22. Whether a Tribunal members can hear a appeal in the case in which he has earlier exercised his jurisdiction, though in a different category?

Held : No

The petitioner came before the High Court in a writ petition with question of law that, whether member of Tribunal can hear the appeal who had exercised jurisdiction as a revisional authority? Brief facts of the case are: the petitioner is a company engaged in the business of manufacture and sale of MS and galvanized tubes. The returns filed by the assessee for the period 1994-95 were accepted by the assessing authority and allowed the refund of Rs. 95,853/-. This order was reopened for revision and revising authority set aside the assessment order. Appeal filed against this order before the Haryana Tax Tribunal. This appeal was allowed and Tribunal held that assessing authority fully justified in passing the order.

The Deputy Commissioner then filed an application before the Tribunal, rejecting the preliminary objection of the respondent for review, the review petition was allowed. Petitioner challenged this review petition in writ before the High Court on the ground that, one of the members of Bench was revisional authority and had dealt with the petitioners file and passed interim orders at the revisional stage. Accepting petitioners say, the High Court set aside the order passed in review, and directed the Haryana Tax Tribunal to hear the matter afresh, taking into consideration preliminary objection raised by the petitioner as well.

[Ravindra Tubes Ltd. vs. State of Haryana & Others. Jinal Industries Ltd. vs. State of Haryana & Others 9 VST 92 (P& H)]

23. Entry Tax, goods imported from outside the country is taxable under entry Tax Act?

Held : No

The appellant imported sophisticated equipment from outside the country for their diagnostic clinic. Hospital equipment including 'x'-ray, ultrasound, doppler and scanning machine, other medical diagnostic apparatus etc. These equipments were taxed under Assam Entry Tax Act @ 8%. Being aggrieved by this imposition of tax, petitioner filed writ in High Court. The question raised was whether the State is competent to levy entry tax on the goods imported into a local area from outside the country?

The appellant argued that imposing entry tax on the goods imported from outside the country to the local area, the State has transgressed the specific prohibition imposed by the Constitution of India. As against this, submission of State was that, entry tax is imposed by virtue of entry 52 of List II of Seventh Schedule and this entry is aimed at imposing entry tax on entry of goods into local area for consumption, use or sale therein and does not make any distinction, in this regard between the goods, which are imported from outside country, and the goods, which are imported into the State by virtue of sale or purchase, which take place by way of inter State Trade or Commerce.

Not agreeing with this, the court held that:

1. Levy of tax on sale or purchase of goods and the levy of tax on entry of goods into a local area are covered by different entries in the Constitution and the incidence of taxation in both the cases is different.
   
   The restrictions imposed by Article 286(1)(b) of the Constitution on the power of the State is in respect of the levy of tax on sale or purchase of goods and not as regards entry of goods into a local area for consumption, use or sale therein and hence the contention that the action of the State Government in imposing entry tax on goods imported from outside the country to the local area is in violation of Article 286(1)(b) of the Constitution of India is misconceived.

2. That the language of section 3 read with section 2(1)(b) of the Assam Entry Tax Act, 2001 is very clear that the Entry Tax Act provides for levy of entry tax on entry of specific goods into a local area from another local area or from outside the State only and does not provide for levy of entry tax into a local area from outside the country and,hence, no entry tax can be levied on entry of specified goods into a local area imported from outside the country. In fact such is not the legislative intent, for section 3 read with section 2(1)(b) of the Act excludes goods brought into a local area, in Assam from outside the country in the course of import of such goods into the territory of India. Further a plain reading of section 2(1) makes it clear that although insurance, excise duty, freight charges etc., have to be taken into consideration for determination of purchase price, no reference has been made to the customs duty payable for import of the goods. Similarly, the term, “importer”, as defined in section 2(1)(d) of the Act, does not take within its sweep a person importing goods from outside the country. Obviously, the Legislature had consciously used the words “including a place outside the State” for, they did not mean to convey outside the country since the distinction between the two is so obvious that this distinction could not have escaped the notice of the law makers. Therefore, tax cannot be levied under the Assam Entry Tax Act, 2001 on goods imported from outside the country into a local area.

[Primus Imaging Pvt. Ltd. vs. State of Assam and Another 9 vst 528 (Guwahati)]

24. Cancellation of Registration Certificate, change in place of business – no mala fide intention, registration restored

The petitioner carrying on business of timber was registered as a dealer under section 22 of the Madhya Pradesh Commercial Tax Act, 1994. Its registration was cancelled by the Commercial Tax Officer on the ground that upon inspection it was found that no business was carried out from the place mentioned on the certificate of registration. The petitioner explained that, because he had shifted the business temporarily, as the work of bridge and road construction by the Corporation was going on around his place of business. While place of business was temporarily shifted petitioner also informed submitted the returns, regularly and also paid commercial tax levied upon it. A revision petition filed by the petitioner before the Deputy Commissioner of Commercial Tax was dismissed. The petitioner then came before the High Court in writ.

While allowing the writ High Court observed that, the dealer made default in communicating his changed address, but there is no mala fide intention in doing so. The reason cited by the dealer and his behaviour of filing return and payment of tax showed that business is continued. The order, cancelling of registration certificate is quashed at the same time directions were given to the Commercial Tax Officer to impose the maximum penalty permitted under the law on the petitioner for not furnishing the information regarding change of address temporarily.

[Titiksha Sales & Consumables Pvt. Ltd. vs Commercial Tax Officer Circle Indore and Others 9 VST 538 (MP)]

25. Recovery of tax, penalty by attachment of bank account only permitted while proceeding is pending

To recover the assessment dues and penalty imposed bank accounts of the petitioner were attached. In the order imposing penalty the petitioner was asked to remit the amounts within one month from the date of service of the order. The assessing authority instead of waiting for a month passed an attachment order within a week from the date of penalty order. Aggrieved with this order, petitioner came in writ before the High Court on the ground that there is no power with the authorities to pass an order of attachment. U/s 27(2)(a) attachment can only be made during pendency of any proceeding. The court observed that provision is clear that the property can only be attached when the prescribed authority is of the opinion that for the purpose of protecting the interest of Revenue it is necessary so to do during the pendency of any proceeding for assessment or reassessment. To support action of assessing authority, revenue referred to Sec 29 of the Andhra Pradesh Value Added Tax, 2005. Rejecting their contention, court observed that sec 29 operates altogether in a different field. It is after the assessment when recoveries can be made from the third parties, therefore order of attachment is bad in law.

[Carlton Industrial Engineers vs. Commercial Tax Officer, Kakinada and Another 9 VST 77 (AP)]

26. Interpretation of condition “use of the goods purchased in the manufacture/process of ‘goods for sale’. (Supreme Court)

The appellant was registered under Orissa Sales Tax Act, and was engaged in the business of manufacture and sale of “Bulk explosive” The principal raw material for manufacture of “Bulk premix” is “ammonium nitrate liquor”. The appellant purchased this raw material from Steel Authority of India in Rourkela Steel Plant against declaration in Form No. IV, at concessional rate of tax of four per cent. “Bulk Premix” is an intermediary product which is used for manufacture of “Bulk explosive”. The appellant did not manufacture “Bulk Explosive” at their Rourkela plant. Therefore “Bulk Premix” was transferred to Branch outside the State.

In the background of these facts, question arose for consideration was whether the appellant who purchased raw materials for manufacture/processing of “bulk premix” for sale on the strength of declaration can be said to have violated condition (2) in sec 5(1), when the “Bulk Premix” was transferred to its different branches situated outside the State for manufacture of “bulk explosive”. The High Court held that Sales Tax authorities were justified in demanding differential tax as provided in the fifth proviso to sec. 5(1) of the Act on the raw material i.e “ammonium nitrate”. The condition (2) of sec 5(1) is that, the goods purchased against the declaration are for use within the State of Orissa by him in the manufacture/processing of goods for sale. Being aggrieved with this, appellant came before the apex court.

The appellant used “ammonium nitrate liquor” within the State to manufacture “Bulk premix”. “Bulk Premix” is the raw material for manufacture of “Bulk explosive”. “Bulk explosive” was for sale and is actually sold. Undisputedly it was admitted that, “ammonium nitrate liquor, was used within the State of Orissa to manufacture “Bulk premix”. “Bulk premix was so manufactured in the State was transferred outside the State to manufacture “Bulk explosive”. “Bulk explosive" has several uses, but “Bulk Premix” is raw material for “Bulk explosive”. In the disputed question, stress was on the phrase on use of the goods purchased in the manufacture/process of ‘goods for sale’
The fifth proviso to section 5(1) indicates the purpose for which the goods are intended to be used, i.e., for manufacture/processing of goods for sale. In the instant case the raw material purchased for manufacture “Bulk premix” has not been used for any other purpose. But the manufactured product; i.e., “Bulk premix” has not been sold but has been transferred to other branches of the appellant situated outside the State. As the goods manufactured have not been sold but have been transferred to other State, there is a violation of the terms of the declaration, with this observation apex court confirmed the judgment of High Court.

[ICI India Ltd. and Another vs. State of Orissa 10 VST 1 S.C.]

27. Whether the process of preservation and tinning of fresh fruits and green vegetables could be described as “manufacture”.

Held : No

Section 2(e1) of Uttar Pradesh Trade Tax Act, 1948 came for interpretation before the Allahabad High Court. The appellant was engaged in the business of manufacture and sale of jam, jellies, pickles, tinned fresh fruits and green vegetables. Green vegetables and fresh fruits were cut into suitable sizes and were added with saline water for the purposes of preservation and were tinned to make them marketable. The assessing authority taxed the same, denying the exemption under Notification No. 7038 dt. 31-1-1985.

The entry 27 in Notification 7038 dt. 31-1-1985 read as “Fresh fruits and green vegetables including mushroom”. The question involved for consideration is whether the process of preservation and tinning amounts to manufacture and whether after tinning of fresh fruits and green vegetables they remain fresh fruits and green vegetables. After referring to various decisions of Supreme Courts in the cases Sterling Foods vs. State of Karnataka 63 STC 239, State of Maharashtra vs. Shiv Datt & Sons 84 STC 497, Krishna Chander Dutta (Spices) Pvt Ltd. vs. Commercial Tax Officer 93 STC 180 and CST vs. Lal Kunwa Stone Crusher Pvt. Ltd. 118 STC 287, came to conclusion that process of preservation and tinning does not amount to manufacture, the process does not bring any new commercial commodity. Process of preservation of fresh fruits and green vegetables keep them as fresh fruits and green vegetables.

[S. R. Cannery vs. Commissioner of Trade Tax, U. P. Lucknow 10 VST 23 Allahabad]

28. Sale of goods to Defence personnel and not to Canteen Stores Department benefit of notification granting concession in rate of tax not available

The appellant sold motor vehicles to defence personnel through Canteen Stores Department and claimed concessional rate of tax. In support his claim he submitted photo copies of certificate issued by the Canteen Stores Department. The Sales Tax Officer was of the opinion that motor vehicles are sold to Defence Personnel and not to Canteen Stores Department and therefore, not entitled to concessional rate of tax, because invoices are issued in the name of various individuals, who actually purchased the vehicle. The appellant also received payment from the Individual to whom vehicle is sold. Therefore, there is no transfer of property in favour of CSD. The Sales Tax Officer also imposed penalty u/s 45A for filing untrue and incorrect return with intention to evade tax. Against this order, appellant came in writ before the High Court.

The appellant submitted that, Canteen Stores Department is eligible to purchase goods at concessional rate of tax. Appellant placed reliance on the URC manual which gives an overall view of the functioning of the CSD. Items like cars; Two wheelers, Tractors, TVs, Washing Machines, Air Conditioners, and Microwave Oven etc. are not stocked by depot, but are arranged by the CSD and collected by the consumers directly from dealers. Due to lack of sufficient space in the Naval Canteen these items are not directly kept by the Canteen in its premises. Vehicle was sold by the assessee to defence personnel on the recommenda-tion of CSD, and in pursuant to this arrangement and recommendation certificate was issued by them. The appellant referred to sec 19(2) of the Sale of Goods Act, 1930 and relied on decision of Supreme Court in the case of Market Committee vs. Shalimar Chemical Works Ltd. (AIR 1997 SC 2502) and submitted that Sec 19(2) of the Sales of Goods Act attempts to give effect to the elementary principle of law of contract that the party may fix the time when the property in the goods shall be treated to have passed.

Revenue referred to notification under KGST Act, and submitted that it is trite that exemption notification has to be interpreted strictly. Column 2 of Schedule III of notification specifically refers to description of person or organization. Entry in notification refers to Military, Naval, Air Force, NCC Canteen and Canteen Stores Department. Exemption is available to, for the sale effected to those organizations and not personnel of the organization.

To register the vehicle under Motor Vehicles under Motor Vehicle Act and Rules, sales certificate is required to be issued in Form 21 which gives details of real purchase. Sale certificate shows that vehicle is not sold to CSD but to individuals. Vehicles are not delivered to CSD. Court, therefore, came to conclusion that vehicles are not sold to CSD therefore, not entitled to concessional rate of tax.

Penalty imposed is deleted following the decision of Apex Court in the case of Hindustan Steel Ltd. vs. State of Orissa 25 STC 211.

Kulathunkal Motors vs. Sales Tax Officer (10 VST 195 Ker)

29. Rectification of Mistake, mistake must be apparent from record. Mistake means to take or understand wrongly or inaccurately, to make an error in interpretation. Apparent means visible, capable of being seen, obvious.

The appellant was dealing in aluminium powder. In the original assessment order aluminium powder was taxed @ 2.2.% treating the same as metal. Subsequently, Assessing Officer came across decision of Supreme Court where in, court held that the entry “all kinds of minerals, ores, metals, and alloys including sheets and circles” covers only primary metals. He, therefore, initiated rectification proceeding u/s 22 of the U.P. Sales Tax Act, and rectified the assessment order. In first appeal rectification order was set- aside. Revenue filed an appeal against this order before the Tribunal, but failed. In revision petition before the High Court it held that action of rectification is correct, following the decision of Supreme Court in the case of Karam Chand Thapar & Bros (Coal Sales) Ltd. vs. State of Uttar Pradesh 4 SCC 257. Against this judgment appellant came to Supreme Court. Not agreeing with the reasoning given by the High Court allowed the appeal with following observation “In order to attract the application of section 22, the mistake must exist and the same be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. “Mistake” means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception. “Apparent” means visible; capable of being seen, obvious; plain. It means “open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming”. A mistake which can be rectified under section 22 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. In our view rectification of an order does not mean obliteration of the order originally passed and its substitution by a new order. What the Revenue intends to do in the present case is precisely the substitution of the order which according to us is not permissible under the provisions of section 22 and, therefore, the High Court was not justified in holding that there was mistake apparent on the face of the record. In order to bring an application under section 22, the mistake must be “apparent” from the record. Section 22 does not enable an order to be reversed by revision or by review, but permits only some error which is apparent on the face of the record to be corrected. Where an error is far from self-evident, it ceases to be an apparent error. It is, no doubt, true that a mistake capable of being rectified under section 22 is not confined to clerical or arithmetical mistake. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. As observed by this court in Master Construction Co. (P.) Ltd. vs. State of Orissa [1966] 17 STC 360, an error which is apparent from record should be one which is not an error which depends for its discovery on elaborate arguments on questions of fact or law.

[Deav Metal Powders Pvt. Ltd. vs. Commissioner of Trade Tax, U. P. 10 VST 751 (SC)]