2019 (1) TMI 165 - HC - VAT and Sales Tax

Benefit of concessional rate of tax under CST Act, 1956 - Inter-state procurement of goods for use in mining - interpretation of word mining - Whether the activity of quarrying carried on by the petitioner/assessee can be termed mining as referred to in Section 8(2) (b) of the Central Sales Tax Act, 1956? - Held that - The provisions of the Mining Act, 1952 actually aids the petitioner. The intention is to provide the concessional rate in inter-state trade where the specific goods are purchased for re-sale or for use inter alia in the manufacture or processing of goods, in mining, telecommunications and generation or distribution of electricity or any other form of power. The essential object is to lessen the tax burden when there is a further sale by itself or after manufacture or processing. In mining on the excavation of minerals, they are taxable at the next instance of sale. We have no doubt that with respect to the goods being intended for re-sale, one has to look at the definition under Section 2(d). However, when the use is in the manufacturing or processing of goods for sale or in the telecommunication network or in mining or in the generation or distribution of electricity or any other form of power; there could be no restrictive meaning applied to the term goods for sale . The goods for sale in the second limb of the provision has to be taken as referring to a common category, which is exigible to tax under one or other enactment within a State in the Country. Concessional rate of duty - inter-State purchases - migration to GST Regime - whether after the introduction of the goods and services tax enactments and the restrictive meaning of goods adopted under the CST Act, the petitioner/assessee can be allowed to have continued; HSD, in his certificate of registration under the CST Act, enabling him to claim concessional rate? - Held that - The provisions are in pari materia in so far as the legislation of the State of Kerala and Haryana. The reference herein above is to the Haryana Goods & Services Tax Act, the provisions of which are similar to the KG&ST Act; both having adopted mutatis mutandis the provisions of the CG&ST Act. The contention there, of the State, was also that Section 8 of the CST Act would be applicable only if the subsequent sale, by way of resale or of manufactured goods, are the goods seen under the definition clause 2(d) of the CST Act, and are taxable under the state VAT Act. In the State of Kerala petroleum products always remained under the Kerala General Sales Tax Act and the contention is identical, only with the difference that here the State asserts applicability of CST Act only if the subsequent sale of goods, even after manufacture is under the KGST Act ie of the goods under the KGST Act. The action of the lower authorities and the impugned orders to be illegal and arbitrary - It is directed that the Certificate of Registration under the CST Act to be restored but amended, including HSD substituting the words fuel elements-all fuels The assessee would be entitled to concessional rate for the inter-state purchases made by it for use in its quarrying activity, which has abeen found by us to be mining as included under Section 8(3)(b) of the CST Act. Revision allowed.

Summary

Issues Involved:
1. Whether the activity of quarrying carried on by the petitioner/assessee can be termed "mining" as referred to in Section 8(2)(b) of the Central Sales Tax Act, 1956.
2. Whether after the introduction of the goods and services tax enactments and the restrictive meaning of goods adopted under the CST Act, the petitioner/assessee can be allowed to have continued; HSD, in his certificate of registration under the CST Act, enabling him to claim concessional rate for the inter-State purchases made.

Issue-wise Detailed Analysis:

1. Quarrying as Mining under Section 8(2)(b) of the CST Act:

The Tribunal had initially found that quarrying granite metals is different from mining of minerals, relying on dictionary definitions that distinguished quarrying from mining based on the type of material extracted. However, the Court disagreed with this distinction, noting that granite metal is also valuable and naturally found in the earth, thus fitting within the definition of mining. The Court emphasized that the regulatory distinctions between mining and quarrying in various enactments, such as the Mines Act, 1952 and the Mines and Minerals (Development and Regulation) Act, 1957, are primarily for regulatory purposes and do not affect the fiscal interpretation under the CST Act. The Court cited precedents, including D.K. Trivedi and Sons v. State of Gujarat, to support the view that quarrying and mining are analogous activities involving the extraction of minerals from the earth, whether through open cast working or subterranean tunneling. Therefore, the Court held that for the purposes of the CST Act, quarrying should be considered as mining.

2. Concessional Rate for Inter-State Purchases under the CST Act Post-GST:

The Court examined the impact of the GST regime and the restrictive definition of goods under Section 2(d) of the CST Act, which now includes only specific petroleum products and alcoholic liquor. The petitioner argued that despite the restrictive definition, HSD used in quarrying should still qualify for the concessional rate under Section 8 of the CST Act. The Court agreed, stating that the intention behind the concessional rate is to mitigate the tax burden on the final product, ensuring that the end consumer is not overburdened by the cascading effect of tax. The Court found that the term "goods for sale" in Section 8(3)(b) should not be restrictively interpreted to only include goods defined under Section 2(d) but should refer to any goods taxable under any state legislation. The Court referred to the judgment in Carpo Power Ltd. v. State of Haryana, which supported the view that the concessional rate applies to goods used in manufacturing or processing, including mining, even after the GST implementation. The Court concluded that the petitioner is entitled to the concessional rate for HSD used in its quarrying activity, which is considered mining under the CST Act.

Conclusion:

The Court set aside the orders of the lower authorities and directed the Certificate of Registration under the CST Act to be restored, including 'HSD' as a substitutive for 'fuel elements-all fuels.' The petitioner is entitled to the concessional rate for inter-state purchases made for use in its quarrying activity, which is deemed as mining under Section 8(3)(b) of the CST Act. The revision was allowed, with each party bearing its own costs.