1986 (7) TMI 385 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether coal briquettes fall within the definition of "coal" as given in section 14(ia) of the Central Sales Tax Act.
2. Legality of the imposition of tax at the rate of 8% on coal briquettes instead of 4%.

Issue-Wise Detailed Analysis:

1. Definition of "Coal" under Section 14(ia) of the Central Sales Tax Act:
The primary issue was whether coal briquettes, manufactured from coal-dust mixed with molasses and clay, fall within the definition of "coal" as given in section 14(ia) of the Central Sales Tax Act. The court examined the definition, which includes "coal including coke in all its forms, but excluding charcoal."

The petitioner argued that coal briquettes are used similarly to coal and coke, particularly for domestic kitchen consumption. The court noted that the raw material for briquettes is coal-dust, which possesses the properties of coal and coke. The court emphasized that the briquettes are merely a transformation of coal-dust into a usable form, retaining the essential properties of coal.

Supporting this view, the court referred to the judgment in Khanna Coke Industries, which held that "mere change in shape by mechanical pressing does not change the commodity. It remains the same." The court also cited the Madras High Court's decision in Deputy Commissioner of Commercial Taxes, Madras Division v. B.R. Kuppuswami Chetty, which classified lignite briquettes as coal, reinforcing the argument that coal briquettes should be considered a form of coal.

The court concluded that coal briquettes, being a preparation from coal-dust, are covered by the definition of "coal" under section 14(ia) of the Central Sales Tax Act.

2. Legality of Imposition of Tax at 8%:
The petitioner challenged the imposition of tax at the rate of 8% on coal briquettes, arguing that it should be taxed at the rate of 4% as previously done. The court examined the instructions issued by the respondent, which led to the higher tax rate. The respondents contended that coal briquettes are a different commodity, made from coal-dust, molasses, and clay, and should be taxed separately.

However, the court found that the coal briquettes are used in the same manner as coal or coke and have the same properties. The court reiterated that the change in form does not create a new commodity. As such, coal briquettes should be taxed as coal, which falls under the special category of goods of importance in inter-State trade or commerce, subject to a lower tax rate.

The court held that the imposition of tax at the rate of 8% on coal briquettes was illegal and quashed the assessment order dated 27th June 1985. Consequently, the writ petition was allowed, and the enhanced tax demand was declared invalid.

Conclusion:
The court concluded that coal briquettes fall within the definition of "coal" under section 14(ia) of the Central Sales Tax Act. The imposition of tax at the rate of 8% was deemed illegal, and the assessment order was quashed. The writ petition was allowed, with no order as to costs due to the absence of representation from the respondents.