TaxTMI 
TaxTMI 
2002 (5) TMI 837
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....er S.O. No. 478 on proportional basis which works out to 9889 MT only and also a direction was made therein that the refund of the tax paid on purchase of raw materials during the period of exemption has to be routed through the seller-company, i.e., TISCO for the refund of the amount of the tax to the dealer-company. 2.. The case of the petitioner is that the petitioner is a company incorporated under the Indian Companies Act having its factory at Golmuri, Jamshedpur and initially it was manufacturing Electrolytic Tin Plate (ETP) having its installed capacity of 90,000 MT and its sole raw material was Tin Mill Black Plate (TMBP) which was totally imported by it from various countries. In pursuance of the Industrial Policy of 1995 which provides for grant of exemption from payment of sales tax on purchase of raw materials and on the sales of finished product in case of new industry in the State of Bihar or an existing unit comes for expansion/diversification/modernisation, the petitioner set up a plant in the said premises for manufacturing TMBP and other CR products on investment of Rs. 300 crores under a separate licence by Ministry of Industries, Government of Bihar. The Stat....
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....order dated June 23, 1998 granted exemption to the petitioner in terms of S.O. No. 478 dated December 22, 1995 from payment of sales tax on purchase of raw materials from April 5, 1996 to April 4, 2004 only on incremental production in excess of 2/3rd of installed capacity of old plant ETP which compelled the petitioner to move the matter before JCCT (Admn.), who by order dated September 22, 1998/September 23, 1998 allowed the claim of the petitioner to exemption from payment of sales tax on purchase of raw materials for the period of eight years on the entire raw materials purchased for the manufacture of entirely new product, namely, TMBP. Since the exemption certificate was issued on June 23, 1998 the petitioner had paid sales tax on the purchase of the raw materials as at the relevant time the completion certificate which covered the period was not issued by the department in time and the petitioner had paid sales tax thereon to the extent of Rs. 823.89 lakhs and Rs. 23.94 lakhs for the period from April 5, 1996 to March 31, 1998 to the seller, i.e., TISCO and SAIL respectively. Thereafter on the application of the petitioner TISCO moved Deputy Commissioner of Commercial Taxes,....
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....oils for which exemption was granted to the petitioner and the part of the HR coils purchased were utilised for the production of semi-processed goods in the form of FHCR. The JCCT further held in the impugned order that the procedure of the refund will be guided by section 42 of the Bihar Finance Act, 1981 where refund of tax paid on purchase of raw materials has to be routed through seller companies, i.e., TISCO and SAIL and the amount would be refunded to the petitioner through them. 4.. Being aggrieved with the impugned order dated June 30, 2000 passed by the JCCT the petitioner has filed this writ petition and it has been stated that the JCCT (respondent No. 3) has gone beyond his jurisdiction and has misinterpreted the order of this Court and also the Industrial Policy and S.O. No. 478 dated December 22, 1995 and the impugned order is arbitrary, illegal and against the direction of this Court as respondent No. 3 has wrongly interpreted the Industrial Policy as well as notification issued in pursuant thereto and has wrongly held that the petitioner is entitled for tax exemption only to incremental production above 2/3rd of its original production capacity. It has been al....
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....ction 42 will not apply in this case and the refund has to be made directly to the petitioner. 5.. The case of the respondents, inter alia, is that in accordance with the Industrial Policy, 1995 read with S.O. Nos. 478 and 479 dated December 22, 1995 the tax-free purchase of raw materials and tax-free sale of finished product in case of expansion/diversification/ modernisation are admissible only in respect of incremental production, i.e., 2/3rd of the original capacity or the highest production during the last preceding three year whichever is higher and the exemption is only admissible regarding incremental production in respect of the diversification also which is fixed at production over and above 2/3rd of the original capacity, i.e., 60,000 MT since it was on higher side of actual production for 1995-96, 1994-95 and 1993-94. It is stated that the Assistant Commissioner of Commercial Taxes (Administration), Jamshedpur had approved the exemption proposal under S.O. Nos. 478 and 479 dated December 22, 1995 holding that the facility of tax-free raw material purchase will be admissible in respect of incremental production only and there shall be no exemption for produc....
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....tion 46 of the Bihar Finance Act, 1981 and in this view of the matter the writ application is not maintainable. Lastly it has been stated that the procedure for refund is to be governed as per provision 42 of the Bihar Finance Act and no prejudice is likely to be caused to the petitioner on account of manner of refund and the claim of refund is to be routed through the supplier to whom the taxes were paid in accordance with the existing legal procedure. 6.. The petitioner had earlier filed C.W.J.C. No. 3248 of 1999(R) for issuance of writ of mandamus directing the respondents to refund the amount of sales tax paid by it on purchase of raw materials between the period April 5, 1996 to March 31, 1998 on the basis of the exemption certificate dated June 23, 1998 with effect from April 5, 1996 pursuant to the Industrial Incentive Policy of the year, 1995. After hearing the parties this Court vide order dated January 6, 2000 while disposing of the writ petition has made the following direction: "The Joint Commissioner of Commercial Taxes, Jamshedpur (respondent No. 3) is directed to consider the matter afresh. The petitioner shall furnish the materials before him with a view to ca....
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....of FHCR." .............. "During 1997-98 the dealer-company's CRM unit has produced 68,588 metric ton of CR coils and consumed HR Coil worth 78,978 metric ton. In view of the express provision of the Industrial policy 1995, S.O. No. 478 and the exemption certificate granted to the dealer-company, the dealer-company may be entitled for tax-free purchase of raw materials over and above the 2/3rd incremental capacity of the unit which has been fixed at 60,000 MTPA. However, the dealer-company has not fully produced TMBP Coils out of the CR coils purchased. Nevertheless dealer-company has exceeded the 2/3rd capacity of production fixed at 60,000 MT towards incremental production qualifying for tax-free purchase of raw materials. As per the notes attached to the balance sheet and profit and loss account, actual production of CRM plant during the year was 68,588 MT against the raw material consumption of 78,978 MT during the year. Therefore, the dealer-company can avail of the tax-free purchase of raw material in the form of HR coil for the production of 8,588 MT of CRM product over and above the 2/3rd incremental capacity of 60,000 MT fixed under S.O. No. 478 on proporti....
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.... the petitioner is entitled for exemption only to the incremental production above 2/3rd of its original production capacity is wrong. It has been submitted by the learned counsel for the petitioner that the plant which the petitioner has established is totally a new plant producing TNBP which is used for manufacture of ETP which it was totally importing earlier and as such there is no question of granting of benefit of above capacity of 2/3rd of its original production. It has further been submitted that clause 15.4 of S.O. No. 478 dated December 22, 1995 is very explicit and it provides that in respect of diversification, the facility of exemption of sales tax would be available in respect of such goods which was not earlier manufactured by the petitioner. It has also been submitted that the petitioner is entitled for benefit of exemption with effect from April 5, 1996 and not from October 1, 1996, as stated in the impugned order as date of production is April 5, 1996 which will be evidenced by the certificate granted by the Director, Technical Development (annexure 4). It has been submitted that as per Indian Accounting Standard issued by Institute of Chartered Accountants of In....
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....ime of the new product and the raw materials are used for the first time in case of diversification and there cannot be any application of the principle of incremental production. It has been submitted that in case of modernisation and expansion of the unit the principle of incremental production only applies. On the basis of the aforesaid submissions it has been contended for the petitioner that the petitioner is entitled for full exemption from payment of sales tax on the purchase of raw materials, i.e., HR coils and in this view of the matter the order of the JCCT is perverse. 9.. It has been contended by the learned Additional AdvocateGeneral that in terms of clause (15.4) of S.O. No. 478 the facility of tax exemption to the unit undergoing expansion/modernisation/diversification will be available only on the extra incremental production as a result of such expansion/modernisation/diversification and the incremental production means the excess of actual production over 2/3rd of the original installed capacity of the highest production in three preceding years. It has also been submitted that the installed capacity of production of the company was 90,000 MT and accordingly th....
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....r manufacturing of ETP and for balance capacity of 30,000 MT the petitioner manufactured other cold rolled products as stated above and the said TMBP is being used as raw materials in the old plant to manufacture ETP. Admittedly the raw materials required for manufacture of TMBP and other cold rolled products are HR coils which it purchased from TISCO and SAIL and the petitioner claimed exemption from payment of sales tax on the purchase of raw materials, i.e., HR coils aforesaid in terms of Industrial Policy read with S.O. No. 478 as aforesaid. It is relevant to mention here that the petitioner came into commercial production with effect from April 5, 1996 which stands testified by the Director, Technical Development (annexure 4). The finding in the impugned order regarding production of TMBP in the new unit of the petitioner with effect from October 1, 1996 is incorrect and against the weight of the materials on the record. The petitioner had paid sales tax on the purchase of the raw materials to the seller i.e., TISCO and SAIL during the period from April 5, 1996 to March 31, 1998. The petitioner applied for the exemption certificate from payment of sales tax on the purchase of ....
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....l production and which has not earlier been produced by the unit and the products manufactured was a new one and it was a case of diversification. The contention of the learned counsel for the petitioner is that in case of diversification there cannot be any incremental production which proceeds on the basis that the production of the relevant year should not exceed 2/3rd of the production capacity. This applies only in case of expansion and modernisation and it can never apply in the case of diversification which postulates the production for the first time of the new products and the raw materials are used for the first time in the case of diversification and there cannot be any application of the principle of incremental production. 12.. Therefore, the core of contention between the parties is as to whether in case of diversification there can be any incremental production over and above 2/3rd of the production capacity for exemption of the sales tax paid on the purchase of the raw materials for the production of new product. Let us now advert to the Industrial Policy of 1995. Clause (16.3) of the Industrial Policy, 1995 runs as follows: "Units undertaking expansion/divers....
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....actual production over two third of the originally installed capacity or the highest production in three years preceding the year in which such expansion/modernisation/diversification commenced, whichever of the two is higher. In case of diversification this facility will be available only on such raw materials which has been used for such commercial production and which has not been produced earlier by the unit. (v) In case of diversification/expansion/modernisation, this exemption in sales tax will only be available which besides the incremental production the original production would also continue." There has been amendment of statutory Notification No. 478 dated December 22, 1995 by S.O. No. 57 dated 2nd March, 2000 with retrospective effect of the date of the Industrial Policy, 1995 clause (Ga) of sub-clause (4) of S.O. No. 57 dated March 2, 2000 is relevant. The English translation of which is as follows: "In case of diversification this facility will be available only on such raw material which has been used for such commercial production and which has not been produced earlier by the unit and this facility shall be available to the unit to the extent of the act....