2024 (8) TMI 589 - HC - VAT and Sales Tax

Denial of Concessional rate of tax on the price of diesel which is used in the process of manufacture of taxable goods against a certificate prescribed by the Commissioner - benefit of Notification issued by the State of U.P. dated 10.08.2017 - concession could not be availed by the revisionist due to want of certificate of the Commissioner as prescribed therein. Whether the process of manufacturing commences from Cane Purchase Centre or after the sugarcane reaches the factory premises? - HELD THAT - The issue is no longer res-integra and a Coordinate Bench of this Court in the case of TRIVENI ENGINEERING INDUSTRIES LTD. VERSUS COMMISSIONER, TRADE TAX 2014 (1) TMI 1619 - ALLAHABAD HIGH COURT has extensively dealt this aspect and held that ' In the present case, sugarcane in its entirety cannot be purchased by sugar factory at its factory premises and under law, it is bound to purchase from the farmers at cane purchase centres. For manufacturing of sugar, crushing of surgarcane is an integral part and for that purpose, sugarcane has to be transported from its place of storage or where it has been purchased to the point of crushing pit where it has to be off loaded for crushing. To my mind, this is integrally connected part of process of manufacturing of sugar and therefore diesel purchased against Form-C if used for cane procurement from centres to factory, it would not amount to violation of purpose for which the said diesel was purchased.' Thus, undoubtedly, the transportation of sugarcane from the Cane Purchase Centre to the Factory Premises is included in the term 'manufacture' of sugar and the Tribunal has not correctly appreciated the controversy and has clearly erred in law. Benefit obtained by the revisionist under the Notification dated 07.12.2019 which according to the State Advised Price, the revisionist was also given 42 paisa per quintal per kilometer to a limit of Rs. 8.35 p per quintal for transportation of the sugarcane from the Cane Purchase Centre to the Factory Premises - HELD THAT - The benefit granted by Notification dated 07.12.2019 clearly confines to the industrial units who are engaged in manufacture of sugar after purchasing sugarcane from the farmers where benefits of transportation from the Cane Purchase Centre to the Factory Gate was provided, while by Notification dated 10.08.2017. Benefit for concessional rate of tax was provided to all the industrial units for the purpose of manufacture of taxable goods. Clearly even if the revisionist has received benefit under the Notification dated 07.12.2019 he cannot be denied the benefits under Notification dated 10.08.2017 inasmuch as there is no provision for excluding the revisionist for being granted benefit under the said Notification, and no such restrictions could be placed. Had it been the intention of the Government to deny the benefit of the Notification dated 10.08.2017 in light of the fact that the sugar industrial units are already obtaining benefits under Notification dated 07.12.2019, the said facts would have been clearly mentioned in the Notification dated 10.08.2017. In absence of any restrictive clause in the Notification dated 10.08.2017, the Tribunal as well as the Commissioner, Commercial Tax had erred in interpreting and restricting the interpretation of the Notification dated 10.08.2017 in its application to the sugar manufacturing units. This Court is of the considered view that Commissioner, Commercial Tax as well as Commercial Tax Tribunal both have erred in interpreting the provisions of Notification dated 10.08.2017, according this Court is of the considered view that the revisionist clearly falls within the ambit of provisions contained in the aforesaid notification and was entitled to the benefit for purchase of diesel at the concessional rate of tax as prescribed therein. Revision allowed.

Summary

Issues Involved:
1. Whether the process of manufacturing sugar includes the transportation of sugarcane from the Cane Purchase Centre to the factory premises.
2. Whether the revisionist is entitled to the benefit of the Notification dated 10.08.2017 despite already receiving benefits under the Notification dated 07.12.2019.

Issue-wise Detailed Analysis:

1. Inclusion of Transportation in Manufacturing Process:
The revisionist contended that the process of manufacturing sugar begins at the Cane Purchase Centre and includes the transportation of sugarcane to the factory premises. The Commissioner and the Commercial Tax Tribunal rejected this claim, stating that the manufacturing process starts only at the factory premises. However, the court referred to a previous judgment in the case of M/s Triveni Engineering & Industries Ltd Vs. Commissioner Trade Tax, which held that the transportation of sugarcane from the purchase centres to the factory is an integral part of the manufacturing process. The court emphasized that the term "manufacture" includes any process or part of the process for making a new substance. The court concluded that the transportation of sugarcane is integrally connected to the manufacturing process and thus should be included under the term "manufacture."

2. Entitlement to Concessional Rate of Tax under Notification dated 10.08.2017:
The revisionist argued that they are entitled to the benefit of the Notification dated 10.08.2017, which provides a concessional rate of tax on diesel used in the manufacturing process. The Commissioner and the Tribunal denied this benefit, citing that the revisionist already received a rebate under the Notification dated 07.12.2019, which provided a rebate for the transportation of sugarcane. The court, however, found that the two notifications pertain to different aspects: the 07.12.2019 notification addresses transportation rebates, while the 10.08.2017 notification concerns concessional tax rates on diesel for manufacturing. The court held that the absence of any restrictive clause in the 10.08.2017 notification indicates that the revisionist should not be denied its benefits. The court emphasized that beneficial legislation should be liberally construed to promote industrialization.

Conclusion:
The court concluded that the Commissioner and the Commercial Tax Tribunal erred in their interpretation of the notifications. The revisionist is entitled to the benefits under the Notification dated 10.08.2017 for the purchase of diesel at a concessional rate of tax. Consequently, the court allowed the revision, setting aside the impugned orders dated 04.12.2020 and 25.02.2021.