2007 (3) TMI 709 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of eligibility for concessional rate of tax on high speed diesel oil under Central Sales Tax Act for manufacturing activities.

The judgment involves two revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging an order of the Tribunal related to the assessment year 2000-01. The dealer was engaged in manufacturing activities and registered under both the U.P. Trade Tax Act and the Central Sales Tax Act, 1956. The dispute arose when the assessing authority denied the benefit of high speed diesel oil for manufacturing gur, claiming it was used in the generator for electricity generation, not directly in manufacturing. The Tribunal, however, allowed the appeals, considering the generator as machinery, citing relevant case laws and holding high speed diesel oil eligible for concessional rate of tax. The issue revolved around the interpretation of whether high speed diesel oil used in a generator for electricity generation qualifies for concessional tax benefits under the Central Act.

The learned Standing Counsel argued that high speed diesel oil used for electricity generation, not directly in manufacturing, should not be eligible for concessional tax benefits. He contended that unless electricity generated was used in production, the diesel engine for electricity generation does not qualify for tax benefits. The court examined the order of the Tribunal, emphasizing the categorization of a generator as machinery by previous court rulings and referred to relevant sections and rules under the Central Act regarding goods eligible for concessional tax rates.

The court analyzed Section 8(3)(b) of the Central Act and Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957, which specify that goods used in manufacturing, processing, or electricity generation are eligible for concessional tax rates. The court noted that the language of the law does not restrict the use of items in electricity generation solely for sale purposes, making any item used for electricity generation eligible for concessional tax rates. The court observed that the generator was installed in the factory, and there was no evidence to suggest that the electricity generated was not used in production.

Referring to past judgments, the court highlighted a case where the Orissa High Court held that the provision applies to a generator, whether as the exclusive or subsidiary source of electricity. The court concluded that high speed diesel oil used for generator operation for electricity generation qualifies for concessional tax benefits under Rule 13 of the Rules and Section 8(3)(b) of the Central Act. Consequently, the court dismissed both revisions, upholding the Tribunal's decision regarding the eligibility of high speed diesel oil for concessional tax rates under the Central Act.