2016 (5) TMI 827 - HC - VAT and Sales Tax

Whether levy of tax under M.P. Commercial Tax Act, 1994, as per entry 22 of Part V of Schedule II on smokeless coke obtained from processing of coal purchased from registered dealer after paying full tax @ 4% is justified under law or not - Appellant engaged in conversion of coal into smokeless soft fuel, ie., smokeless coke by application of mechanized plants. Held that - there was no need to list the coal and coke in other forms separately, because Entry No.22 of Part V of Schedule-II of the Madhya Pradesh Commercial Tax Act, 1994 is wide enough to cover all varieties of coal and byproducts of coal. Smokeless soft fuel fuel i.e. smokeless coke is a different commodity, its use is different from coal and coal-tar and carbon to some extent is separated from the coal by process of heating, burning and quenching, therefore, the manufactured item becomes different from coal. Provision of Section 9-B of the Madhya Pradesh Commercial Tax Act, 1994 is clear on this point and the Department has levied tax, in accordance with the aforesaid provision and has not levied double taxes, because it is levying only on difference of sale price and purchase price. Therefore, manufactured smokeless soft fuel i.e. smokeless coke out of coal is distinct commodity and also understood in common parlance different from coal, therefore, commodity manufactured is liable to tax under Section 9 of the Madhya Pradesh Commercial Tax Act, 1994. - Decided against the petitioner

Summary

Issues Involved:
1. Whether smokeless coke obtained from processing of coal is a different commercial commodity from coal.
2. Whether the conversion of coal into smokeless coke constitutes a manufacturing process.
3. Whether smokeless coke is taxable under the Madhya Pradesh Commercial Tax Act, 1994.

Issue-wise Detailed Analysis:

1. Different Commercial Commodity:
The petitioner argued that smokeless coke is merely a refined form of coal and should not be treated as a different commodity for commercial tax purposes. The petitioner relied on Section 14(ia) of the Central Sales Tax Act and Entry No.22 of Part V of Schedule II of the M.P. Commercial Tax Act, which includes "Coal including coke in all its forms and charcoal." The petitioner cited several judgments, including Universal Hydrocarbons v. State of Bihar, where it was held that petroleum coke and calcined petroleum coke are forms of coal. The court, however, referred to the judgment in Sonebhadra Fules v. Commissioner Trade Tax, U.P. Lucknow, which held that coal briquettes are a different commercial commodity from coal. The court concluded that smokeless coke, obtained through a mechanical process, is a distinct commodity from coal and is therefore taxable.

2. Manufacturing Process:
The court examined whether the conversion of coal into smokeless coke constitutes a manufacturing process under Section 2(o) of the M.P. Vanijyik Kar Adhiniyam, 1994. The definition of "manufacture" includes any process of producing or making goods but excludes certain processes notified by the State Government. The court noted that the conversion of coal into coke, excluding mechanized plants, is listed as a non-manufacture process. However, since the petitioner used a mechanized plant, the conversion process qualifies as manufacturing. The court referenced the case of Sonebhadra Fules, where it was held that manufacturing coal briquettes involves a process of treating or adapting coal, resulting in a different commercial commodity.

3. Taxability under M.P. Commercial Tax Act, 1994:
The court addressed whether smokeless coke is taxable under the Madhya Pradesh Commercial Tax Act, 1994. The petitioner contended that the sale of smokeless coke should not be taxed again as it is a form of coal. The court, however, emphasized that the process of converting coal into smokeless coke results in a new and different commercially marketable commodity. The court cited the case of M/s. K.A.K Anwar & Co. v. State of Tamil Nadu, which held that different goods placed in the same entry are not regarded as a single commodity unless expressly provided by the legislature. The court concluded that smokeless coke, being a distinct commodity from coal, is liable to tax under Section 9 of the Madhya Pradesh Commercial Tax Act, 1994.

Conclusion:
The court held that the conversion of steam coal into smokeless coke by mechanical process results in a different commercial commodity, which is taxable under the Madhya Pradesh Commercial Tax Act, 1994. The petitions were dismissed with no order as to costs.