TaxTMI 
TaxTMI 
2014 (1) TMI 1381
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.... affirming the orders of the Appellate Authority-cum-Chief Commissioner of Commercial Taxes and that of the Assessment Officer whereby it has denied the benefit of concessional rate of tax on purchase of raw materials by the Petitioner used for manufacturing the goods which has been transferred by way of stock transfer outside the State in terms of Section 13(1)(b), Second proviso to the Bihar Finance Act, 1981 (now Jharkhand) as amended by Notification dated 2nd January 2002. 2. The Bihar Finance Act came into force on 01.04.1981. The State of Jharkhand was formed on 15.11.2000 and the State of Jharkhand adopted the Bihar Finance Act, 1981. Sub Section (1) of Section 13 of the Bihar Finance Act (adopted by the State of Jharkhand) provides for Special/Concessional rate of tax being charged subject to certain restrictions and conditions prescribed under the Act and Rules as it stood on 1.4.1981. Amendment was made in Section 13(1)(b) with effect from 01.08.1985 by which the words "In Bihar or in the course of Inter-State trade or commerce", as appearing after the term "Sale" was deleted. 3. After the first proviso of Sub Section (1) of Section 13 of the Act, by notification No. LG....
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.... provides that if benefit of concessional purchases is availed, sales of manufactured products are to be made within the State of Jharkhand or in the course of inter-state sales and the Assessing Officer resorted to Section 13(3) of the Act and levied differential rate of tax on those goods as leviable under Section 12. 7. Challenging the vires of Second proviso to Section 13(1)(b) as inserted vide the Notification dated 02.01.2002 and also order of assessment made in respect of the assessment year 2004-05 and also to quash the notice of demand dated 19.08.2008, the Petitioner filed writ petition W.P.(T) No.71 of 2009. M/s. Tata Motors Limited filed similar writ petition in W.P.(T) No. 1325 of 2009. Those writ petitions were disposed of by order dated 08.05.2009 directing the Petitioners to avail the statutory remedy of appeal against the assessment order passed by the respondent authorities and to raise all the points before the Appellate Authority. The Division Bench directed the authorities to consider "the effect of the amended provision without amending the corresponding rules". 8. Challenging the assessment order for the assessment years 2004-2005 and 2005-2006, the Petitio....
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....g eligible for concessional rate of tax under Section 13(1)(b) and even if such goods are moved to the other states and sold elsewhere, the Petitioner will be eligible for purchase of goods at concessional rate of tax under Section 13(1)(b). There is no geographical restriction for the manufactured goods being sold elsewhere, rather the restriction is only for manufacture of goods i.e., raw materials should be used for manufacture of goods in the State of Jharkhand. According to the Petitioner, sale of manufactured goods under Section 13(1)(b) can be of four types - Intra State Sale, Inter-state Sale, Sale Outside State and also Export Sale. The writ Petitioner contends that Petitioner is entitled to the benefit of purchase of goods at a concessional rate of tax under Section 13(1)(b) of the Act in respect of the finished goods which are sent outside the State by way of stock transfer for sale in as much as Form IX does not provide for a declaration to the effect that the goods so manufactured must be sold only within the State of Jharkhand or in the course of inter-state trade and commerce and not outside the State of Jharkhand. 13. Resisting the writ petition, the respondents ha....
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....Jharkhand and the same is evident from the language of the impugned notification which uses the word 'BHI' ( ) rather than 'HEE' ( ). Learned Senior Counsel for the Petitioner contended that had it been the legislative intention to restrict the benefit of Section 13(1)(b) read with the Second proviso, only to intra state and inter-state sale originating from the State of Jharkhand to make good the losses of tax on purchase and increase the State revenue by putting geographical restrictions then it would have used the word 'HEE' ( ) rather than 'BHI' ( ) in the impugned notification while providing for sale of goods manufactured in the State of Jharkhand. The learned Senior Counsel for the Petitioner submitted that the authorities were not right in invoking Section 13(3) of the Act and the Tribunal failed to appreciate that concession was being allowed to the Petitioner between 1985 to 2002 then the term "sale" in Section 13(1)(b) was not qualified by either "inside State of Bihar" and "in the course of inter-state trade and commerce". The learned senior counsel further submitted that the Tribunal erred in holding that - (i) State Sales Tax Law can take into sphere only sales within....
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.... trade or commerce or export. Section 2(t) provides definition of sale which means any transfer of property in goods or cash or deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of a charge or pledge of goods. Section 3 provides that subject to the provisions of this part, sales tax would be paid by every dealer if his gross turnover during the period not exceeding 12 month, exceeded the specified quantum. Sub- section 9 thereof stipulates that the provisions of Central Sales Tax Act which shall apply for determining when a sale shall be deemed to have taken place inside the Bihar. Section 7 provides for exemption and indicates that no tax shall be payable under this part on sales or purchase of goods which have taken place (a) in the course of interstate trade or commerce (b) outside the State; (c) in the course of import or export of the goods outside the territory of India. 19. Section 21 provides for definition of taxable turnover. In the aforesaid scheme of the Act, rates of taxes to be ordinarily paid are prescribed under Section 12. Section 12 provides for rates of taxes payable by the dealer under Sections 3 and 4 which may ....
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....the sale was made to the purchaser holding certificate granted under the said sub-section. (3) In respect of sales under clauses (a), (b), (c) and purchase under clause (b) of sub-section (1), if the goods purchased are utilized by the purchaser for any purpose other than those specified in the said clause the purchaser shall, without prejudice to any action which is or may be taken under Section 49, be liable to pay tax on the sale or purchase price, as the case may be, at the rate which is arrived at after deducting the concessional rate under this Section from the rate applicable to the goods, class or description of goods under Section 12. (4) .... 22. By the amendment made with effect from 01.08.1985, the words "in Bihar or in the course of inter-State trade or commerce" as appearing after the term "sales" was deleted. That is after the amendment from 01.08.1985, the restriction for use of goods purchased under concessional rate in the manufacture or processing of any goods for sale in Bihar was deleted. Deletion of the aforesaid words by the amendment from 01.08.1985, removed the geographical restriction for manufacture of goods from raw materials purchased on concessional....
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....ions of the English Translation given by both the parties, we have tried to construe the amended Second proviso in the manner indicated as in its original version in Hindi. 27. In the amendment, the words "evam utpadit maal ka vikray Jharkhand rajya ke antargat ya antarajya vyapar avam vanijya 28. The language used in the amended proviso makes clear the intention of the legislature that the goods manufactured out of the raw materials purchased at a concessional rate under Section 13(1)(b) has to be used for manufacture of goods within the State of Jharkhand and such manufactured goods are to be sold in the State of Jharkhand or in course of inter-state trade and commerce. The purchaser who buys goods on the concessional rate of tax and does not utilize the goods for the purpose indicated in Section 13(1)(b) read along with amended proviso, are made liable for paying up the differential rate of tax i.e., the difference between tax at the full rate and the concessional rates under Sub-Section (3) of Section 13, apart from liability for criminal prosecution under Section 49. 29. Section 12 of the Act prescribes that the rate of (sale or purchase) tax payable by a dealer under Sect....
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....ifferential tax on the goods. 32. In the Second proviso inserted by the amendment in 2002, the Jharkhand legislature has restricted the concessional rate of purchase only to those dealers who manufacture goods within the State and sell these goods within the State or inter-state sales originating from the State on which taxes have accrued to State and not to dispose it otherwise than by way of sale i.e. stock transfer for which revenue does not accrue to the State. 33. The learned Senior Counsel for the Petitioner Mr. Mittal submitted that the Second proviso inserted by the amendment does not contemplate any geographical restriction on sale of manufactured goods and the same is evident from the plain language of the impugned notification which uses the word 'BHI' ( ) rather than 'HEE' ( ). As far as the condition with respect to the sale of manufactured goods is concerned, it was submitted that the manufactured goods can be sold in the State or in the course of inter-state trade and commerce in addition to sale outside the State of Jharkhand and also the export sale. The learned Senior Counsel submitted that the intention of the legislature has to be gathered from the plain readi....
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....mpugned notification while providing for sale of goods manufactured in Jharkhand. Learned senior counsel further submitted that if the meaning of the word 'BHI' ( ) which means "also" is taken into consideration, then the interpretation which would emerge is that the goods manufactured "may also" be sold in the State or in the course of inter-state trade and commerce in addition to export sale and sale outside the State. The contention of the Petitioner is that the Petitioner dispatched the goods manufactured in Jharkhand to its depots all over the country on stock transfer basis against Form F and such goods have been admittedly sold in other states in which depots are situated and such sale outside the State of Jharkhand also qualifies for the benefit of Section 13(1)(b) and, therefore, the State is not right in invoking Section 13(3) to impose the differential rate of tax on the Petitioner. 35. Learned counsel for the State Mr. Rajesh Shankar submitted that the word 'BHI' ( ) has been used in the Second proviso as a conjunction in view of the two transactions indicated in the Second proviso. Learned counsel for the State further submitted that the Petitioner is a purchasing dea....
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....er availed of concessional rate of tax, but were not required either to manufacture the goods within the State or to sell it in Bihar or in course of inter-state trade or commerce. This obviously would have resulted in absence of any increase in manufacturing activity within the State by such purchase of raw material availing concessional rate and also absence of increase of revenue as there was no restriction on sale of goods so manufactured in the State or in course of inter-state trade or commerce. The amended proviso introduced in the year 2002 therefore appears to have been incorporated with a conscious objective to ensure that such grant of benefit of concessional rate to the purchaser is coupled with a restriction to manufacture the goods from such raw materials within the State of Jharkhand and at the same time, the goods were also sold within the State of Jharkhand or in course of inter-state trade or commerce. This was intended to encourage not only the manufacturing activity within the State but also increase revenue resultant from such sale. In the aforesaid background, Legislature therefore must have intended to insert the Second proviso to ensure that the grant of suc....
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....se tax on sale taking place outside its geographical limits. The State is barred from levying any tax on export sale in view of prohibition under Article 286(1)(b) of the Constitution of India. There is no merit in the contention of the Petitioner that the Second proviso to Section 13(1)(b) has no geographical restrictions on sale and that it includes goods stock transferred to outside State for sale outside the State. 40. Learned counsel for the respondent State submitted that if the goods manufactured out of the raw materials purchased at the concessional rate under Section 13(1)(b) are sold outside the State, the State is deprived of its revenue and, therefore, the Second proviso was inserted restricting that the goods manufactured out of the raw materials purchased at concessional rate under Section 13(1)(b) has to be sold within the State of Jharkhand or in course of inter-state trade and commerce. The learned counsel further submitted that in case, if the sales are effected outside the State and the conditions of Second proviso are not complied with, the State rightly invoked Section 13(3) imposing the differential rate of tax. 41. Learned senior counsel for the Petitioner ....
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....he Courts must always seek to find out the intention of the legislature. The Second proviso has to be interpreted in harmony with other provisions of the statute and the State legislature would not have intended to legislate to suffer revenue loss. We are of the view that the words occurring in the notification "... goods so produced shall be sold within the State of Jharkhand or also in the inter-state trade and commerce" (evam use utpadit maal ka vikray Jharkhand rajya ke antargat ya antarajya vyapar avam vanijya ke liye bhi hoga) clearly means that the goods manufactured out of the raw materials purchased at a concessional rate of tax under Section 13(1)(b) has to be sold within the State of Jharkhand or in course of inter-state trade and commerce which refers to Section 3 of the C.S.T. Act. The intention of the legislature is quite clear in the amendment. 45. The intention and object of the Second proviso is to recompense the revenue to the State which grants concessional rate of tax to the Petitioner for purchase of raw materials used in the manufacture of goods and the goods so manufactured be sold in the State of Jharkhand or in the course of inter-state trade and commerce ....
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....s of construction which, with their general tendency to give the tax payer the breaks", are out of place where the legislation has a fiscal mission. Indeed, taxation has ceased to be regarded as an impertinent intrusion into the sacred rights of private property" and it is now increasingly regarded as a potent fiscal tool of State policy to strike the required balance required in a context of the felt needs of the times - between citizen's claim to enjoyment of his property on the one hand and the need for an equitable distribution of the burdens of the community to sustain social services and purposes on the other. These words of Thomas M. Cooley in Law of Taxation Vol.2 are worth mentioning : "Artificial rules of construction has probably found more favour with the Courts than they have ever deserved. Their application in legal controversies has oftentimes been pushed to an extreme which has defeated the plain and manifest purpose in enacting the laws. Penal laws have sometimes had all their meaning construed away and in remedial laws, remedies have been found which the legislature never intended to give. S....
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.... 2005-06, the gross turnover is Rs.11,626.47 crore and Rs.12,868.24 crore respectively out of which the Petitioner transferred stock of Rs.7,535.88 crore (64.816% of the G.T.O.) during the assessment year 2004-05 and stock of Rs.8,475.07 crore (65.86% of the G.T.O.) during the assessment year 2005-06 to other depots of the company for sale outside the State. The Petitioner furnished Form F stating that he has transferred the goods so produced to other depots and claimed deduction on the ground that it is not a sale. In the assessment year 2004-05, stock of Rs.7,535.88 crore and in the assessment year 2005-06 stock of Rs.8,475.07 crore have been transferred to other depots of the company for sale outside the State and before the Assessing Officer the Petitioner preferred a claim that he is not liable to pay tax under Section 6A of the CST Act because the goods have been transferred to outside the State. 51. The manufactured products worth Rs.7,535.88 crore (2004-05) and Rs.8,475.07 crore (2005-06) transferred to other depots of the company situated outside the State which were manufactured using the raw materials purchased at the concessional rate. On the one hand, the State has lo....
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....us inserted Second proviso imposing condition that the manufactured goods has to be sold in the State of Jharkhand or inter-state trade and commerce to see that there was no revenue loss caused to the State. The amendment is only to balance the loss in respect of the sales effected outside the State and normal revenue accrues to the State in respect of the sale of the raw materials purchased by the registered dealer availing concessional rate of tax. 54. The submissions made by the learned Senior Counsel for the Petitioner relying upon the notings is not acceptable since if the language of the statute is clear and the legislative intent and purpose can be deciphered, then the court is not required to fall back on any intrinsic or extrinsic aid to its construction. The rules of interpretation clearly provide that only if the language of the statute is not clear and is ambiguous, then court may resort to intrinsic aid. Only after exhausting the resort to intrinsic aid, the court may seek to discover the intent from extrinsic aid as may be available. In the present case therefore, the reliance of the Petitioner upon the notings in the file at different levels of executive hierarchy i....
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....o the Union Territory of Delhi and the Act was applied to Delhi subject to certain modification by a Notification dated 28.04.1951 issued by the Central Government. The said Act provided a Clause that concessional rate of tax shall be available only if the goods are manufactured in Delhi for sale. An amendment was introduced on 28.05.1972 and Section 5(2)(a)(ii) was substituted. As per amendment, Section 5(2)(a)(ii), taxable turn over means that part of a dealer's gross turn over during any period, which remains after deducting therefrom the allowable deductions. Section 5(2)(a)(ii) reads as under: - (2) In this Act the expression "taxable turnover" means that part of a dealer's gross turnover during any period which remains after deducting therefrom (a) his turnover during that period on- (i) ......... (ii) sales to a registered dealer - of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for re-sale by him, or for use by him as raw materials in the manufacture in the Union Territory of Delhi (hereinafter in this sub-clause referred to as Delhi), of goods (other than goods declared tax free under Section 6): - (A) for....
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....the goods declaration in the prescribed form as it stood prior to March 29, 1973 stating that the goods were purchased by them for use as raw materials in the manufacture of goods for sale and thereafter used the goods as raw materials in the manufacture of goods in some cases outside Delhi and in some other inside Delhi. 61. The Hon'ble Supreme Court held that even where the assessees used the goods purchased as raw materials in the manufacture of goods outside Delhi or having manufactured the goods sold by them outside Delhi, there was no breach of the intention expressed by them in the declaration given to the selling dealer and therefore cannot be said to have utilized the goods for any purpose other than that for which they were purchased so as to attract applicability of the Second proviso. 62. The reliance by the Petitioner in the case of Polestar appears to be misplaced in view of the fact that under the relevant provisions of Delhi Act i.e., Section 5(2)(a)(ii), the words 'inside the Union Territory of Delhi' were absent. In the said context the Hon'ble Supreme Court found that there was no such expression in the declaration form also to charge the assessee with such dif....
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....icate of Registration are purchased by the purchasing dealer but utilized by it for any other purpose, the price of goods purchased had to be deducted from the gross turnover of selling dealer but to be included in taxable turnover of the purchasing dealer. 66. It is under these circumstances, the involvement of both the selling as well purchasing dealer comes in case, the form of declaration as well as Certificate of Registration are mis-utilised. Whereas, in Section 13(3) of the Bihar Finance Act, there is a direct incidence of differential rates of tax upon the purchasing dealer (the Petitioner herein) if it does not fulfill the requirement for concessional rates of tax as mandated in Section 13(1)(b). Moreover, Second proviso of Bengal Act starts with the condition of misutilisation of Certificate of Registration by the registered Dealer, whereas, Section 13(3) of the Bihar Finance Act does not speak of any such misutilisation of Certificate of Registration/ Form by the purchasing dealer, rather the incidence of differential rates of tax automatically comes into play to be charged from the purchasing dealer (the Petitioner herein), if the conditions of Section 13(1)(b) are no....
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...., therefore, the Petitioner cannot be held guilty of violating Section 13(1)(b) read with Second proviso of the Act, especially in view of the fact that it has not used the goods purchased at the concessional rate of tax under Section 13(1)(b), contrary to declaration and intention expressed by it in Form IX. 70. Laying emphasis upon Clause (iv) in the Form IX it was submitted that Clause (iv) only states "for direct use in the manufacturing/processing of goods for sale..." and does not contain any clause that the goods so manufactured must be sold only within the State of Jharkhand. It was therefore contended that in the absence of any amendment in Form IX, the Petitioner cannot be said to have utilized the goods for purposes other than the one declared by the Petitioner and therefore the Petitioner cannot be held liable for paying the differential rate of tax - the difference between the tax at the full rate and the concessional rate of tax. 71. Placing reliance upon Polestar Electronics (Pvt.) Ltd. Case, it was contended that in the said case the Hon'ble Supreme Court has held that the declaration form on the strength of which seller claims exemption/concession from tax contai....
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....ation in the prescribed form duly filled up and signed by the purchaser shall be furnished by the selling dealer to the prescribed authority in the prescribed manner. 74. By a careful reading of Section 13(2), it is evident that Form IX is to be filed by the selling dealer, of course by enclosing the prescribed form duly filled up and signed by the purchaser. On perusal of Section 13(2) and Rule 13, it is seen that the requirement of submission of 'Form IX' has been made with respect to the selling dealer in support of its claim that any amount of his turnover should be assessed at the rate provided in Section 13 of the Bihar Finance Act. 75. Rule 13 read with 'Form IX' is not meant for the purchasing dealer (the Petitioner herein). On the contrary, the Petitioner is directly concerned with complying the provision of Section 13(1)(b) read with Second proviso, failing which the provision of Section 13(3) of the Bihar Finance Act automatically comes in application having no bearing on 'Form IX'. 76. Under Section 5(2)(a)(ii) of Bengal Finance (Sales Tax) Act, 1941 as applied in the Union Territory of Delhi, the prescribed form was to be filed by the purchasing dealer. In the light....
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.... stipulated in the Second proviso inserted by the amendment. Section 13(3) is the charging Section for levying differential rate of tax in case of contravention of Section 13(1)(b) read with the Second proviso and other provisions. The charging provision Section 13(3) is independent by itself. If the goods purchased under Section 13(1)(b) on concessional rate of tax and utilized by the purchase for any purpose other than those specified in the said clauses under Section 13(3), liability is created or fixed to impose differential rate of tax. 80. The charging Section 13(3) is to be invoked when the conditions stipulated in the Second proviso is violated. Section 13(3) is the substantive provision for imposing differential rate of tax in case the goods purchased and utilized for any purpose other than those specified. Whereas Rule 13 and Form IX is a form to be filed by the selling dealer enclosing the form of declaration given by the purchasing dealer evidencing the support of claim for payment of tax at a special rate under Section 13. Section 13(3) is a substantive provision; whereas Rule 13 Form IX is a procedural provision. The Tribunal referred to the decision of the Hon'ble S....
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.... 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 payable on the raw materials purchased at concessional rate of tax by 4% paid by furnishing Form IV. The High Court's impugned judgment, therefore, does not warrant any interference. It may be noted that the High Court made some observation about what would have been the consequence had there been mention of final product in the certificate of registration of the appellant." 82. Applying the ratio of the above decision in the case on hand, we are of the view that transfer of the manufactured goods by the Petitioner to the other depots situated outside the State of Jharkhand is "used for any other purpose" within the meaning of Section 13(3) for imposing the differential rate of tax. 83. Petitioner's liability under Section 13(3) to pay differential rate of tax - As discussed above, the essential ingredients of the Second proviso and availing of concessional rate of tax is in respect of sale either well within the State of Jharkhand or inter-state trade and commerce originating from the State of Jharkhand. The concessional rate of tax is not to be....
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....at full rate on the goods purchased. The order of the Assessing Officer has been confirmed by the order of the Appellate Authority. Referring to the concurrent findings recorded by the Assessing Officer and the Appellate Authority, the Tribunal dismissed the revision petition by its well considered order and we do not find any error warranting interference. 84. The learned Senior Counsel for the Petitioner has placed reliance upon M/s. Lafarge India Limited's case and submitted that in the said case the goods purchased under Section 13(1)(b) of the Act at concessional rate have been utilized in manufacture of cement for sale. On the same set of facts, the Commercial Taxes Tribunal, Ranchi held that since the rules have not been amended accordingly and in as much as, declaration in the prescribed Form IX continues, the amended provision cannot be given effect to. The learned Senior Counsel appearing for the Petitioner submitted that the State revenue has not chosen to challenge the said order passed in Lafarge India Limited which would show that the State revenue has accepted the said order and while so, the State cannot turn around and contend otherwise in the case of the Petition....
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....y appellate forum. It was submitted that W.P.(T) No. 2257 of 2009 filed earlier was subsequently disposed of on 27.06.2009. Learned counsel for the State submitted that in view of the filing of the writ petitions challenging the order of assessments, the Department did not proceed in respect of two assessment years 2002-03 and 2003-04. Since the Petitioner had chosen to challenge the demand notice and also the order of assessment for the assessment years 2004-05 and 2005-06, the Department was perhaps waiting for the matter to reach finality. In such facts and circumstances, the Petitioner cannot contend that in respect of the assessment years 2002-03 and 2003-04 the Department has not invoked Section 13(3) and thus acquiesced the returns filed by the Petitioner claiming stock transfer. 88. In the result we summarize our conclusions as under - * Second proviso to Section 13(1)(b) of Bihar Finance Act (adopted by the State of Jharkhand), inserted by amendment, 2002 stipulates that the goods manufactured using the goods purchased at the concessional rate of tax under Section 13(1)(b) has to be sold within the State of Jharkhand or in the course of inter-state trade and commerce. T....