that
arises for consideration in this writ petition.
2. The petitioner is a Partnership firm and is a
dealer under the Orissa Sales Tax Act, 1947
(hereinafter referred to as 'the Act'). It carries on
business of manufacturing and selling of hand
pumps and spare parts thereof. In response to the
notice issued under section 12(4) of the Act for the
assessment year 1991-92, the petitioner appeared
before the Assessing Officer and produced
necessary documents with reference to the returns
it filed earlier. The assessing Officer noticed that it
had sold water lifting hand pumps worth
Rs.52,52,724/- to a registered dealer-M/s Orissa
Small Industries Corporation (opp. party no.6) on
the strength of declaration in Form XXXIV.
Subsequently, on February 12, 1992 the petitioner
filed a revised return disclosing the above sales to
be taxable at the rate of 12 per cent but did not pay
any tax thereon. The Assessing Officer treating the
"water lifting hand pump" to be an item coming
under the category of 'machinery' as per entry
No.70 of the Taxable List, levied tax at the rate of
16 per cent. This resulted in extra demand against
the petitioner under the Act. The Assessing Officer
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also charged interest of Rs.3,50,436/-. The
petitioner being aggrieved by the said order of
assessment preferred appeal. The Assistant
Commissioner of Sales Tax in appeal confirmed the
finding of the Assessing Officer that "water lifting
hand pump" is 'machinery' coming within the serial
No.70 of the taxable list for which tax is payable at
the rate of 16 per cent. He, however, set aside that
part of the order imposing interest. This decision of
the appellate authority gave rise to filing of two
appeals; one by the petitioner and other by the
department before the Orissa Sales Tax Tribunal
which in its order dated March 16, 1996 dismissed
the former's appeal and allowed the appeal filing
by the department.
In the premises stated above, the petitioner
has prayed for quashing of the impugned
assessment order dated August 26,1992 (annexure
8), first appellate order dated February 7, 1994
(annexure 9) and the second appellate order dated
March 16, 1996 (annexure 10). Its further prayer is
that "water lifting pumpsets" should be charged to
tax at lower rate than being charged at 12 per cent
and to direct the Orissa Small Industries
Corporation (opposite party No.6) for refund of the
tax as is relatable to the turnover of
Rs.52,52,724/- and pay the taxes to it for effecting
payment to the Government treasury towards the
taxes as are due on such sale.
3. The Revenue, i.e., opposite parties 2, 4 and
5 have filed counter-affidavit resisting the claim of
the petitioner. According to them "hand pumps"
have rightly been treated as machineries and taxed
at 16 per cent as per entry 70 of the rate chart
prescribed under the Act. The Orissa Small
Industries Corporation (opposite party No.6) had
not issued any certificate to the Sales Tax Officer
indicating payment of tax. A copy of the letter
No.7267 dated June 29, 1992 issued by the
aforesaid Corporation to the petitioner, however,
shows that a sum of Rs.6,30,277.38 had been
deposited with the sales tax authorities, Cuttack on
account of collection of Orissa sales tax. The said
deposit could not be accounted for due to want of
evidence. Moreover, as the petitioner is liable to
pay the tax since "machinery" is the "first point
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tax-paid goods" and the petitioner being a selling
dealer, the tax paid by the purchaser cannot be
adjusted in the account of the seller.
The Orissa Small Industries Corporation
(opposite party No.6) has filed a separate counter-
affidavit. Its case is that it availed a purchase
order from the concerned Chief Engineer for supply
of "India Mark II hand pumps" to different
consignees. Accordingly, it placed orders with the
petitioner. In the purchase order placed with the
petitioner, the condition of charging sales tax is as
follows:
"Sales tax shall not be paid to you and this
Corporation will furnish sales tax declaration in
lieu of such payment."
After executing the order under the banner
of O.S.I.C., the petitioner submitted its bill to it
without charging sales tax. Against the entire
transaction of the petitioner during 1991-1992,
opposite party No.6 had not paid sales tax to the
petitioner and in lieu of that issued form XXXIV
and in return collected Rs.6,30,277.38 from the
ultimate purchaser against the corresponding bills
and deposited the same in the Government
treasury on March 18, 1992, March 30, 1992 and
May 20, 1992 vide challan Nos.19, 40 and 16.
Since the opposite party No.6 collected sales tax
from the ultimate purchaser and duly deposited the
said amount in Government treasury towards the
said transaction, the petitioner should not be
demanded to pay tax once more on the very
transaction.
4. At this stage, it is worthwhile to
extract various entries which were governing the
filed during the relevant period relating to "pump
and pump sets".
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"Sl.No. Description of goods Rate of tax
38. Diesel and kerosene Eight per cent
pump sets
41-A Electrict pump set Eight per cent
70. Machineries excluding Sixteen per
sewing machines and cent"
component parts and
accessories thereof,
(earth moving
machineries) that is to
say bulldozers, crawler
tractors, shovels,
wheeled loader
scrappers, dumpers,
tippers, motor graders.
As already stated, the departmental authorities
treated "hand pumps" as "machineries" coming
within entry 70 and levied tax at 16 per cent on the
disputed transactions.
5. Learned counsel for the petitioner submitted
that although it is open to the Legislature or the
State Government to select different rates of tax for
different commodities, there must exist rational
basis for discriminating one commodity and
another for the purpose of imposing tax. He
contended that if "diesel and kerosene pump sets"
and "electric pump sets" are to be taxed at 8 per
cent, there is no rational basis to treat "hand pump
sets" differently and bring the same within the
"machinery" (vide serial No.70) and charge tax at
16 per cent. In this connection, he placed reliance
on the judgment of the Supreme Court in Arya
Vaidya Pharmacy v. State of Tamil Nadu [1989] 73
STC 346; AIR 1989 SC 1230. He further submitted
that the State Government in S.R.O. Nos.137, 138
and 139 of the year 2000 published in the
extraordinary gazette dated February 18, 2000
revised tax rates of several goods basing on the
uniform floor rate as recommended by the
Committee of the State Finance Minister on sales
tax reforms and as per the notification the rate of
tax on hand pump is as follows:
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"Sl. No. Name of the Existing Revised
commodity rate of tax rate
31. Hand pumps 12% 4%"
According to him, this revision of rate is an
indication that hand pumps do not come within the
description of "machineries".
6. The Supreme Court in Arya Vaidya
Pharmacy v. State of Tamil Nadu [1989] 73 STC
346 held as follows:
"It is open to the Legislature, or the State
Government if it is authorised in that behalf by
the Legislature, to elect different rates of tax for
different commodities. But where the
commodities belong to the same class or
category, there must be a rational basis for
discriminating between one commodity and
another for the purpose of imposing tax. It is
commonly known that considerations of
economic policy constitute a basis for levying
different rates of sales tax. For instance, the
object may be to encourage a certain trade or
industry in the context of the State policy for
economic growth, and a lower rate would be
considered justified in the case of such a
commodity. There may be several such
considerations bearing directly on the choice of
the rate of sales tax, and so long as there is good
reason for making the distinction from other
commodities no complaint can be made. What
the actual rate should be is not a matter for the
courts to determine generally, but where a
distinction is made between commodities falling
in the same category a question arises at once
before a court whether there is justification for
the discrimination. In the present case, we are
not satisfied that the reason behind the rate of
30 per cent on the turnover of arishtams and
asavas constitutes good ground for taking those
two preparations out from the general class of
medicinal preparations to which a lower rate has
been applied..." (emphasis* supplied).
7. As noticed earlier, for a pump set run
by diesel or kerosene or electricity, rate of tax has
been prescribed at 8 per cent. There is no valid
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reason as to why a pump set run by human hand
should be differentiated from the pump sets run by
diesel or kerosene or electricity, the source of power
to run the pump set being immaterial. A pump set
run by diesel or kerosene or electricity also
answers the description of "machinery", but those
pump sets are charged with different rate of tax.
We, therefore, do not find the rationale behind the
demand of tax at 16 per cent by treating "hand
pumps" as "machineries".
For the reasons aforesaid, we are of the
considered opinion that the "hand pumps" cannot
be brought within the meaning of "machineries"
when pump sets run by diesel or kerosene or
electricity have not been treated as "machineries".
8. In the result, the impugned orders
holding that "hand pumps" are "machineries" and
tax is leviable at 16 per cent on their sale are
hereby quashed. The matter is remitted to the
Sales Tax Tribunal to pass appropriate order
keeping in view the observations made in this
judgment which may be done within a period of
three months of its receipt. The sales Tax Tribunal
will examine if the Orissa Small Industries
Corporation (opposite party No.6) already collected
sales tax from the ultimate purchasers and
deposited the same in the Government treasury. If
it comes to a finding in the affirmative, it is
needless to mention that the petitioner cannot be
demanded to pay tax once more. We may notice
here that the learned counsel for the petitioner
submitted that as there was not specific entry for
hand pumps in the taxable list at the relevant time,
tax on hand pumps could at the worst be levied at
12 per cent as per residuary entry.
The writ petition is allowed. No costs."
4. Learned counsel for the Revenue Department-
opposite parties is not in a position to dispute the same.
5. Considering the submission made and keeping in
view the above said judgment of this Court dated
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08.01.2002, the issue is required to be answered in favour
of the assessee.
Hence, the impugned notices under Annexures-1,
1/A and 1/B are hereby quashed and set aside.
The writ petition is accordingly allowed.
All the connected Misc. Case(s)/I.A.(s) if any,
is/are accordingly disposed of.
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( K.S. Jhaveri ) Chief Justice ................................ (K.R. Mohapatra) Judge mp