Writ jurisdiction against jurisdictionless show cause notice and concessional purchase use in manufacturing supported quashing of differential tax notice
A writ petition under Article 226 may lie against a show cause notice where, even on the facts stated in the notice, the authority lacks jurisdiction to initiate revision; the existence of an alternative remedy does not bar intervention in such a case. Goods purchased at concessional rate against form IV and used in an integrated manufacturing process, including the making of intermediate products, were held not to attract differential tax merely because those intermediates were later branch transferred outside the State. On the assumed facts, the revision notice was without jurisdiction and was quashed.
Issues: (i) Whether a writ petition under Article 226 of the Constitution of India was maintainable at the stage of a show cause notice issued under section 23(4)(a) of the Orissa Sales Tax Act, 1947 read with rule 80 of the Orissa Sales Tax Rules, 1947 on the ground of want of jurisdiction. (ii) Whether goods purchased on concessional rate against declaration in form IV and used in the manufacture of intermediate products, which were then transferred outside the State by branch transfer, attracted differential tax under the fifth proviso to section 5(1) of the Orissa Sales Tax Act, 1947.
Issue (i): Whether a writ petition under Article 226 of the Constitution of India was maintainable at the stage of a show cause notice issued under section 23(4)(a) of the Orissa Sales Tax Act, 1947 read with rule 80 of the Orissa Sales Tax Rules, 1947 on the ground of want of jurisdiction.
Analysis: A show cause notice can be interfered with in writ jurisdiction where, assuming the facts stated in the notice to be true, the authority has no jurisdiction to initiate proceedings. The existence of an alternative statutory remedy does not bar intervention when the notice is without legal foundation or is an attempt to usurp jurisdiction. The Court applied this principle to the impugned notice and examined whether the alleged facts in the notice could at all justify revision under the Act.
Conclusion: The writ petition was maintainable because the Court found that, on the face of the allegations in the notice, jurisdiction to initiate revision was not made out.
Issue (ii): Whether goods purchased on concessional rate against declaration in form IV and used in the manufacture of intermediate products, which were then transferred outside the State by branch transfer, attracted differential tax under the fifth proviso to section 5(1) of the Orissa Sales Tax Act, 1947.
Analysis: The expression relating to use of goods in the manufacture or processing of goods for sale was construed to include processes integrally connected with actual production, including anterior and intermediate processes. Goods used in the manufacture of intermediate products within the State do not cease to be used in the manufacture of goods for sale merely because the intermediate products are subsequently sent by branch transfer, so long as the finished goods ultimately produced are for sale inside or outside the State. On that reading, the mere transfer of intermediate products outside the State did not establish contravention of the fifth proviso.
Conclusion: No differential tax was payable merely because the intermediate products were branch transferred outside the State; the notice was without jurisdiction on the assumed facts.
Final Conclusion: The impugned revision notice could not survive and was quashed, resulting in relief to the assessee.
Ratio Decidendi: Where goods purchased on a concessional declaration are used within the State in an integrated manufacturing process that yields intermediate products, the subsequent branch transfer of those intermediates does not by itself amount to misuse attracting differential tax if the finished goods ultimately produced are for sale.
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