1997 (3) TMI 583 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of sections 5C, 5CC, and 5CCCC of the Rajasthan Sales Tax Act, 1954.
2. Applicability of concessional tax rates on diesel used for generating electricity.
3. Imposition of penalty under section 5CCCC(3) of the Rajasthan Sales Tax Act.
4. Refund of excess tax collected from the petitioner-company.

Issue-wise Detailed Analysis:

1. Interpretation of Sections 5C, 5CC, and 5CCCC of the Rajasthan Sales Tax Act, 1954:
The core of the controversy revolves around the interpretation of sections 5C, 5CC, and 5CCCC of the Rajasthan Sales Tax Act (RST Act). The Tribunal examined the provisions to determine whether the purchase of diesel for use in standby generating sets to generate electricity falls under these sections. Section 5C deals with concessional rates for raw materials, Section 5CC provides remission of tax for raw materials for a specified period, and Section 5CCCC specifies a special rate of tax on certain sales. The Tribunal noted that all these sections provide for concessional tax rates under specific conditions.

2. Applicability of Concessional Tax Rates on Diesel Used for Generating Electricity:
The Tribunal considered whether the diesel used in standby generating sets for electricity generation qualifies for concessional tax under sections 5C, 5CC, or 5CCCC. The petitioner-company, which manufactures man-made fibers and cement, argued that diesel should be taxed at a concessional rate of 4% under section 5CCCC. The Tribunal found that diesel, light diesel oil (LDO), and lubricants used for generating electricity for captive use do not qualify as raw materials or fuel used in the manufacturing process under sections 5C and 5CC. Instead, they fall under section 5CCCC, which applies to goods required for use in manufacturing, processing, mining, or electricity generation.

3. Imposition of Penalty Under Section 5CCCC(3) of the Rajasthan Sales Tax Act:
The Tribunal addressed the imposition of a penalty on the petitioner-company under section 5CCCC(3) for allegedly misusing form S.T. 17C. The Tribunal concluded that the petitioner sought recourse to section 5CCCC and used the form S.T. 17C only after obtaining clarification from the Commercial Taxes Department. Since the petitioner acted with the department's explicit sanction, the question of misuse did not arise. Therefore, the penalty imposed was deemed unsustainable and was set aside.

4. Refund of Excess Tax Collected from the Petitioner-Company:
The Tribunal examined the issue of refunding the excess tax collected from the petitioner-company. It noted that the department's stance was contradictory, as the applicable tax rate under section 5CCCC (4%) was higher than that under sections 5C and 5CC. Consequently, the department's refusal to refund the excess tax collected at a rate of 12.5% was unjustified. The Tribunal ordered the refund of the excess tax with interest at 15% per annum from the date of deposit.

Conclusion:
The Tribunal declared that the rate of tax applicable to the purchase of high-speed diesel (HSD), light diesel oil (LDO), and lubricants for generating electricity by the petitioner-company should be 4% under section 5CCCC of the RST Act. The penalty imposed on the petitioner was quashed, and the excess tax collected was ordered to be refunded with interest. The writ petitions were allowed, and no costs were imposed.