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HIGH COURT OF CALCUTTA
Sinha
BHARTIA ELECTRIC STEEL CO. LTD. - Appellant
Versus
COMMERCIAL TAX OFFICER - Respondent
Matter 20 Of 1955
Decided On : FEBRUARY 02, 1956
BHARATIA ELECTRIC STEEL CO. LTD. V. COMMERCIAL TAX OFFICER, BEADON STREET DISTRICT II, CALCUTTA - BENGAL FINANCE (SALES TAX) ACT, 1941 - SECTION 5(2)(A)(II) - REGISTRATION CERTIFICATE - EXEMPTION OF GOODS - CONSTRUCTION OF STATUTE - AMENDMENT OF CERTIFICATE - SCOPE OF JUDICIAL REVIEW.
Fact of the Case:
The petitioner, a steel manufacturing company, applied for registration under the Bengal Finance (Sales Tax) Act, 1941. The registration certificate granted exempted certain goods from sales tax, including building materials and fixtures for construction, fitting out, or repair of any building. Subsequently, the Commercial Tax Officer amended the certificate to delete the exemption for building materials and fixtures, contending that such items were not intended for use in the manufacture of goods as per Section 5(2)(a)(ii) of the Act. The petitioner challenged the amendment, arguing that it was unauthorized and that the goods were necessary for the construction and maintenance of factory premises and staff quarters.
Finding of the Court:
The court held that the amendment of the registration certificate was authorized under Section 7(4) of the Act, which empowered the Commissioner to amend certificates based on information received. The court interpreted Section 5(2)(a)(ii) narrowly, holding that the exemption applied only to goods directly used in the manufacturing process and not to goods used for the construction or maintenance of factory buildings and other adjuncts. The court also declined to interfere with the Commissioner's decision, finding that it was based on a reasonable construction of the statute and that the petitioner had an alternative remedy through the revision process under Section 20(3) of the Act.
Issues: 1. Whether the amendment of the registration certificate was authorized under the Bengal Finance (Sales Tax) Act, 1941. 2. Whether building materials and fixtures for construction, fitting out, or repair of factory premises and staff quarters were intended for use in the manufacture of goods under Section 5(2)(a)(ii) of the Act.
Ratio Decidendi: 1. The court interpreted Section 7(4) of the Act to allow the Commissioner to amend registration certificates based on information received, including information from the Government. The court rejected the petitioner's argument that the amendment was unauthorized because it was ordered by the Government rather than initiated by the Commissioner. 2. The court interpreted Section 5(2)(a)(ii) of the Act narrowly, holding that the exemption applied only to goods directly used in the manufacturing process. The court found that building materials and fixtures for construction, fitting out, or repair of factory premises and staff quarters were not directly used in the manufacturing process and were therefore not exempt from sales tax.
Final Decision: The court dismissed the petitioner's application, holding that the amendment of the registration certificate was authorized and that the construction of Section 5(2)(a)(ii) was reasonable. The court also declined to interfere with the Commissioner's decision, finding that the petitioner had an alternative remedy through the revision process under Section 20(3) of the Act.
Key Points: - (!) The exemption under Section 5(2)(a)(ii) applies only to goods directly used in the manufacturing process, not for construction/maintenance of factory buildings and adjuncts. - (!) The amendment of the registration certificate is authorized under Section 7(4) of the Act, based on information received, including information from Government. - (!) The petitioner had an alternative remedy via revision under Section 20(3) of the Act; the application was dismissed without prejudice to other legal proceedings. - (!) Goods like building materials/fixtures used for construction or repair of buildings are not generally considered "intended for use in the manufacture of goods" for exemption under Section 5(2)(a)(ii). - (!) The court rejected the challenge to the amendment as authorized and upheld the construction of the statute; the petition was dismissed. - (!) Expert evidence may be needed to decide whether certain construction materials are directly required in the manufacturing process; in ordinary cases, such materials for buildings are not part of the manufacturing process. - (!) The amended certificate can delete exempted items if not warranted by the statute, and the prior exemptions may be corrected to reflect proper interpretation. - (!) The decision emphasizes not to compel continuation of exemptions that are not warranted by law, to avoid discrimination among dealers. - (!) The petitioner may pursue other legal avenues to establish rights if desired. - (!) The final order: rule discharged; no costs; without prejudice to other proceedings.
( 1 ) THE petitioner in this case is Messrs. Bhartia Electric Steel Co. , Ltd. It carries on the business of manufacturing steel casting, ingots, bars, rounds, flats and squares and selling the same after such manufacture. The petitioner is a registered dealer under Section 7 of the Bengal Finance (Sales Tax) Act 1941 (Bengal Act VI of 1941) hereinafter referred to as the 'act' ). Under Section 7 of the Act, no dealer, while being liable to pay tax under Section 4 of the Act, can carry on business unless he has been registered under the Act, and possesses a registration certificate. That is to say, a dealer whose turnover exceeds the taxable quantum and who had thus become liable to pay tax under the Act, must get himself registered and possess a registration certificate. The turnover of this particular company admittedly exceeds the taxable quantum and therefore it had to get itself registered. The petitioner company made application in the prescribed form. The application for registration 'for the year ending 31-12-1940 was made on 4-9-1941. The application was made by Nandalal Bhartia, one of the directors of the company, stating that the business was mainly wholesale manufacturing and partly retail. It was mentioned that the gross turnover during the year ending December 31, 1940 was Rs. 22,00,000/ -. It was then stated as follows:"following classes of goods are ordinarily purchased by us. (a) For purposes of manufacture, Iron and steel, scrap, boring, hardware, metals, stationery, mill stores, ingots and billets, mill stores, oils, tools, machinery accessories spare parts, chemicals, bricks, building materials, sand, coal".
( 2 ) IT was further stated that the company did not purchase anything for resale. Finally, it was stated that the company manufactured for sale the following class of goods: "steel castings, ingots, bars, rounds, flats, squares etc". This application was produced at the hearing and has been marked as Ex. 1. The certificate was granted by the Commercial Tax Officer, Beadon Street, on 27-9-1941 in form IIB as prescribed by the Rules. This certificate has been produced at the hearing and has been marked Ex. A. The certificate inter alia contains the following statement:"sales of the following goods to this dealer will be free of tax-- (a) For purposes of manufacture. Iron, steel scrap, borings, hardware, metals, stationery; mill stores, ingots and billets, oils, tools, sand and coal, and (1) any other raw materials. Certified by the purchasing dealer to be required for usein any process in the manufacture of steel castings, ingots, bars, rounds, flats, squares. (2) Plant, machinery, spareparts, accessories and consumable stores. (3) Building or plumbing materials or fixtures required for construction, fitting out or repair of any building. "
( 3 ) SO far as goods for resale are concerned, the certificate was originally endorsed as 'nil' but subsequently it was amended by adding piece goods. Similar certificates continued to be issued for succeeding years. The certificates dated 14-10-1941 and 19-5-1954 have been produced. These certificates have been collectiveiy marked as Ex. A. On 13-12-1954 the petitioner made an application to the Commercial Tax Officer, Beadon Street District II Calcutta for inserting tea, ghee spices fuel, utensils and cutlery in the said certificates for exemption of sales tax, alleging that they were used for manufacture of sweetmeat, tea, foodstuffs and meals in the canteen of the factory. On the same day the respondent Commercial Tax Officer wrote to the petitioner asking it to send its registered certificate by 16-12-1954. On 18-12-1954 the petitioner replied by saying that the registration certificate had already been sent. On 23-12-1954 the respondent Commercial Tax Officer sent a Memorandum to the petitioner a copy whereof is annexed to the petition at page 13. It is in the following terms:"re : Scrutinisation of the registered certificate. It is proposed to del
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