2001 (8) TMI 1338 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the Commissioner of Commercial Taxes' suo motu revisional jurisdiction.
2. Determination of whether hot rolled products (HRM) and cold rolled products (CRM) are commercially different.
3. Applicability of exemption notifications under the Bihar Finance Act, 1981.
4. Validity of the exemption certificate issued to the petitioner.

Detailed Analysis:

1. Legality of the Commissioner of Commercial Taxes' Suo Motu Revisional Jurisdiction:
The petitioner, M/s. Tata Iron Steel Co. Ltd., challenged the order dated April 3, 2001, passed by the Commissioner of Commercial Taxes, Jharkhand, who exercised his suo motu revisional jurisdiction under section 46(4) of the Bihar Finance Act, 1981. The Commissioner set aside the order dated December 16, 2000, by the Joint Commissioner of Commercial Taxes, Jamshedpur, and directed the cancellation of the exemption certificate issued to the petitioner.

2. Determination of Whether HRM and CRM are Commercially Different:
The petitioner's case hinged on whether CRM is commercially different from HRM. The petitioner argued that CRM is a different product from HRM and invested Rs. 1,300 crores to set up a new unit for CRM production. The Commissioner, however, concluded that CRM and HRM are not different, relying on section 14 of the Central Sales Tax Act, 1956, which clubs hot and cold rolled products together for taxation purposes. The Commissioner cited judgments from the Supreme Court in Telangana Steel Industries and the Karnataka High Court in Master Strips Pvt. Ltd., which held that items under the same sub-category cannot be treated as different commodities for taxation purposes.

3. Applicability of Exemption Notifications under the Bihar Finance Act, 1981:
The petitioner sought exemption under S.O. No. 479 dated December 22, 1995, and S.O. No. 58 dated March 2, 2000. These notifications granted sales tax exemptions to new industrial units and units undergoing diversification. The Joint Commissioner initially approved the exemption, but the Commissioner later disagreed, arguing that CRM did not qualify as a diversified product distinct from HRM.

4. Validity of the Exemption Certificate Issued to the Petitioner:
The Commissioner directed the cancellation of the exemption certificate issued to the petitioner on the grounds that CRM and HRM are not commercially different. The Court, however, found that the Commissioner had misdirected himself by relying on taxability aspects under section 14 of the CST Act, 1956, which were irrelevant to determining whether CRM and HRM are commercially different products.

Court's Conclusion and Directions:
The Court concluded that the petitioner is entitled to exemption if CRM is commercially different from HRM. The Court remanded the matter to the Commissioner of Commercial Taxes for reconsideration, directing him to pass a fresh order based on relevant factors such as the nature of use, manufacturing process, product composition, and marketability. The Commissioner was instructed to take appropriate evidence, including expert witnesses if necessary, and to conclude the proceedings within three months. The interim direction issued by the Court on April 12, 2001, and modified on May 31, 2001, was to continue in the meantime.

Final Disposition:
The petition was allowed, the impugned order dated April 3, 2001, was set aside, and the matter was remanded for reconsideration. The Court emphasized the need for the Commissioner to pass a reasoned and speaking order within three months, with the possibility for the petitioner to seek interim relief if the proceedings were not concluded within the stipulated time. No order as to costs was made.