2014 (4) TMI 448 - HC - VAT and Sales Tax

Concessional Rate of Taxation - purchase of diesel and lubricants used for power generation in the DG Set - u/s 10(3) or 10(1) of the Rajasthan Sales Tax Act, 1994 Held that - Decision in Commercial Taxation Officer, Udaipur Vs. Rajasthan Taxchem Ltd. 2007 (1) TMI 187 - SUPREME COURT OF INDIA followed - the diesel and lubricant is used to generate electricity through DG sets which is used for the purpose of manufacturing yarn -as diesel is specifically and intentionally included in the definition of raw material u/s 2 (34) by the legislature, the question that whether it is directly or indirectly used in the process of manufacture is irrelevant Decided against Revenue.

Summary

Issues:
Challenge to sales tax revision petition under Section 86 of the Rajasthan Sales Tax Act, 1994 regarding the purchase of diesel and lubricants at concessional tax rate of 3% under Section 10(1) vs. the applicable tax rate of 4% under Section 10(3).

Analysis:
The petitioner-Department filed a sales tax revision petition challenging the order passed by the Rajasthan Tax Board, which dismissed the appeal regarding the purchase of diesel and lubricants by the respondent-assessee at a concessional tax rate of 3% under Section 10(1) of the Rajasthan Sales Tax Act, 1994. The assessing authority raised a demand against the respondent-assessee for tax evasion, claiming that the applicable tax rate for diesel used in power generation was 4% under Section 10(3) of the Act. The Dy. Commissioner (Appeals) allowed the respondent's appeal, leading to the petitioner-Department's appeal before the Board, which was dismissed.

The only issue raised was whether the respondent-assessee should pay tax on the purchase of diesel and lubricants for power generation at 4% under Section 10(3) instead of the concessional rate of 3% under Section 10(1). The court referred to a Supreme Court decision in the case of Commercial Taxation Officer, Udaipur Vs. Rajasthan Taxchem Ltd., where it was clarified that diesel used for electricity generation in manufacturing processes qualifies as raw material, regardless of direct or indirect usage, as per the definition under Section 2(34) of the Act. The court also cited a previous judgment in a similar case.

Based on the legal precedent, the court found no illegality in the Board's decision. The court dismissed the revision petition, stating it lacked merit. The judgment upheld the application of the 3% concessional tax rate for the purchase of diesel and lubricants used in power generation for manufacturing processes, in line with the statutory provisions and judicial interpretations.