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2007 Supreme(SC) 1257
2007(7) Supreme 619
Supreme Court of india
(From Orissa High Court)
Dr. Arijit Pasayat & Tarun Chatterjee, JJ.
ICI India Ltd. & Anr. — Petitioner
versus
State of Orissa & Ors. — Respondent
Appeal (civil) 1193-1194 of 2002
Decided on : 28-09-2007
important point
Transferring the manufactured product outside the state instead of selling it within the state violates Section 5(1), 5th Proviso of the Orissa Sales Tax Act, 1947.
Headnote:Orissa Sales Tax Act, 1947 – Section 5(1), 5th Proviso – Raw materials purchased must be used for manufacture of goods in the State of Orissa for sale – The manufactured product has not been sold but has been transferred to other branches of the appellant situated inside as well as outside the State of Orissa – As such there is a violation of the terms of the declaration and the assessee has been rightly held to be liable for payment of the differential tax. (Paras 10, 14 and 15)
(1978)1 SCC 636; 1965 (16) STC 563 – Referred.
Facts of the case:
The ICI India Ltd. is a company engaged, inter-alia, in the business of manufacture and sale of “Bulk Explosives”. For the purpose of carrying on business at Rourkela in the State of Orissa, the appellant has set up an industry on Plot No. 77, Industrial Estate, Kalunga, and is registered as a dealer with the Sales Tax officer, Rourkela II Circle, Panposh. The certificate of registration granted under Section 9 of the Act indicates that the appellant requires, amongst others, “Ammonium Nitrate” to be used for manufacture/processing of “Bulk Premix” for sale. The appellant had set up and commissioned its third bulk emulsion premix manufacture unit at Rourkela in April, 1997. The principal raw material for manufacture of “Bulk Premix” is “Ammonium Nitrate Liquor”. The principal supplier of the said raw material is the Rourkela Steel Plant of the Steel Authority of India from whom the appellant purchases the same. The other raw materials are either purchased locally or purchased centrally at Gomia in Bihar and the stock is transferred to its Rourkela Plant. At the Rourkela Plant, all the raw materials are utilized for manufacture of Emulsion Premix or Bulk Premix, which is an excisable product. For purchase of raw material from the Rourkela Steel Plant, the appellant gives declaration in Form No.IV to avail the concessional rate of tax @ 4%. It is an admitted case of the parties that the “Bulk Premix” so manufactured at Rourkela is not sold as such because it is an intermediary product which is used for manufacture of “Bulk Explosive”. This “Bulk Explosive” is not manufactured in the Rourkela plant of the appellant. So the “Bulk Premix” is sent to its other branches at Angul (Talcher) and Belpahar in the State of Orissa, for which the appellant has obtained Sales Tax Registration, wherein the raw material has been mentioned as “Bulk Premix”, while the finished product is mentioned as “Bulk Explosive”. Apart from sending the “Bulk Premix” to its different branches in the State of Orissa, the appellant also transfers/sells the goods outside the State.
In the assessment order for the year 1998-99, the assessing officer did not find any violation of the declaration given by the appellant while purchasing “Ammonium Nitrate”, though the “Bulk Premix” has been transferred from Rourkela plant to Talcher and Belpahar, i.e., inside the State of Orissa, and did not make any addition for the same. But, for goods sent outside the State of Orissa, the assessing officer was of the view that the appellant had contravened the provisions of the 5th proviso to Section 5(1) of the Act by furnishing wrong declaration as the goods manufactured were not sold. For the year 1997-98, however, all transfers of “Bulk Premix”, whether inside or outside the State of Orissa, were disallowed and it was held that the appellant has contravened the declaration given in Form IV while purchasing the raw material. This order was confirmed by the Assistant Commissioner of Sales Tax.
The High Court held that the Sales Tax Authorities were justified in demanding differential tax as provided in the 5th Proviso to Section 5(1) of the Act on the raw material (Ammonium Nitrate) purchased by furnishing declaration in Form IV by paying concessional tax at the rate of 4%. The writ applications were accordingly dismissed.
Findings of the Court:
Appellant are liable to pay differential rate of tax.
Result : Appeal dismissed.
judgment
Dr. ARIJIT PASAYAT, J. —
1.These two appeals assail correctness of the judgment rendered by a Division Bench of the Orissa High Court dismissing the writ petitions filed by the appellants. The two writ petitions i.e. OJC 16928 of 1998 and 1500 of 2000 were filed questioning correctness of the views expressed by the Sales Tax Authorities that the appellants had contravened the declaration given in Form IV to avail concessional rate as provided in the Orissa Sales Tax Act, 1947 (in short the ‘Act’) and the Orissa Sales Tax Rules, 1947 (in short the ‘Rules’). In the first writ petition challenge was to the appellate order passed by the Assistant Commissioner of Sales Tax confirming the assessment made by the assessing officer for the assessment year 1997-98, whereas in the second writ petition challenge was to the assessment order passed by the Sales Tax Officer for the assessment year 1998-99.
2.Background facts sans unnecessary details are as follows :-
The ICI India Ltd. (hereinafter referred to as ‘’the assessee”) is a company incorporated under the Companies Act, 1956 having its registered office at ICI House, 34, Chowranghee Road, Calcutta. It is engaged, inter-alia, in the business of manufacture and sale of “Bulk Explosives”. For the purpose of carrying on business at Rourkela in the State of Orissa, the appellant has set up an industry on Plot No. 77, Industrial Estate, Kalunga, and is registered as a dealer with the Sales Tax officer, Rourkela II Circle, Panposh (Respondent No.3). The certificate of registration granted under Section 9 of the Act indicates that the appellant requires, amongst others, “Ammonium Nitrate” to be used for manufacture/processing of “Bulk Premix” for sale. The appellant had set up and commissioned its third bulk emulsion premix manufacture unit at Rourkela in April, 1997. The principal raw material for manufacture of “Bulk Premix” is “Ammonium Nitrate Liquor”. The principal supplier of the said raw material is the Rourkela Steel Plant of the Steel Authority of India (in short the ‘SAIL’) from whom the appellant purchases the same. The other raw materials are either purchased locally or purchased centrally at Gomia in Bihar and the stock is transferred to its Rourkela Plant. At the Rourkela Plant, all the raw materials are utilized for manufacture of Emulsion Premix or Bulk Premix, which is an excisable product. For purchase of raw material from the Rourkela Steel Plant, the appellant gives declaration in Form No.IV to avail the concessional rate of tax @ 4%. It is an admitted case of the parties that the “Bulk Premix” so manufactured at Rourkela is not sold as such because it is an intermediary product which is used for manufacture of “Bulk Explosive”. This “Bulk Explosive” is not manufactured in the Rourkela plant of the appellant. So the “Bulk Premix” is sent to its other branches at Angul (Talcher) and Belpahar in the State of Orissa, for which the appellant has obtained Sales Tax Registration, wherein the raw material has been mentioned as “Bulk Premix”, while the finished product is mentioned as “Bulk Explosive”. Apart from sending the “Bulk Premix” to its different branches in the State of Orissa, the appellant also transfers/sells the goods outside the State.
3.For manufacture of “Bulk Explosive”, the “Bulk Premix” is carried in special tankers dedicated for such purpose to the actual blasting site from the onsite support plants where the ingredient i.e. “Bulk Premix” and other chemicals are mixed in proportion commensurate with the character of the rock and/or other substances to be blasted. Such mixing in right proportion takes places at the site of blasting and the resultant manufacture being explosive is discharged into the bore holes at the mine bench. It is at this stage that the “Bulk Premix” when mixed with the other chemicals and discharged into bore holes becomes explosives and at that stage the sale of explosives takes place and the sales tax and excise duty are paid on s
