TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 62
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.... without jurisdiction and contrary to the provisions of OET Act. 2. Petitioner's case in a nut-shell is that it is a Government of Odisha Undertaking incorporated under the Companies Act, 1956 and a joint venture of Government of Odisha and AES of USA having main objects to establish, operate and maintain power generating stations and tielines, sub-stations and main transmission line connected therewith. In other words, the petitioner is engaged in business of generation of electricity and distribution thereof in the State of Odisha. Ib Thermal Power Station (ITPS) is one of the thermal power generation units of the petitioner-Company situated at Ib Valley area in the district of Jharsuguda, Odisha. The petitioner has also set up mini hydel projects for furtherance of its business to achieve its objects. It is registered under the Orissa Value Added Tax Act, 2004 (for short 'OVAT Act') and OET Act and in the said registration certificate it has been authorized to purchase coal as raw-material for generation of electricity. The petitioner having thermal power plant is engaged in manufacture and distribution of electricity. It uses coal as primary/only raw-material in it....
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....Court is impermissible in law. 4. Coal has been mentioned as an item required to be purchased for generation of electricity in the registration certificate and the petitioner during relevant time was purchasing coal from MCL furnishing declaration in Form E-15 in terms of Rule 3(5) of OET Rules stating therein that coal purchased shall be used for production of finished product, i.e., electricity. 5. It was further submitted that 'manufacture' means bringing into existence a new substance. In other words, manufacture implies that when a change takes place a new and distinct article comes into existence known as a commercial product, which can be no longer regarded as the original commodity. Any process or processes creating something else having a distinct name, character and use would be manufacture. In the instant case, coal is used by the petitioner at its thermal power station at IB Valley area as a raw-material for generation of electricity by which process coal loses its characteristics and is transformed into electricity which is a finished product. Hence, the finding of opposite party No.2 in the impugned assessment order that generation of electricity cannot be e....
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....l concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules? 9. Question No.(i) is whether generation of electricity is a manufacturing activity. The expression 'manufacture' is not defined in the OET Act. However, Rule 2(1)(c) of the OET Rules provides that "manufacture" with all its grammatical variations and cognate expressions, means a dealer or a person in the business of manufacture as defined in the Orissa Value Added Tax Act, 2004. 10. Section 2(q) of the OET Act provides as follows: "2(q) Words and expressions used in OET Act and not defined in the said Act, but defined in the OVAT Act shall have the same meaning respectively assigned to them in that Act." 11. Section 2(28) of the OVAT Act defines "manufacture" as under: "2(28) "Manufacture" means any activity that brings out a change in an article or articles as a result of some process, treatment, labour and results in transaction into a new and different article so understood in commercial parlance having a distinct name, character and use, but does not include such activity or manufacture as may be notified." 12. It may be relevant to mention here that law is well-settled that where a....
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....cted to (sic that the) manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture." 18. This Court in the case of Orient Paper & Industries Ltd. (supra) while interpreting Section 2(b) of the Central Excise and Salt Act, 1944 has held that generation of electricity for the purpose of Central Excise and Salt Act is "manufacture or production of electricity", since the term "manufacture or production" is to be given a wide meaning. 19. In view of the definition of 'manufacture' as provided in Section 2(28) of OVAT Act read with Rule 2(1)(c) of the OET Rules and Section 2(q) of the OET Act and all the above judicial pronouncements of the Hon'ble Supreme Court and High Court, we are of the considered view that the activity of generating electricity in thermal power plant by using coal would qualify as a manufacturing activity. 20. Question No.(ii) is as t....
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....n view of the above decisions of the Hon'ble Supreme Court, electricity is an article as referred to in Section 2(28) of the OVAT Act read with Rule 2(1)(c) of OET Rules which define 'manufacture'. 22. Question No.(iii) is whether coal is a raw-material for generation of electricity in thermal power plant. The processes that are involved in manufacture/generation/ production of electricity as narrated in the written submission filed by the petitioner before the Assessing Authority and not disputed by the opposite party-Department, are as follows:- (a) Coal is the primary material for power generation; (b) In a Thermal Power Plant chemical energy available in Coal is converted into electricity; (c) Coal is fed into a boiler along with water and air; (d) Coal is fired to heat the water and resulting in generation of steam; (e) Chemical energy in coal gets converted into heat energy and the same is carried by steam which acts as a medium to the Turbine; (f) The high pressure steam impinges and expands across a number of blades in the turbine and thereby rotating the turbine; (g) In the process heat energy carried through steam gets converted into mechanical energy;....
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....ependance of the end product for its essential presence at the delivery and of the process. The ingredient goes into the making of the end-product in the sense that without its absence the presence of the end-product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus." 25. When the processes that are involved in manufacturing/ generation/production of electricity in a thermal plant as narrated in the preceding paragraph is considered in the light of the above observation of the Hon'ble Supreme Court, it can safely be concluded that coal is a raw material for production/generation of electricity. 26. This Court in Bhushan Power and Steel Limited (supra) held that coal is a raw material for the purpose of generating electricity. 27. Apart from the above, perusal of the impugned assessment order reveals that before the Assessing Authority, the petitioner produced the expert opinion obtained from IIT, Kharagpur, wherein, it has been opined that coal is a raw material which results in the emergence of electricity. The relevant portion of the said repo....
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....be used only for the purpose of fertilizer or whether crushed bones are sold to the farmers for use thereof only as fertilizer." 30. In view of the above, we are of the considered opinion that coal is a raw material for production of electricity in thermal plant. The facts and the issues involved in Ahmedabad Electricity Co. Ltd. and others (supra) are completely different from the present case and therefore, it is of no assistance to the Department. 31. Now, let us examine whether the reasons given by the learned Assessing Authority for disallowing the petitioner's claim to avail concessional levy of entry tax in terms of Rule 3(4) of the OET Rules are legally valid. The reasons assigned by the Assessing Authority to disallow the petitioner's above claim are as follows: (a) coal generates steam and steam so generated rotates the turbine and in the process of rotation of turbine electricity is generated. Therefore, coal does not transform into electricity; (b) Though coal contains chemical energy that does not convert to electric energy; (c) In absence of any standard input and output ratio between coal and generation of electricity, it cannot be said that coal is a ....
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....sing Authority that without coal thermal power which is finished product in a thermal power station can be produced and therefore, coal is not a primary/principal raw material to generate/produce thermal power. On the other hand, use of coal and production of electricity in a thermal power plant is an integral process and so inextricably connected that no thermal power can be produced without use of coal; (b) Consumption and output ratio between coal and electricity is not necessary/relevant in deciding whether coal is a raw material for generation/production of thermal power. (c) While adjudicating as to whether coal is a raw material for generation/production of thermal power, it is irrelevant to find out whether water, wind, solar power are raw material for generation of hydro electricity, wind energy and solar energy respectively. Such questions may be adjudicated in appropriate case (s). (d) There is no dispute over the legal proposition that every change in a processing is not manufacture as held by the Hon'ble Supreme Court in Kutty Flush Doors & Furniture Co. (supra). As in the present case a new and different article, i.e., electricity energy emerges which is distin....
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.... 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. 36. In view of the above analytical discussion of this Court, by no stretch of imagination, it can be said that the findings/observations of this Court that 'coal is a raw material for generation of electricity' are unnecessary for the decision of that case or it does not relate to the material facts in issue. Therefore, the learned Assessing Authority is wholly unjustified to hold that the observation of this Court in Bhusan Power and Steel Ltd. (supra) that "coal is a raw material for generation of electricity" is a cursory remark, i.e., obiter dicta. 37. It may be relevant to note that the As....
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....nce Corporation Ltd., AIR 1992 SC 711, in paragraph 6 has observed as follows: "The High Court has, in our view, rightly criticized the conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department-in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has b....
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....e correct position of law. As a result, the judiciary would lose its credibility. 46. It may be noted that it is not the case of the Assessing Authority that the decision of this court in Bhusan Power and Steel Ltd. (supra) has been stayed or varied by the Hon'ble Supreme Court. Therefore, the Assessing Authority cannot refuse to follow the judgment of the High Court on the ground that a challenge has been made to the judgment of this Court in the Hon'ble Supreme Court and the same is pending. Hence, the Assessing Authority is clearly guilty and committed contempt of this Court and is liable to be proceeded against. The Registry of this Court is directed to separately initiate a contempt proceeding against Mr. A.C. Nayak, Joint Commissioner of Sales Tax, Sambalpur Range, Sambalpur by name, who has passed the assessment order dated 03.05.2014 under Section 9C of the OET Act for the period 01.04.2011 to 31.03.2013. 47. We are afraid to notice that even though the petitioner has filed a written submission in course of the assessment proceeding as evident from the impugned assessment order relying on various statutory provisions, the Supreme Court judgments, judgments of the ....