1998 (10) TMI 517 - HC - VAT and Sales Tax

Issues Involved:
1. Whether coal and coal-ash (cinder) are to be treated as the same commodity or as different commodities for the purpose of taxation under the Andhra Pradesh General Sales Tax Act, 1957.
2. Whether coal-ash is a product of the petitioner's industrial unit and whether the sale of "coal-ash" by the petitioner is eligible for exemption under G.O. Ms. No. 606, dated April 9, 1981.
3. Whether the Sales Tax Appellate Tribunal erred in law stating that the judgment of the Supreme Court in India Carbon Ltd. v. Superintendent of Taxes, Gauhati [1971] 28 STC 603 is not applicable to the facts of the present case.
4. Whether coal-ash is taxable under entry (1) of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957 or under the Seventh Schedule.

Detailed Analysis:

Issue 1: Treatment of Coal and Coal-Ash as the Same or Different Commodities
The petitioner-company contended that coal and coal-ash should be considered as the same commodity, arguing that coal-ash is merely a residual product of coal used as fuel. The Sales Tax Appellate Tribunal (STAT) rejected this contention, stating that coal and coal-ash are commercially different commodities. The court upheld the STAT's decision, referencing the Division Bench decision in P. Chitta Reddi v. State of Andhra Pradesh [1969] 24 STC 317, which held that cinders are not coal or coke. Additionally, the court cited the Full Bench of the Madhya Pradesh High Court in Hukumchand Mills Ltd. v. Commissioner of Sales Tax, M.P. [1988] 71 STC 101, which declared coal and coal-ash as distinct goods. The Supreme Court's ruling in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408 further supported this view, stating that derived commodities cannot be introduced into relevant provisions unless specified. Thus, the court concluded that coal and coal-ash are different commodities, making the sale of coal-ash a first sale in the hands of the petitioner-company.

Issue 2: Eligibility of Coal-Ash for Tax Exemption under G.O. Ms. No. 606
The petitioner-company claimed that coal-ash should be exempt from tax under G.O. Ms. No. 606, which provides tax exemption for products of industrial units in scheduled areas for five years from the commencement of production. The court rejected this claim, noting that the primary products of the petitioner-company are paper and paperboards, and coal-ash is merely a residue from burning coal as fuel. Therefore, coal-ash is not considered a product of the industrial unit, and the petitioner-company is not entitled to the tax exemption under the said G.O.

Issue 3: Applicability of the Supreme Court's Judgment in India Carbon Ltd. v. Superintendent of Taxes
The petitioner-company argued that the Supreme Court's decision in India Carbon Ltd. v. Superintendent of Taxes [1971] 28 STC 603, which dealt with the classification of petroleum coke, should apply to their case. The court found this argument inapplicable, as the Supreme Court's decision pertained to whether petroleum coke is a form of coke under the Central Sales Tax Act. The current case involves the classification of coal and coal-ash, which the court determined to be different commodities. Therefore, the STAT correctly held that the Supreme Court's judgment in India Carbon Ltd. does not apply.

Issue 4: Taxability of Coal-Ash under the Third or Seventh Schedule
The petitioner-company contended that eucalyptus and casuarina wood purchased from unregistered dealers should be taxed as firewood at 3% under entry 64 of the First Schedule, rather than as unclassified goods. The court rejected this argument, noting that the petitioner-company failed to provide evidence that the wood was firewood. The department treated the wood as unclassified goods, as it was used as raw material for manufacturing paper and paperboards. The court upheld the STAT's finding that the wood should be taxed as unclassified goods under section 6-A of the APGST Act, 1957.

Conclusion:
The court dismissed the tax revision cases, upholding the STAT's findings that coal and coal-ash are different commodities, coal-ash is not eligible for tax exemption under G.O. Ms. No. 606, the Supreme Court's judgment in India Carbon Ltd. does not apply, and the wood purchased by the petitioner-company should be taxed as unclassified goods.

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