14. Issue: Barter or sale?

Held : “Sale”

Appellant has supplied molasses in lieu of rent. Appellant was issued a deed of licence in his favour and in pursuant to it and in furtherance whereof the appellant had executed a performance guarantee to ensure performance of the said deed of licence. As per said performance guarantee executed by the appellant, it was agreed that major part of the licence fee would be paid in the shape of molasses. In view of the appellant, molasses supplied is in lieu of the consideration for right to use, the said mill; i.e., the licence fee and therefore it will not constitute sale of molasses and would not attract tax, but it is barter. According to appellant the definition of ‘sale’ under U.P. Trade Tax Act, 1948 is not applicable in the above situation.

Contentions put forth by the appellant were not accepted by the Supreme Court and the petition filed by the appellant was accordingly dismissed and supply of molasses by the appellant was held as ‘sale’ for following reasons.

1. That the mode and manner in which the licence fee was to be paid was not the subject matter of the deed of licence. No clause under the licence deed provides that the appellant was required to transfer molasses in lieu of the licence fee;
    

2. Appellant had not entered into contract for supply of molasses by way of barter or exchange in lieu of licence fee payable;
    

3. This was not a transaction by way of transfer of stock nor by way of a mortgage or lease, but the parties by mutual consent had only agreed to adjust the price of molasses supplied with the amount of licence fee; and
    

4. It was transfer of ownership in goods where of appellant was to get price.
   
   While dealing with the matter the court referred to the definition of ‘Sale’ under U.P. Trade Tax Act and also clause (29A) of Article 366 of the Constitution, which defines ‘Sale’.
   
   [Dhampur Sugar Mills Ltd. vs. Comm. of Trade Tax, U.P.- (147:STC:57)]

15. Issue: Are Coal Ash and Coal same?

Held: No

Respondent has paid tax on purchase of coal. Said coal was used as fuel. During the process coal ash comes out. Said coal ash was sold by respondent to appellant on which respondent has recovered tax. However, in view of the appellant since the tax was already paid by the respondent on purchases of coal, no tax is payable on sale of coal by respondent. Accordingly refund of tax was demanded by the appellant.

However, following the full bench decision in case of M/s Hukumchand Mills Ltd. vs. CST, (MP) 71: STC:101 (MP) it was held that coal ash and coal are different.

[Dariyai Lal Arora vs. National Newsprint and Paper Mills Ltd. 147:STC: 25 (M.P. High Court)]

16. Issue: Is ‘block board’ and ‘block board frame’ different from ‘plywood’?

Held : Yes

The dispute arose on account of appellant claiming exemption using soft wood for manufacture of block board and block board frames. The exemption of soft wood was for manufacture of plywood. It was contention of the appellant that ‘block board’ and block board frame’ are manufactured out of ply wood and are not different commodities.

Rejecting the claim of the appellant, court held that ‘block board’ and ‘block board frame’ are distinct and different commercial products having separate identity and market in the commercial circles. Processing, manufacture as well as their uses are different. Therefore ‘block board’ and ‘block board frame’ cannot be equated with plywood. Reference was made to Supreme Court decision in case of State of Punjab vs. M/s Punjab Fibres Ltd. [139:STC: 200) and M/s Associated Cement Companies Ltd. vs. state of Bihar (137:STC:389]

[Choice Plywood Industries vs. State of Kerala (147:STC:72) (Kerala High Court)]

17. Issue: Can officer in same case act in two different capacities?

Held : No

In the present petition filed by the petitioner one of the Government officers has appeared as a State representative before Tribunal. Tribunal has remanded the matter. Subsequently said remanded mater was taken up for order by the same officer but now as Dy. Comm. of Commercial Taxes. In writ said order was challenged by the petitioner.

While dealing with the writ, it was observed that involvement of the same officer at earlier stage of the proceedings, gives rise to a real ground for doubting his ability to bring an objective judgment to bear on the issues before him. The order passed by said officer is vitiated by bias and accordingly the court set aside the order and directed that the case may be transferred to any other Dy. Comm. of Commercial Taxes. Reference was taken from the decisions reported in [2000] (1) ALL ER 65 & [2001] 1 SCC 182. Various case laws on term ‘bias’ were also referred by the court

[Sridhar Lime Products vs. Dy. Comm. of Commercial Taxes, No. II Division., Guntur and Another. 147:STC: 89 (Andhra Pradesh High Court)].

18. Issue: Reassessment- Time of limitation

Assessment of respondent for C.Y. 1988 was completed on 7th Oct, 1991. Notice for assessment was served on 15th March, 1995 and accordingly reassessment order was framed. Said order was set aside by the Rajasthan Tax Board. Being aggrieved with the order of Board, revenue filed petition for revision in High Court. The High Court came to the conclusion that the period of limitation for initiating assessment proceeding in respect of the assessment year 1988-89 expired on 31st March, 1994 and accordingly revision petition was dismissed. Against said dismissal order revenue filed present appeal before Supreme Court. Supreme Court reversed the decision of the High Court and set aside the order. Supreme Court referred to the definition of “Previous Year” u/s 2(m) of the Rajasthan Sales Tax Act which reads as “Previous year means the twelve months ending on the 31st day of March next preceding the assessment year, or, if the accounts of a dealer have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then, at the option of the dealer, the year ending on the date up to which his accounts have so been made up.”

Interpreting the said definition it was observed and held that ‘the assessment year in respect of the calendar year 1988 could be only 1989-90 and, therefore, the notice for reassessment issued on March 15, 1995, was within the period of limitation of five years from the end of that assessment year, and the assessment order was valid’.

[Commercial Taxes Officer, Jodhpur vs. Derby Textiles Ltd. 145:STC:662 (SC)].

19. Issue: Manufacture- Burden of proof

Held : On revenue

Appellants are dealing in stepped transmission poles. Said stepped transmission poles are made by joining three pipes of different dimensions to obtain a desired length by process of welding. According to them the pipes do not lose their original character and get converted into something, which is a commercially distinctive product. Pipes/poles do not lose their original character and identity as pipes. The pipes retain their character as pipes. Further in view of appellants no process of manufacture as per Excise Act is carried out.

However, revenue treated it otherwise and issued show cause notices for payment of Excise duty. According, to department process of ‘welding’ of electric resistant pipes/tubes of different diameters, results into a new product and hence liable to excise duty.

Supreme Court examined the definition of ‘manufacture’ under excise law and various judicial pronouncements on the subject and held that the process carried on by the assessee, manufacturing stepped transmission poles, viz, of joining by welding three pipes of different dimensions to obtain a desired length, could not be brought within the category of manufacture as it did not change the original basic identity or original character of M.S. welded pipes to make them a new marketable product leading to manufacture as per excise law. While dealing with the matter it was also observed that the burden to prove manufacture is always on the revenue. Further it was observed that recourse to residuary entry be made only when impugned goods falls outside the ambit of specified entry.

In concluding the matter court shown their anguish about the approach of the revenue and observed that “Before we part with this case we would like to impress upon the respondent authorities that before issuance of show cause notices the Revenue must carefully take into consideration the settled law which has been crystallized by a series of judgments of this Court. The Revenue must make serious endeavour to ensure that all those who ought to pay excise duty must pay but in the process the Revenue must refrain from sending of indiscriminate show case notices without proper application of mind. This is absolutely imperative to curb unnecessary and avoidable litigation in courts leading to unnecessary harassment and waste of time of all concerned including Tribunals and courts.”

[Hindustan Poles Corporation vs. Commissioner of Central Excise, Kolkata, (SC), (145: STC: 625)].