National Aluminum Company Limited vs Deputy Commissioner of Commercial Taxes, Bhubaneswar-III

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2012 Supreme(Ori) 306

HIGH COURT OF ORISSA: CUTTACK
SHRI V.GOPALA GOWDA AND B.N.MAHAPATRA, JJ.
M/s. National Aluminum Company Limited, having its principal place of business at Plot No.P/1, NALCO Bhawan, Nayapalli, Bhubaneswar, Dist: Khurda, represented by its Chairman-cum-Managing Director Mr. Bajranglal Bagra, aged about 58 years, S/o. Hanuman Prasad Bagra - Petitioner
Versus
Deputy Commissioner of Commercial Taxes, Bhubaneswar-III, Circle, Bhubaneswar, Dist: Khurda - Opp. Party
W.P.(C) Nos. 1597 and 1686 of 2012
Decided On : 09.10.2012

Advocates Appeared:
For Petitioner:Dr. Devi Pal, Senior Advocate M/s. S. Kanungo, CH. S. Mishra, R.N. Pattnaik, N.R. Mohanty & N.K. Nanda
For Opp. Party : Mr. R.P. Kar, Standing Counsel (Revenue)

Headnote:1. ORISSA VALUE ADDED TAX ACT, 2004 - Sec. 43 - Order of assessment - Demand raised - Prayer to treat coal, alum, caustic soda and other consumables as input for manufacturing of aluminium, aluminium ingots and sheets etc. and to allow the petitioner to take input tax credit on such inputs - The generation of electrical energy in the captive power plant is integrally connected with the ultimate production of finished goods - Goods required in the process of generation of electrical energy would fall within the expression ’in the process of manufacturing’ - Coal, alum caustic soda and other consumables etc. which are used for manufacturing/generating of electrical energy, are inextricably connected with the manufacturing process of aluminium and aluminium ingots, they are nothing but input and tax paid on purchase of such input shall qualify for set off against out tax paid/payable on sale of finished products - Coal, alum, caustic soda and other consumables and other consumables etc. can only be termed as input in terms of Sec. 2(25) of the O.V.A.T.Act - Tax which has been paid on such purchases can be claimed as input tax credit under Sec. 2(27) of the Act against the tax payable on sale of finished products - Demand raised in the assessment orders quashed.
2. ORISSA VALUE ADDED TAX ACT, 2004 - Sec. 43(2) - Generally penalty proceedings are quasi judicial in nature - Quantification of penalty under Sec. 43 of the Act is dependant upon the Tax assessed under that section - Penalty is quantified on the basis of the tax assessed - No discretion is left with the Assessing Officer for levying any lesser amount of penalty - Penalty is not independent of the tax assessed - If the tax is assessed, imposition of penalty under Sec. 42(5) is warranted.
3. ORISSA VALUE ADDED TAX ACT, 2004 - Sec. 2(25), 2(26) and 2(27) - A registered dealer under the O.V.A.T.Act shall be entitled to set off the tax paid on the purchase of goods effected by such dealer either for resale or for use in execution of works contract or for manufacture and processing against the output tax, that is the tax payable on sale of any taxable goods.

JUDGMENT

B.N. Mahapatra, J. The above two writ petitions have been filed with a prayer to quash the assessment order dated 31.10.2011 (Annexure-1) passed by the sole opposite party-Deputy Commissioner of Commercial Taxes, Bhubaneswar-III Circle, Bhubaneswar, Dist: Khurda and to issue a direction to the said opposite party to treat coal, alum, caustic soda, and other consumables as input for manufacturing of aluminum, aluminum ingots and sheets etc. and to allow the petitioner to take input tax credit on such inputs.

2. Annexure-1 attached to W.P.(C) No.1597 of 2012 is an order of assessment passed by the opposite party-Deputy Commissioner of Commercial Taxes, Bhubaneswar Circle-III, Bhubaneswar, Khurda under Section 43 of the Orissa Value Added Tax Act, 2004 (for short, “OVAT Act”) for the period 01.04.2011 to 30.06.2011 raising a demand of Rs.11,32,49,874/-which includes penalty of Rs.7,54,99,916/-levided under Section 43(2) of the OVAT Act.

Similarly, Annexure-1 attached to W.P.(C) No.1686 of 2012 is the assessment order passed by the opposite party-Deputy Commissioner of Commercial Taxes, Bhubaneswar Circle-III, Bhubaneswar, Khurda under Section 43 of the OVAT Act for the period 01.07.2011 to 30.09.2011 raising a demand of Rs.14,68,62,843/-which includes penalty of Rs.9,79,08,562/-levied under Section 43(2) of the OVAT Act.

3. Since the issues involved in both the writ petitions are identical, they are dealt with together.

4. Petitioners’ case is that the petitioner-company is a Central Government Public Sector Undertaking under the Administrative Control of the Ministry of Mines, Government of India, having its Corporate Office at NALCO, Plot No.P/1, NALCO Bhawan, Nayapalli, Bhubaneswar, Dist: Khurda. It is an integrated establishment consisting of the following three units, namely,

(a) Aluminium Refinery Plant at Damanjodi in the district of Koraput, having (8.00 lakh Tons per annum). Presently, enhanced to 21.0 lakhs MT per annum.

(b) Aluminium Smelter Plant at Angul in the district of Angul having (2.15 lakhs MT per annum). Presently enhanced to 4.60 MT per annum.

5. For the aforesaid activities, the petitioner is registered under the Central Sales Tax Act, 1956 vide Registration Certificate No. BHC1113 dated 16.09.1981 whereas separate and individual Registration Number had been allowed under Orissa Sales Tax Act, subsequently replaced with the OVAT Act in respect of the aforesaid three manufacturing units of the petitioner. Thereafter the petitioner has been granted the centralized registration certificate under the OVAT Act w.e.f. 01.04.2011 by declaring its Corporate Office at Bhubaneswar as the principal place of business. It has filed its statutory monthly returns for the impugned tax period, by claiming Input Tax Credit in respect of inputs, namely coal, alum, caustic soda, consumables (lubricants, gas) used for generation of electricity in its Captive Power Plant which in turn used in the continuous process of manufacturing of aluminum. After scrutiny of the returns, the sole opposite party issued a notice in Form VAT-307 on 16.08.2011 by initiating assessment proceeding under Section 43 of the OVAT Act and completed the assessment raising aforesaid demands. Hence the writ petition.

6. Dr. Devi Pal, learned Senior Advocate appearing for the petitioners submitted that the opposite party without communicating the reasons as asked for by the petitioner has reopened the assessment proceeding and passed the order of assessment disallowing the input tax credit in respect of purchase of coal, alum, caustic soda, consumables (lubricants, gas) used for its Captive Power Plant for generation of electricity which in turn is used in continuous process of manufacturing of aluminum by treating the electricity so generated by the petitioner in its Captive Power Plant as its finished product which is exempte

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