2024 (10) TMI 558 - HC - VAT / Sales Tax

Imposition of Entry Tax on the crude Soyabean Oil brought by the petitioners within the State of MP for manufacturing/refining Soyabean Refined Oil - revision filed u/s 62 of the MPCT Act read with the relevant provision of the Entry Tax Act - levy of tax also challenged on the ground that in case, the refining of Soya crude oil is treated as a process of manufacture then even in such case, soya crude oil being Raw material would be exempted under N/N. A-3-10-2000-ST-V(82) dated 06-09-2001. HELD THAT - In the case of Commercial Trade Tax V/s M/s Kumar Paints and Mills Store 2023 (3) TMI 943 - SUPREME COURT the Apex Court considered the question with respect to the product which underwent mixing of base paint with different colours did not result in the new product after undergoing the process of manufacturing as defined under the U.P. Trade Tax Act. The revenue department contended that the sale of paints which had undergone mixing through a computerized process amounts to manufacture thereby resulting in new products. The case in hand, admittedly the petitioner brought Soyabean crude oil within the State and after the process manufactured the refined oil. According to the petitioner, the entry tax on oil entered into the State of M.P. and after refining sent to the outside State hence the entry tax is not leviable because there is neither any consumption nor use of oil. The petitioner claimed the non-liveability on the ground that the process of refining does not constitute the process of manufacturing oil because before and after refining it remains the same commodity - The process of so-called refining has been explained in the aforesaid paragraphs with the help of the diagram clearly establishes that a big manufacturing plant is required to be installed for making Soyabean oil from crude Soya oil, therefore, the tax on entry of the goods into the local area has rightly been imposed for consumption/use or sale therein. The petitioner is trying to avoid the payment of the entry tax solely on the ground that the petitioner is engaged in refining the crude Soya oil to Soyabean oil, no entry tax is leviable in view of Proviso 2 of Section 3 (1) of the Entry Tax Act, only in case of consumption or use of oil by the Assessee. It is correct that the Revisional Authority while rejecting the aforesaid contention has held that the process of refining crude oil does not constitute a process of manufacture in view of the said exclusion of the process of refining under notification No. 18 dated 01.04.1995 issued by the State under Section 2(o) of the MPCT Act, 1994. As per Entry No.52 of List 2, VIIth Schedule of the Constitution of India, the tax on the entry of goods into the local area is leviable for consumption, use or sale therein even if it is called by whatever name manufacturing or refining. In the case of the petitioner, a new product Refined Soyabean oil emerges after applying various processes to the crude Soyabean oil. The cued soya oil is used in making finished consumable soyabean oil. Refined soyabean oil is a new commodity that is packed in bottles and cans of different sizes for sale in the market after undergoing various processes as explained. Therefore, there is a consumption/use in the local area before the sale of finished refined oil to other States by the petitioner. Even if the Revisional Authority has held that under notification No.18 dated 01.04.1995, the processing of refining of crude oil into refined soyabean oil cannot said to be manufacturing even then under N/N. 82 dated 06.09.2001 it is leviable for the Entry tax. There are no ground to interfere with the order of the Assessment Authority and the Revisional Authority, therefore, all the Writ Petitions are hereby dismissed.

Summary

Issues Involved:

1. Imposition of Entry Tax on crude soybean oil brought into Madhya Pradesh for refining and subsequent sale outside the state.
2. Definition and interpretation of "manufacture" in the context of refining crude soybean oil.
3. Applicability of exemptions under the Entry Tax Act and related notifications.
4. Interpretation of "use or consumption" within the local area under the Entry Tax Act.

Issue-wise Detailed Analysis:

1. Imposition of Entry Tax:
The writ petitions challenged the imposition of Entry Tax on crude soybean oil brought into Madhya Pradesh, which was refined and sold outside the state. The petitioners argued that refining does not constitute "manufacture," and therefore, the oil was not used or consumed in the local area, making it exempt from Entry Tax under proviso (ii) to Section 3(1) of the Madhya Pradesh Entry Tax Act. The court, however, upheld the tax imposition, stating that the refined oil is a new product, thus constituting use or consumption within the state.

2. Definition and Interpretation of "Manufacture":
The petitioners contended that refining crude oil does not amount to "manufacture" as per the definition in Section 2(o) of the MPCT Act and related notifications, which exclude refining from manufacturing processes. The court analyzed definitions from various statutes, including the Factories Act and Central Excise Act, concluding that the refining process transforms crude oil into a distinct, marketable product, thus meeting the criteria for manufacturing.

3. Applicability of Exemptions:
The petitioners sought exemption under Notification No. 82 dated 06-09-2001, arguing that crude oil, as raw material, should be exempt if not used in manufacturing. The court noted that despite the revisional authority's acknowledgment that refining is not "manufacture," the process results in a new commodity, refined oil, subject to Entry Tax. The court found no grounds for exemption, emphasizing the emergence of a new product.

4. Interpretation of "Use or Consumption":
The petitioners argued that the crude oil was not used or consumed locally since it was refined and sold outside the state. The court referred to Supreme Court judgments on the interpretation of "use or consumption," determining that the transformation into refined oil constitutes use within the local area. The court emphasized that the process of refining involves significant changes, creating a commercially distinct product, thus fulfilling the criteria for local use or consumption.

Conclusion:
The court dismissed the writ petitions, affirming the imposition of Entry Tax on crude soybean oil brought into Madhya Pradesh for refining. It concluded that the refining process constitutes manufacturing, resulting in a new product, refined oil, which is used or consumed within the local area before being sold outside the state. The court found no merit in the petitioners' claims for exemption under the Entry Tax Act or related notifications.