2023 (4) TMI 911 - HC - VAT and Sales Tax

Exemption from levy of Entry Tax - coal imported by petitioners for generation of electricity in it s Thermal Power Plant - applicability of notification dated 13.12.2010 - Whether provisions of Odisha VAT Act 2004 are pari materia to the provisions of M.P. VAT Act 2002 to enable petitioners to take advantage of Division Bench judgment of Orissa High Court in ODISHA POWER GENERATION CORPORATION LTD. VERSUS STATE OF ODISHA ANOTHER 2015 (5) TMI 62 - ORISSA HIGH COURT whereby in similar facts and circumstances the contention of petitioners therein (which were similar to the petitioners herein) was upheld by treating coal as the raw material brought in the course of business for generation of electricity? Whether coal imported by petitioners for generation of electricity by Thermal Power Plant is exempted from Entry Tax on the anvil of notification dated 13.12.2010 by virtue of being raw material purchased in the course of business? - HELD THAT - Bare perusal of the charging provision Section 3 of M.P. Entry Tax Act reveals that the levy of Entry Tax is on the entry in the course of business of a dealer of goods specified in Schedule II into each local area for consumption use or sale. However no levy of entry tax can be made over goods specified in Schedule III which are for sale - The State is vested with power to exempt certain goods from levy of entry tax subject to such restrictions and conditions and on such terms and conditions as it thinks fit. In the instant case the State by notification dated 13.12.2010 Annexure P/3 in W.P. No.16965/2016 exempted in whole payment of Entry Tax on coal which is brought by dealers into the local area as raw material in the manufacture of goods. Petitioners or all dealers bring coal into local area for being consumed by their thermal power stations for generation of electricity - In absence of coal which is the very primary source for generation of heat leading to creation of steam resulting in turning of turbines no electricity can be produced by any thermal power station. Whether coal can be termed as raw material as defined in Section 2(g) of M.P. Entry Tax Act? - HELD THAT - Bare reading of expression raw material reveals that the definition is not only generic in nature but wide enough to include all articles used as ingredients in the process of manufacturing of goods or articles consumed in the process of manufacturing including fuel required for the process of manufacture - Since manufacture is not defined in M.P. VAT Act resort is made to the definition of manufacture u/S 2(p) of the M.P. VAT Act which is exhaustive in nature due to its inclusive characteristic. The said expression manufacture u/S 2(p) in the MP VAT Act includes any activity of brings out change in an article as a result of some process treatment labour and leads to transformation into an article which is new and different in commercial parlance having distinct name character etc. - In the definition of manufacture there is nothing to imply that unless and until any traces or element of raw material are found in the finished product the requirement of the process of manufacturing is not satisfied. Merely because coal gets burnt out in the initial process of creation of heat for making steam and thereby turning the turbine leading to production/manufacture of electricity and thus coal is not found in any physical form in the finished product i.e. electricity does not mean that coal cannot be treated as raw material for generation/manufacture of electricity. The other aspects which need to be satisfied is that coal is brought into the local area by petitioners in the course of its business as per Section 3 of M.P. Entry Tax Act - the expression course of business is not defined in M.P. Entry Tax Act and therefore resort is made to M.P. VAT Act which though does not defined the expression course of business but defines expression business in Section 2(d) of the M.P. Tax Act. The definition of expression business in M.P. VAT Act is generic inclusive and thus exhaustive in nature. This expression business includes the process of manufacture - it is obvious that coal is raw material as defined in Section 2(g) of M.P. Entry Tax Act required for the process of manufacturing/generation of electricity. More so coal is also one of the items mentioned in Schedule II appended to the Entry Tax Act. Once it has been held that coal is raw material for manufacturing/generating electricity and thus is exigible to Entry Tax Act the exemption/concession notification issued by the State u/S 10 of M.P. Entry Tax Act vide Annexure P/3 in W.P. No.16965/2016 and Annexure P/4 in W.P. No.3109/2015 are available to be availed by petitioners exempting them from payment of Entry Tax on coal brought into local area where the thermal power station of petitioners are situated on such terms and conditions as mentioned in the notification. Applicability of judgement in the case of Odisha Power Generation Corporation Ltd. vs. State of Odisha and another - HELD THAT - Bare perusal of the aforesaid comparison of provisions in Madhya Pradesh and Orissa reveal that textually as well as contextually the provisions are para materia and are not materially different and distinct as contended by the State. Thus there is no substance in the State s objection about applicability of Division Bench judgment of Orissa High Court in the case of Odisha Power Generation Corporation Ltd . This Court has no manner of doubt that submissions of State deserve to be rejected and petitions with regard to exemption as well as concession deserve to be allowed.

Summary

Issues Involved:
1. Exemption from Entry Tax on imported coal.
2. Applicability of Odisha VAT Act provisions to M.P. VAT Act.
3. Binding nature of the Supreme Court's dismissal of Special Leave Appeal (Civil) No.35253/2015.

Summary:

Issue 1: Exemption from Entry Tax on imported coal

The petitioners sought 100% exemption from Entry Tax on coal imported for electricity generation in their Thermal Power Plants based on a notification dated 13.12.2010. The court examined whether coal could be considered a "raw material" under Section 2(g) of the M.P. Entry Tax Act. It was determined that coal is indeed a raw material as it is consumed in the process of manufacturing electricity. The court also noted that the definition of "manufacture" in Section 2(p) of the M.P. VAT Act includes any activity that transforms an article into a new and different article, which applies to the generation of electricity from coal. Consequently, the court held that the exemption notification dated 13.12.2010 applies to the petitioners, exempting them from Entry Tax on coal.

Issue 2: Applicability of Odisha VAT Act provisions to M.P. VAT Act

The court considered whether the provisions of the Odisha VAT Act, 2004, are pari materia to the M.P. VAT Act, 2002, enabling the petitioners to benefit from the Orissa High Court's judgment in Odisha Power Generation Corporation Ltd. v. State of Odisha. The court found that the provisions in both Acts are textually and contextually similar. The Orissa High Court had held that coal is a raw material for generating electricity and that electricity generation is a manufacturing activity. The Madhya Pradesh High Court agreed with this reasoning, concluding that the Division Bench judgment of the Orissa High Court applies mutatis mutandis to the present case.

Issue 3: Binding nature of the Supreme Court's dismissal of Special Leave Appeal (Civil) No.35253/2015

The court addressed whether the Supreme Court's dismissal of the Special Leave Appeal (Civil) No.35253/2015 amounts to a confirmation of the Orissa High Court's judgment as a binding precedent. The court noted that the Supreme Court's order dismissing the appeal stated, "Heard the learned counsels for the parties and perused the relevant material. We do not find any legal and valid ground for interference." This indicated that the Supreme Court had considered the merits of the case and found no reason to interfere, thereby upholding the Orissa High Court's judgment. The court concluded that the Orissa High Court's judgment acts as res judicata in subsequent proceedings between the parties and supports the petitioners' claims for exemption/concession from Entry Tax.

Conclusion:

The court allowed the petitions, quashing the impugned orders and reassessment notices issued by the Divisional Deputy Commissioner, Commercial Tax, and other authorities. The court held that the petitioners are entitled to exemption/concession from payment of Entry Tax on coal imported for electricity generation based on the notification dated 13.12.2010 and the principles established in the Orissa High Court's judgment, which was upheld by the Supreme Court.