2020 (1) TMI 579 - HC - VAT and Sales Tax

Concessional rate of tax - business of petroleum products - sale to power generating undertakings in the joint sector - sale of furnace oil, lubricant etc. as industrial raw material/component parts sold to industrial units for use in production. Sale to power generating undertakings in the joint sector - HELD THAT - It was held by the Tribunal in T.A.No.9/2012, in respect of the said assessment year that, the assessee fulfilled the requirements of the notification, i.e., SRO 319/2005, which succeeded SRO No.1091/ 1999 and that as such, concessional rate of tax could not be denied to the assessee. The Revenue took up the matter in revision. S.T.Rev.No.1/2014 was dismissed by order dated 18.1.2017 stating that there is no ground warranting interference with the impugned order in revision. Though it appears from the order in S.T.Revision that it was on the concession made by the Senior Government Pleader that the revision was rejected, the rejection of the revision amounts to upholding of the order of the Tribunal. Therefore, the Tribunal was justified in having followed its own decision in T.A.No.9/2012 - it cannot be said that the Appellate Tribunal has erroneously decided or failed to decide any question of law. The challenge on that ground therefore must fail. Sale of furnace oil, lubricant etc. as industrial raw material/component parts sold to industrial units for use in production - Use of goods for which concessional rate is claimed as raw material - HELD THAT - In the absence of any provision which obliges the purchaser to give any information to the vendor as to the purpose for which the goods are being purchased, it would be for the Revenue to proceed against the purchaser in case they have a contention that the product purchased is not consumed for the production of the end material, but is only used as fuel - If the purchaser misrepresents or subsequently uses the raw material for some other purpose, this Court held that the legislative wrath would fall on the purchasing dealer and that appropriate action would therefore have to follow as against him. In the instant case as well, it is the specific case that the sale was made on the basis of the declaration furnished by the purchasing dealer. In the above view of the matter, the finding by the Tribunal to the effect that the petitioner cannot be held to be disentitled to the concessional rate of tax as claimed by him on the basis of a declaration provided by the purchasing dealer cannot be found to be perverse or an incorrect decision. Petition dismissed.

Summary

Issues Involved:
1. Concessional rate of tax at 4% for sales to BSES Kerala Power Ltd.
2. Concessional rate of tax at 3% for sales of furnace oil, lubricant, etc., as industrial raw materials.

Issue-wise Detailed Analysis:

1. Concessional Rate of Tax at 4% for Sales to BSES Kerala Power Ltd.:

The Revenue filed a Sales Tax Revision Petition against the order of the Sales Tax Appellate Tribunal, which had allowed the respondent assessee a concessional rate of tax at 4% for sales to BSES Kerala Power Ltd. The assessment for the year 2000-01 initially accepted the assessee's claim under SRO No.1091/1999, which provided a concessional rate for sales to power-generating undertakings in the joint sector. However, upon review, the Deputy Commissioner of Commercial Tax found that BSES Kerala Power Ltd. did not qualify as a joint sector undertaking, as Reliance Energy Limited held 86.32% of the shares, and KSIDC held only 13.68%. Consequently, the concessional rate of tax was deemed inapplicable, and the assessment was set aside.

The Tribunal, however, referenced its own decision in T.A.No.9/2012, which had previously ruled in favor of the assessee for the assessment year 2005-06, stating that BSES Kerala Power Ltd. met the requirements of SRO No.1091/1999. The Tribunal restored the original assessment order, allowing the concessional rate of tax. The Revenue contended that the Tribunal's reliance on the previous decision was unsustainable and that BSES Kerala Power Ltd. did not meet the criteria for a joint sector undertaking.

The High Court considered the Tribunal's previous decision and the fact that the Revenue's revision petition (S.T.Rev.No.1/2014) against that decision was dismissed. The Court concluded that the Tribunal was justified in following its earlier decision, and there was no error in its judgment. Thus, the challenge on this ground failed.

2. Concessional Rate of Tax at 3% for Sales of Furnace Oil, Lubricant, etc., as Industrial Raw Materials:

The Deputy Commissioner also disallowed the concessional rate of tax at 3% for sales of furnace oil, lubricant, etc., on the grounds that these were not used as industrial raw materials but as fuel. The Tribunal, however, upheld the assessee's claim, referencing the High Court's decision in Essar Oil Ltd. v. State of Kerala, which held that the selling dealer is not obliged to ensure the use of goods by the purchasing dealer. The Tribunal noted that the assessee had provided valid Form 18 declarations, and the burden to prove the use of the goods lay with the purchaser.

The High Court supported the Tribunal's view, citing the Essar Oil Ltd. case and Bharat Refineries Limited case, which established that once a valid declaration is obtained from the purchaser, the selling dealer is entitled to the concessional rate of tax. If the purchaser misuses the goods, the Revenue should proceed against the purchaser, not the seller.

The Court found that the Tribunal's decision was neither perverse nor incorrect and upheld its findings. Consequently, the revision petition was dismissed, affirming the Tribunal's order in favor of the assessee.

Conclusion:

The High Court dismissed the revision petition, upholding the Tribunal's decision to allow the concessional rates of tax for the respondent assessee based on valid declarations and previous consistent rulings. The Tribunal's findings were deemed legally sound and not subject to interference.