TaxTMI 
TaxTMI 
2012 (11) TMI 696
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Act, 1999 making some rectification of mistakes occurred in the audit assessment order passed on 30.7.2011. By order under Annexure-8, opposite party no.2 has rejected the petitioner's application for rectification of the audit assessment order dated 30.7.2011. 2. Petitioner's case in a nutshell is that it is a public limited Company incorporated under the provisions of Companies Act, 1956 having its Registered Office at 4th Floor, Tolstoy House, Tolstoy Marg, Connaught Place, New Delhi and plants at Chandigarh in the State of Punjab and at Kolkata in the State of West Bengal and Branches in all over India. The petitioner has set up an Integrated Steel Plant at village- Thelkoloi, Rengali in the district of Sambalpur, Odisha. The petitioner- Company is engaged in manufacturing and selling of sponge iron, steel billets and HR Coil. For manufacturing sponge iron, steel billets and HR Coil, the petitioner purchases various raw materials including iron ore, Dolomite, pig iron, sponge iron, quartz , coke breeze, coking coal etc. The said raw materials are procured from the State of Orissa and outside the State of Orissa. The petitioner paid taxes on entry of those materials int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f jurisdiction thereby offending Articles 14, 19(1)(g) and 265 of the Constitution of India. The impugned audit assessment order dated 30.7.2011 denying the benefit of concessional levy under Rule 3(4) on the ground that the petitioner had transferred the manufactured goods to the Branches outside the State is wholly without jurisdiction. The condition stipulated under Rule 3(4) being satisfied and the said rule being not in any way contemplated or stipulated the manner in which the goods used or disposed of, denial of benefit to the petitioner under Rule 3(4) is illegal. Form E-15 requires a declaration that the goods purchased under the said declaration shall be used for manufacture of finished products. The declaration does not contemplate nor stipulate the manner in which the goods so manufactured needs to be used or disposed of. Opposite party no.2 has no power to import any condition which is non-existent under Rule 3(4) which amounts to legislation and is not permissible under the law. Opposite party no.2 is fully unjustified to deny concessional rate of tax to the petitioner placing reliance on Section 26 of the Act, 1999 and Rule 19 of the Rules, 1999 as Section 26 deals w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n assessee as fuel for producing steam to run the machines used in their factories to manufacture the end product and in the process of burning, coal was burnt in the boilers of furnaces for producing steam. So it was used only for the ancillary purpose as fuel and coal was not transformed into the end product. He further submitted that for the purpose of manufacture the raw material had ultimately to get a new identity by virtue of the manufacturing process either on its own or in conjunction with other raw materials. Therefore, coal is not a raw material of the end product. Burning of coal for the purpose of producing heat cannot be said to be a manufacturing activity. Therefore, coal consumed in the CPP by the instant dealer for production of electricity cannot be treated as raw material for production of sponge iron. Further, the end product i.e. electricity which is produced out of coal consumption is a non-scheduled goods under E.T. Act. The basic objective of allowing purchase of raw materials at concessional rate of tax of fifty per centum aims at collection of balanced fifty per centum of tax on sale point as provided under Section 26 of the Act, 1999. No where in the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of Electricity cannot be treated as raw material for production of sponge iron and that electricity produced out of coal consumption is a non-scheduled goods? (v) Whether levy of Entry Tax on the finished product sent out to other branches situated out side the State and subsequently returned for some reason is valid in law? 7. Question nos. (i) and (ii) being interlinked, they are dealt with together. To deal with the above two questions, it is necessary to quote the relevant provision of Section 3 of the Act, 1999 and Rule 3(4) of the Rules, 1999. "Section 3- Levy of Tax: (1)- There shall be levied and collected a tax on entry of the scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding twelve per centum of the purchase value of such goods from such date as may be specified by the State Government and different dates and different rates may be specified for different goods and local areas subject to such conditions as may be prescribed. (2) The tax leviable under this Act shall be paid by every dealer in scheduled goods or any other person who brings or causes to be brought into a local area such scheduled goods w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hed by such manufacturer to the seller. At this juncture, it is necessary to know what is the condition stipulated in Form E-15. For ready reference, Form E-15 is reproduced below: "FORM E15 (See Rule 3(4)) DECLARATION BY THE BUYING MANUFACTURE I/We..............................................hereby declare that the goods purchased by me/us in Cash/Credit Memo/Bill No. ............................Dated ............... from.......... Bearing the[ TIN/ SRIN/ Identification No.............. under the Orissa Value Added Tax Act, 2004] and/or Registration No............ under the Orissa Entry Tax Act, 1999 shall be used as raw material for manufacture of the finished products, namely......... Date: Signature of buying manufacturer/dealer" Place: 9. A careful reading of Rule 3(4) of Rules, 1999 and the declaration given in Form E-15 reveals that the only condition to avail concessional levy of Entry Tax in terms of Rule 3(4) by a manufacturer is that he is required under the rule to use the scheduled goods as raw material for manufacture of the finished product. There is nothing in Rule 3(4) or declaration given in Form E-15 that i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... buying dealer or person in prescribed manner and shall pay the tax so collected into the Government Treasury: Provided that the tax so payable by a manufacturer under this sub-section during a year shall be reduced by the amount of tax paid under this Act on the raw materials which directly go into the composition of the finished products during that year in the prescribed manner: Provided further that where a buying dealer, under the Rules providing for the rates of tax required to be specified with reference to Section 3, is entitled to pay tax at a concessional rate or not to pay any tax, as the case may be, in respect of such finished products, the manufacturer shall, on a declaration furnished by the buying dealer in the prescribed form, collect the tax at such concessional rate or shall not collect any tax, as the case may be. Explanation.- For the purposes of this section, 'manufacturer' shall include a person who is engaged in mining and sells goods produced or extracted therefrom." "Rule 19: "Every manufacturer of scheduled goods who is registered under VAT Act shall, in respect of the finished products which are scheduled goods and are sold by it to a dealer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration also forms part of the manufacturing activity and the raw materials used in that electricity generation qualify for availing concessional levy of entry tax in terms of Rule 3(4) of the O.E.T. Rules. 13. The above submission of Mr. Mohanty, learned Senior Advocate for the petitioner does not enure to the benefit of the petitioner. The requirement of Rule 3(4) is that the scheduled goods purchased must be used as raw material in manufacturing the finished product. Thus, those scheduled goods are exclusively confined to 'raw material' only used in manufacture of the finished products. The petitioner-company manufactures sponge iron billets and HR coil and undisputedly to manufacture such finished goods the coal is not the raw material. Coal is a raw material for the purpose of generating electricity, which is, in turn, essential to run the plant and for that it cannot be said that the coal is a raw material for manufacturing sponge iron, billets and HR coil. The Hon'ble Supreme Court in the case of Ahmedabad Electricity Co. (supra) has categorically held that the coal is used for fuel for producing steam to run the machinery used in the factories to manufacture end produc....