Held : Yes.
The appellant is a manufacturer of Bixially Oriented
Polypropylene (BOPP) Film. It made an application for amendment of Central
Sales Tax Registration Certificate to incorporate therein the item “ Diesel”
to enable him to effect inter-State purchase against 'C' form at concessional
rate. This diesel was required to be used in the D.G. Sets of 3380 KV capacity
for generating electricity and the electricity so generated was to be used for
production purposes. The authorities rejected request on the ground that the
Diesel is covered under the Motor Spirit Taxation Act, 1958 and, therefore, it
cannot be incorporated in the Certificate issued under the Central Act. It is
also held that the Diesel is intended to be used for generation of electricity
which is used for captive consumption. The contention of the appellant before
the Tribunal was that its manufacturing process starts from raw material
feeding by conveying system and it is melted in the extruder. The melt is
converted into a sheet through die and then the sheet is oriented to make
shape in desired width. During the process various machines are run partially
by the power supplied by MSEB and partially by generating power through D.G.
Sets. Due to fluctuation in the MSEB supply the appellant depends largely on
D.G. Sets. The Tribunal examined the provisions of section 8(3) of the Central
Act which governs the issue of goods specified in the Certificate intended for
resale by him or subject to any rule made by Central Government in this behalf
for the use by him in the manufacture or processing of goods for sale or in
mining or in generation or distribution of electricity or any other form of
power. The Tribunal observed“ that the words “use in the manufacture” has been
so interpreted in the past by several judgments of this Tribunal, High Courts
and also the Apex Court that even the goods which are not directly used in the
manufacture, but which are so inextricably linked with the manufacturing
process that without the use thereof the manufacturing is impossible or
difficult or commercially inexpedient are also covered by the said
expression". The Tribunal held that not only the goods which are directly used
in the manufacture but which are indispensable for the manufacture, are also
covered and are held as eligible to tax benefits extended to the
manufacturers. In view of the above considered opinion the Tribunal directed
inclusion of “Diesel” in the Registration Certificate held by the appellant.
(Cosmo Films Ltd. vs. The State of Maharashtra – Second
Appeal No. 1559 of 2004 dated 4th June, 2007. The judgment is delivered at the
Third Bench of the Tribunal by the Hon'ble Member G.G. Kochrekar. The
appellant was represented by Ashok Chandak, Chartered Accountant).
Held : Yes.
A group of 5 Second Appeals were filed before the Tribunal
agitating the common ground as to whether the assessees are entitled for
interest on the refund amount arising out of the assessment done under the
Works Contract for the period prior to 1.4.2004. In all the above cases, the
assessments under the Works Contract Act have resulted in refunds. Section 9
of the Works Contract Act is amended on 1-7-2004 and section 9A is inserted
providing for grant of interest on refund in respect of any period of
assessment commencing on or after 1.4.2004. The Works Contract Act is a
referential legislation in the sense that the Act contains provision relating
to procedural law of the Bombay Sales Tax Act are made applicable for the
purpose of assessment, reassessment, collection and enforcement of payment of
tax including any interest or penalty payable by a dealer under this Act.
Section 9 of the Works Contract Act prior to its amendment with effect from
1.7.2004 is in pari materia with section 9 of the Central Sales Tax Act, 1956.
The Tribunal therefore discussed both these sections simultaneously at great
length including the legislative history and various pronouncements by the
Apex Court. The department on the basis of the judgment of the Supreme Court
in India Carbon Ltd. (106 STC 460) has issued a circular instructions
withdrawing interest on the refund in respect of orders passed under the
Central Sales Tax Act, Works Contract Act and Lease Act. It is the well known
stand of the revenue that “charging or payment of interest” arise only when
there is a substantive provision in the Act and in the absence of a
substantive provision in the Act no interest can be given.
The appellants explained the substantive law and procedure
law especially in the context of fiscal law. The submission was made that in
procedure law also there will be substantive provisions for appeal, revision,
rectification, refund etc. If procedural law is applied to an enactment by
referential legislation then substantive provisions of the procedural law as
well as regulatory or procedural provisions would apply. Based on the judicial
pronouncements and the principles laid down by the Supreme Court about the
concept of substantive law and procedural law in the case of State of Kerala
vs. P.P. Joseph & Co. (25 STC 483), Khemka & Co. (35 S.T.C. 571) and India
Carbon, (cited supra) the Tribunal observed: “From the judgments referred to
above it is evident that any provision imposing liability to pay tax, interest
or penalty is a provision of substantive law and unless it is specifically
provided under the Act it cannot be enforced by importing the provisions of
general sales tax law of the States. By virtue of section 9(2) the provisions
of procedural law of the States including the substantive and procedural
provisions thereof are made applicable to effectuate the substantive
provisions of levy of tax, interest or penalty provided in the CST Act.”
The Tribunal after referring to Orissa Cement Ltd. vs. Sate
of Orissa (27 STC 118) (SC) of which a reference has been made by the Supreme
Court in Khemka & Co. (cited supra) the Tribunal held that the grant of
interest on refund is not a substantive law but a part of procedural law and
being not a substantive law, it is not required to be specifically provided
for in the Act it is intended to be granted.
The appellants further argued that as the provisions of
refund is a part of assessment of tax all the provisions related to refund are
also part of assessment of tax. Right of appeal is a substantive provision.
Though it is a substantive provision it has also been held that it is a part
of procedural law and even in absence of a specific provision under Central
Sales Tax Act or Works Contract Act, the local provisions of appeal are
applicable by virtue of section 9 of the Central Act or Works Contract Act.
(Blitz Publication Pvt. Ltd. S.A. No.1214 of 1970 dated 4-7-1972). It is
further argued on behalf of the appellants that when the word “refund” is used
it means that all the provisions relating to refund get incorporated in
section 9 of the Works Contract Act. Sections 4 and 43A are connected
provisions. If section 43 gets incorporated in section 9, it stands to reason
that all other sections pertaining to refund get incorporated.
After a very lengthy deliberations the Tribunal held it is
of the confirmed view that no separate proceedings other than that of refund
is required to be conducted for granting interest on refund and only thing to
be done is to calculate interest as provided in the section and simply add it
and grant the refund as the section itself provides that a dealer is entitled
to receive interest in addition to the refund. The Tribunal further held that
the grant of interest on refund is thus very well connected and integrated
process of refund itself. The Tribunal also observed that it is convinced by
the logic explained by the appellants in applications of the related
provisions of appeal under the Works Contract Act.
(Second Appeal No. 1817 of 2002 – Arvind Daftary, Second
Appeal No. 168 of 2005 – Harbhajan Sarbjeet & Associates, Second Appel No.972
of 2005, Second Appeal No.1248 of 2005 P.B.A Infrastructure Ltd, & Second
Appeal No.1504 of 2005 – Turnkey Electrical Engineers P. Ltd. vs State of
Maharashtra, dated 12th June 2007. The judgment of the Tribunal was delivered
at the Second Bench by Hon.Member D.H. Sali. The appellants were represented
N.V.Tapre, Advocate, T.R. Jalnawala, C.A., D.H. Joshi, Advocate, S.P.,
Sakhala, C.A., Kiran Garkar, C.A. Shri A.B. Ghanekar, Sales Tax Practitioner
and C.B. Thakar Advocate and Shri D.V. Shintre Sales Tax Practitioner appeared
as amicues curiae)
