TaxTMI 
TaxTMI 
2015 (11) TMI 48
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....Under the circumstance, all the writ petitions have been heard together. For the sake of convenience, the facts of the Writ Tax No.255 of 2012 is taken into consideration. 3. The petitioners are manufacturers and have applied for a Recognition Certificate under Section 4-B(2) of the Act for concessional rate of tax on purchase of goods for use in the manufacture of their final product which is a notified goods. The Recognition Certificate under Section 4-B(2) of the Act was granted by the Assessing Authority in which the goods 'diesel' was also mentioned under the category 'fuel'.' The petitioners were using diesel in their generator sets, which produced electricity, which was used to run the plant and machinery to manufacture the notified goods. Subsequently, the Commissioner of Trade Tax, U.P., Lucknow, issued a circular dated 20.7.2000 to all the subordinate officers directing that the benefit of form III-B for concessional rate of tax under Section 4-B of the Act shall not be given on purchase of diesel oil for use in generator sets in the factory. Consequently, notices were issued on 29.06.2000 by the Assessing Authority to the petitioners for deleting t....
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....d Civil appeal no.1929 of 2004 before the Hon'ble Supreme Court which was allowed by judgment dated 26.2.2010, State of U.P. and others Vs. Van Organic Chemicals Ltd., 2010, U.P.T.C., 413 and the matter was remanded to the Assessing Authority for de novo adjudication on the show cause notices. While allowing the Civil Appeals of respondents, Hon'ble Supreme Court observed that under the scheme of Section 4-B(2) of the Act, the Assessing Authority was vested with statutory power to issue Recognition Certificate in respect of items enumerated therein which was required by the dealer for use in the manufacture of any notified goods but the question whether the department is precluded to rectify mistake in issuing Recognition Certificate by including HSD Oil, was not answered by the High Court and, therefore, each case was required be examined by the Assessing Authority. The Supreme Court held that the show cause notices issued would constitute as a show cause notices for amending the Recognition Certificate. Hon'ble Supreme Court further directed that Assessing Authority would decide each case on its own merit uninfluenced by the decision of the High Power Committee dated ....
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....the diesel oil has not been directly used in the manufacture of the final product by the petitioners. 8. Aggrieved with the aforesaid orders, passed by the concerned Assessing Authorities, amending the Recognition Certificate by deleting the goods 'diesel oil', the petitioners have filed the present writ petition. Submission of the Petitioners 9. Learned counsel for the petitioners submitted as under ; (i) The petitioners of Writ Petition no.255 of 2012, Writ Petition No.399 of 2012, Writ Petition No.279 of 2012 and Writ Petition No.289 of 2012 have no electricity connection from the U.P. Electricity Board/U.P. Power Corporation. They run their plant and machinery by diesel generator sets only. (ii) The industry of petitioners of Writ Petition No.254 of 2012, and Writ Petition No. 342 of 2012 are continuous process industry and, therefore, the plant and machinery are necessarily required to be run continuously to manufacture final products. Diesel generator sets have been installed in the factory premises to run plant and machineries in the event of power cut/brake down and in which diesel oil is used. (iii) There is no dispute that petit....
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....o as to use the same in the manufacture of their final product. (ii)Section 4-B(2) of the Act uses the phrase "for use in the manufacture of notified goods', since electricity is a notified goods and diesel oil is consumed as such use of diesel can not be said to be for use in the manufacture of final products of the petitioners. (iii) Use of diesel by the petitioners in diesel generator sets to produce electricity and in turn to use the same to run their plant and machinery would amount to disposal of electricity otherwise than by way of sale and thus, would attract the provisions of Section 4B(5)/(6) of the Act. (iv) Hon'ble Supreme Court has directed the Assessing Authorities for de novo adjudication and adjudication orders have been passed which are impugned in the present writ petitions. Against the impugned orders, the petitioners have a statutory remedy of first appeal under Section 9 and, thereafter IInd appeal before the Tribunal under Section 10 and thereafter revisions under Section 11 of the Act before the High Court and, therefore the present writ petitions under Article 226 of the Constitution of India are liable to be dismissed on t....
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....gned. (ii) Where vires of an Act, Rules, Notification or any of its provisions has been challenged. (iii) Where an order prejudicial to the writ petitioner has been passed in violation of principles of natural justice. (iv) Where enforcement of any fundamental right is sought by the petitioner. (v) Where procedure required for decision has not been adopted. (vi) Where Tax is levied without authority of law. (vii) Where decision is an abuse of process of law. (viii) Where palpable injustice shall be caused to the petitioner, if he is forced to adopt remedies under the statute for enforcement of any fundamental rights guaranteed under the Constitution of India. (ix) Where a decision or policy decision has already been taken by the Government rendering the remedy of appeal to be an empty formality or futile attempt. (x) Where there is no factual dispute but merely a pure question of law or interpretation is involved. 16. The above principles are supported by law laid down by Hon'ble Supreme Court in the case of Himmatlal Harilal Mehta v. State of Madhya Pradesh, AIR 1954 SC 403, Collector of Custom....
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....se of the appellant was that the assessment for sales tax has been made in respect of matters which do not fall within the legislative power of the State to impose sales tax. The writ petitioners raise questions involving interpretation of the words "transfer of the right to use any goods" in Sub-clause (d) of Clause (29-A) of Article 366 of the Constitution. By the impugned judgment, the High Court has dismissed the writ petitions filed by the appellant on the view that the alternative remedy of an appeal against order of assessment is available under the sales tax law and since the said remedy is available the writ petitions could not be entertained. Having regard to the question that was involved in the writ petitions relating to interpretation of sub-clause (d) of Clause (29-A) of Article 366 of the Constitution and the taxability of the transactions in respect of which sales tax has been assessed by the Sales Tax Officer, we are of the view that the High Court should have entertained the writ petitions and should have considered the said question instead of requiring the appellant to avail the remedy of appeal under the Sales Tax Act, The appeals are, therefore, allowed, the i....
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....003(7) SCC 693. We, therefore, do not see any justification to hold that the High Court wrongly entertained the writ petition filed by the Respondent." (Emphasis supplied by us) 20. In the case of State of Union of India v. Tantia Construction (P) Ltd. (Supra) Hon'ble Supreme court held as under : "21. In support of his aforesaid submissions Mr. Chakraborty firstly relied on and referred to the decision of this Court in Harbanslal Sahnia v. Indian Oil Corporation Ltd. (2003) 2 SCC 107, wherein this Court observed that the Rule of exclusion of writ jurisdiction by availability of an alternative remedy, was a rule of discretion and not one of compulsion and there could be contingencies in which the High Court exercised its jurisdiction inspite of availability of an alternative remedy. 33. Apart from the above, even on the question of maintainability of the writ petition on account of the Arbitration Clause included in the agreement between the parties, it is now well-established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such alternati....
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.... has been a breach of principles of natural justice or procedure required for decision has not been adopted. 19. Another Constitution Bench of this Court in State of M.P.v. Bhai, AIR (1964) SC 1006, held that the remedy provided in a writ jurisdiction is not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defence legitimately open in such actions. The power to give relief under Article 226 of the Constitution is a discretionary power. Similar view has been reiterated in N.T. Veluswami Thevar v. G. Raja Nainar, AIR (1959) SC 422; Municipal Council, Khurai v. Kamal Kumar, AIR (1965) SC 1321;Siliguri Muncipality v. Amalendu Das, AIR (1984) SC 653; S.T. Muthusami v. K. Natarajan, AIR 1988 SC 616; Rajasthan S.R.T.C. v. Krishna Kant, AIR (1995) SC 1715; Kerala State Electricity Board v. Kurien E. Kalathil, AIR (2000) SC 2573; A. Venkatasubbiah Naidu v. S. Chellappan, 2000(7) SCC 695; L.L. Sudhakar Reddy v. State of Andhra Pradesh,2001(6) SCC 634; Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha v. State of Maharashtra, 2001, 8 SCC 509; Pratap Singh and Anr. v. State of Haryana, [2002] 7 SC....
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....hose proceedings run their full course. Secondly, the doctrine has no application when the impugned order has been made in violation of the principles of natural justice. We may add that where the proceedings itself are an abuse of process of law the High Court in an appropriate case can entertain a writ petition. 23. Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, something going to the root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute. It was noted by this Court in L. Hirday Narain v. ITO, Bareilly, AIR 1971 SC 33 that if the High Court had entertained a petition despite availability of alternative remedy and heard the parties on merits it would be ordinarily unjustifiable for the High Co....
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....reme Court referred its judgment in the case of Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108 and observed in paras 31 to 33 as under: "31. In Southern Electricity Supply Co. of Orissa Ltd. vs. Sri Seetaram Rice Mill, (2012) 2 SCC 108 a three-Judge Bench held: (SCC pp.139-40, paras 80-81) "80 It is a settled canon of law that the High Court would not normally interfere in exercise of its jurisdiction under Article 226 of the Constitution of India where statutory alternative remedy is available. It is equally settled that this canon of law is not free of exceptions. The courts, including this Court, have taken the view that the statutory remedy, if provided under a specific law, would impliedly oust the jurisdiction of the Civil Courts. The High Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India can entertain writ or appropriate proceedings despite availability of an alternative remedy. This jurisdiction, the High Court would exercise with some circumspection in exceptional cases, particularly, where the cases involve a pure question of law or vires of an Act are challenged....
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....ccordance with law. The case is one of improper exercise of jurisdiction. It is not expected of us to deal with this issue at any greater length as we are dismissing this petition on other grounds. * * * * 9. ........, we hereby make it clear that the orders of the Commission are incapable of being questioned under the writ jurisdiction of the High Court, as a statutory appeal in terms of Section 27-A(1)(c) lies to this Court. Therefore, we have no hesitation in issuing a direction of caution that it will not be a proper exercise of jurisdiction by the High Courts to entertain writ petitions against such orders of the Commission." 33. Another Division Bench of this Court in CIT vs. Chhabil Dass Agrawal, 2014(1) SCC 603 held: (SCC pp. 608-11, paras 11-13 and 15) "11. Before discussing the fact proposition, we would notice the principle of law as laid down by this Court. It is settled law that non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. Undoub....
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....ierarchy of appeals is provided by the statute, the party must exhaust the statutory remedies before resorting to writ jurisdiction for relief and observed as follows: (SCC pp. 343-45, paras 12-14) "12. In Thansingh Nathmal v. Supt. of Taxes, air 1964 SC 1419, this Court adverted to the rule of self-imposed restraint that the writ petition will not be entertained if an effective remedy is available to the aggrieved person and observed: (AIR p. 1423, para 7) "7. ... The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by the statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up." 13. In Titaghur Paper ....
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.... Mills case, 1983(2) SCC 433 and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation." (Emphasis supplied by us) 24. The aforenoted judgment In the case of Major General Shri Kant Sharma, (supra) relied by the respondents shows that Hon'ble Supreme Court has held in the case of Southern Electricity Supply Co. of Orissa Ltd.(supra) that it is a settled canon of law that the High Court should not normally interfere in exercise of its jurisdiction under Article 226 of the Constitution of India where statutory alternative remedy is available but it is equally settled that this canon of law is not free of exceptions. The Courts, including the Supreme Court, have taken the view that statutory remedy, if provided under a specific law, would impl....
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....ct by the petitioners. It is also undisputed that some of the petitioners as mentioned above do not have any power connection and use diesel oil in their generator set installed in the factory premises to run their plant and machinery so as to manufacture their final product. The other petitioners who have power connection but their industry is a continuous process industry and, therefore, so as to ensure to run plant and machinery continuously even in the event of power cut or power breakdown, generators have been installed in the factory in which diesel oil has been used to run the plant and machinery. 28. Thus, there is no dispute that in order to run plant and machinery, the generators are essential, and for that purpose, diesel oil has been used in the generators. There is no denial of the fact that the entire process of manufacture carried on by the petitioners for converting raw material into finished goods essentially require generators in which diesel oil has been used. Thus the generation of power by generators by use of diesel oil so as to run plant and machinery is integrally connected with the manufacture of the notified goods i.e. the final product of the petitione....
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....ere any declared goods liable to tax under sub-section (1) of section 3-D are sold or supplied by a dealer, who is the first purchaser thereof, to another dealer, holding a valid recognition certificate under sub-section (2) in respect thereof, the State Government may, subject to such conditions and restrictions as may be specified by a notification in that behalf, grant the same relief as mentioned in clause (a) to such first purchaser: Provided that any notification under this clause or clause (a) in respect of paddy may b e made effective from a date not earlier than the first day of May, 1977: Provided further that the rules to carry out the objects of this clause or clause (a) may also be made effective from a date not earlier than the first day of May, 1977: (b) Where any goods liable to tax under any other provision of this Act are sold by a dealer to another dealer and such other dealer furnishes to the selling dealer in prescribed form and manner a certificate to the effect that he holds a recognition certificate issue under sub-section (2) in respect thereof, the selling dealer shall be liable in respect of those goods to tax at such concession....
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....alid with effect from the date of such notification has been made effective. (3) Omitted by U.P. Act No.1/1973. (4) (I) Where the assessing authority is satisfied that the dealer in whose favour the recognition certificate in respect of any goods was granted under sub-section (2)- (a) has discontinued the manufacturing business for the purpose whereof the recognition certificate was granted; or (b) has made a breach of any condition of the recognition certificate or (bb) has failed to pay any tax, penalty or other dues payable under this Act within a period of three months from the date such tax, penalty or other dues became payable; or (c) has failed to furnish the security required under section 8-C; or (d) is a firm, association or a joint Hindu family which, within the meaning of the explanation to sub-section (1) of section 18, is deemed to h ave discontinued its business, such authority may, either of its own motion or on the application of the dealer, cancel the recognition certificate with effect from such date as it may specify. ii.The assessing authority may amend a recognition certificate gr....
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....calculated at the rate of four percent, on the sale or purchase of such goods. (7) For determining whether a sale or purchase is in the course of inter-State trade or commerce, within the State, or in the course of export out of India, the provisions of sections 3, 4 and 5 of the Central Sales Tax Act, 1956, shall respectively apply. (8) No penalty under this section shall be imposed unless the dealer has been given a reasonable opportunity of being heard. (9) No prosecution under section 14, shall be instituted, and no penalty under section 15-A shall be imposed in respect of the same facts on which a penalty has been imposed under this section. 32. Recognition Certificate has been granted to the petitioners under Section 4-B(2) of the Act for concessional rate of tax on purchase of goods required by the petitioners for use in the manufacture by them in the State of any notified goods. Thus the entire controversy is dependent upon the interpretion of the expression "for use in the manufacture of any notified goods" 33. In the case of M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. Vs. The Sales Tax Officer, Kanpur and another, AIR 1965 SC 131....
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.... the expression "in the manufacture" of cloth in that restricted sense, would raise many anomalies. Raw cotton and machinery for weaving cotton and even vehicles for transporting raw and finished goods would qualify under Rule 13, but not spinning machinery, without which the business cannot be carried on. In our judgment, Rule 13 does not justify the importation of restrictions which are not clearly expressed nor imperatively intended. Goods used as equipment, as tools, as stores, as spare parts, or as accessories in the manufacture or processing of goods, in mining, and in the generation and distribution of power need not, to qualify for special treatment under s.8(1), be ingredients or commodities used in the processes, nor must they be directly and actually needed for "turning out or the creation of goods." 9. In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every cat....
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....g of Rule 13, is a difficult question on which no opinion need be expressed. But to qualify for specification under S. 8(3)(b) goods must be intended for use of the nature mentioned in Rule 13, in the manufacture of goods. Building materials used as raw materials for construction of "plant" cannot be said to be used as plant in the manufacture of goods. The Legislature has contemplated that the goods to qualify under S. 8(3)(b) must be intended for use as raw materials or as plant, or as equipment in the manufacture or processing of goods, and it cannot be said that building materials fall within this description. The High Court was, therefore, right in rejecting the claim of the Company in that behalf. 12. The expression "electricals" is somewhat vague. But in a factory manufacturing cotton and other textiles, certain electrical equipment in the present stage of development would be commercially necessary. For instance, without electric lighting it would be very difficult to carry on the business. Again electrical humidifiers, exhaust fans and similar electrical equipment would in the modern conditions of technological development normally be regarded as equipment necessa....
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....erial in the manufacture of paper. Following the law laid down in M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. (supra), Hon'ble Supreme Court held that Sodium Sulphate was used in the manufacture of paper as raw material. 36. In the case of Member Board of Revenue West Bengal Vs. Phelps and Co. (P) Ltd. (1972) 4 SCC 121, Hon'ble Supreme Court again considered the expression "for use by him in the manufacture of goods for sale" while interpreting the provisions of Section 5(2) of the Bengal Finance "Sales Tax" Act, 1941, so as to answer the question whether gloves used by workmen engaged in hot jobs in the course of manufacture of goods would be covered and held as under: "6. We have now to find out what exactly is the meaning of the expression "for use by him in the manufacture of goods for sale." Identical words are used in Section 8(b) of the Central Sales Tax Act 1956. This court was called upon to find out the scope of that expression in M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. Vs. The Sales Tax Officer, Kanpur and another, AIR 1965 SC 1310 Dealing with that expression this Court observed: The expression "in the manufacture of ....
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....; the raw naphtha so used is, it is not disputed, eligible to the exemption. The question is whether the ammonia used in the off-site plants is also ammonia which is "used elsewhere in the manufacture of fertilisers". The water treatment, steam generation and inert gas generation plants are part and parcel of the composite process that produces as its end product urea, which is a fertilisers. These off-site plants are part of the process of the manufacture of urea. There is no good reason why the exemption should be limited to the raw naphtha used for producing ammonia that is utilised directly in the urea plant. The exemption notification does not require that the ammonia should be used directly in the manufacture of fertilisers. It requires only that the ammonia should be used in the manufacture of fertilisers. The exemption notification must be so construed as to give due weight to the liberal language it uses. The ammonia used in the water treatment, steam generation and inert gas generation plants, which are a necessary part of the process of manufacturing urea, must, therefore, be held to be used in the manufacture of ammonia and the raw naphtha used for the manufacture there....
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.... years upon the environment and pollution control requires that all plants which emit effluents should be so equipped as to rid the effluents of dangerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end product is part and parcel of the manufacturing process of that end product. The ammonia used in the treatment of effluents from the urea plant of the appellants has, therefore, to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia to be entitled to the said exemption." (Emphasis supplied by us) 38. In the case of Steal Authority of India Ltd. Vs. Union of India and another (1997) 11 SCC 117, Hon'ble Supreme Court again considered an exemption notification under the Central Excise Act and held that Oxygen gas captively consumed by the manufacturer of iron and steel would amount to use in the manufacture of iron. In the case of Commercial Tax Officer Vs. Rajasthan Electricity (1997) 10 SCC 330. Hon'ble Supreme Court again followed the law laid down in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. (Supra) 39. In the case of Collector of C....
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.... eligibility of sales tax exemption on the controversy whether fuel consumed for electricity generation which was used to manufacture the end products would qualify for exemption as raw material, processing material or consumable stores and observed as under: "8. In our view, one of the important tests applied by this Court in J.K. Cotton, AIR 1965 SC 1310 and Ballarpur Industries, 1989(4) SCC 566 is the "test of essentiality" or the "test of dependency" in deciding the question as to whether the expression "raw materials" or processing materials" or "consumable stores" would cover various fuels like naphta, liquid diesel oil, natural gas, etc. We may reiterate for the sake of clarity that in this case, the fuels consumed are natural gas, furnace oil, diesel oil and naphtha. Broadly, these fuels are used by the industry for carrying on its manufacturing process. In most cases, these fuels are used to generate electricity which is then used in the manufacture of end products like caustic soda, industrial chemicals, etc." (Emphasis supplied by us) 42. In the case of Collector of Central Excise, Jaipur Vs. Rajasthan State Chemical Works, Deedwana, Rajasthan 1991(4....