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TMI Blog2007 (2) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.6.1998 for mining magnesite and dunite over an extent of 177.96 hectares of forest land in Salem Division subject to certain conditions by G.O.(2D) No.53, Environment and Forests (FRX) Department dated 23.10.1997. Subsequently, by Government Order in G.O.Ms.NO.234, Environment and Forest Department dated 6.8.1998, the Government of Tamil Nadu renewed the lease in favour of the petitioner for the said area of 177.96 hectares (168.78 hectares of already broken up area and 9.882 hectares of to be broken up area) for a period of ten years from the date of issue of said order on certain conditions. Pursuant to the grant of lease, the petitioner also entered into Mining lease in Reserve Forest Agreement under Forest(Conservation) Act, 1980 with the District Forest Officer, Salem on 24.11.2002 agreeing all the conditions contained therein and the conditions in respect of payment of rent and royalty reserved therein. 3. For the assessment year 1999-2000, the petitioner filed the monthly return in Form A1 under TNGST Act reporting their total and taxable turnover of Rs.2,61,85,450.48ps and Rs.2,58,28,274.32ps claiming exemption over a turnover of Rs.3,57,176.16ps. The petitioner's book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s x other State and } and used in the goods Total sale value of the to other country } despatched to a place goods (including stock by export } outside the State either transfer, 'consignment } by branch transfer to an sales and export sales agent and in the goods manufactured out of exported. Form XVII) The differential tax at the rate of one percent under Section 3(4) of the TNGST Act has been arrived at in a sum of Rs.1,95,815/-. 6. The other proposal at para 7, which is the subject matter of the writ petition No.2359 of 2006 was that the dealer has incurred expenses in a sum of Rs.60,63,294.00 towards packing and forwarding charges as per Schedule 23 of Annual Report of the petitioner during the relevant assessment year 1999-2000. According to explanation clause (ii) of Explanation 2 of Section 2(r) of the TNGST Act, the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof. The packing and forwarding charges in a sum of Rs.60,63,294/- has not been assessed for tax. The same has to be taxed at 11%. 7. Thus, among other things, by pointing out the above three de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess the turnover of Rs.60,63,294/- has to be confirmed. He further informed the petitioner in the same notice that in the event of confirmation of the proposal of the said turnover, penalty should also be levied under Section 12(3)(b) of the TNGST Act and called for an objection. The petitioner filed their objection on 9.6.2003 by annexing certain invoices to show that the packing and forwarding charges incurred by them has been included in the sale price. By proceedings dated 31.7.2003, the objection so raised has been rejected and the said turnover has been brought to tax at 11 percent. That portion of the order is challenged in W.P.No.2359 of 2006. 10. The royalty paid, which has been regarded as purchase consideration and assessed to tax under Section 7-A, in respect of the assessment year 2000-2001, is put in issue in W.P.No.2631 of 2006. 11. It is contended on behalf of the petitioner that the second respondent has no jurisdiction to levy purchase tax under Section 7-A of the TNGST Act as the quarrying of raw magnesite was nothing but profit a prendre, which is an immovable property and beyond the State's taxing power. By Government Order in G.O.Ms.No.234 dated 6.8.1998, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners had taken settlement of forest areas for exploitation of bamboos and some others had taken annual settlement for exploitation of timber and other forest produce. All of them filed writ petitions and contended, inter alia, that by imposing purchase tax on "bamboos and standing trees agreed to be severed", the State Government was not imposing any tax on "sale of goods", that if there was any sale of goods, the State Government was taxing the same goods twice, once at the purchase point and again at the sale point, which was forbidden by law, and that, therefore, the notifications were beyond the competence of the State Government. The contention of Revenue, inter alia, was that bamboos and trees agreed to be severed were different commercial commodities from bamboos and timber after they were felled and therefore the Government was competent to tax them, both at the sale point and purchase point. In those factual circumstances of the case and having regard to the licence agreement entered into between the parties, the High Court of Orissa at Cuttack held that under the agreement relating to exploitation of timber and forest produce, persons taking auction were liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. That bamboos which would come in future were also the subject-matter of transfer but such transactions also amounted to profit a prendre and could not amount to sales or purchases of goods as envisaged under the Sale of Goods Act, 1930. That the notifications were accordingly ultra vires the provisions of the Act. In the case of bamboo exploitation contracts, the notifications also amounted to impost of tax on profit a prendre and, as such, were against the provisions of the Act. On the above said reasoning, the High Court quashed the notifications. 16. The Revenue carried the above matter on appeal to the Supreme Court and the Supreme Court in 60 STC 213, after construing the agreement has held that by reason of the operation of the Forest Contract Rules, the property in bamboos passed to the company only after the bamboos were felled, taken to the depots at inspection points and there checked and examined and thereafter removed from the contract area. The notifications did not have any application and the amount payable under the bamboo contracts were not exigible to purchase tax in the hands of the company. That the bamboos contract was not a contract for the sale of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 2) The lessee should pay to the District Forest Officer, Salem Forest Division, Salem on the day of 1st April in each year Royalty on minerals despatched from the leased area at the rate specified below (as fixed in Govt. of India Gazette No.156, New Delhi, dt.11th April 1997) Rs.25/- (Rupees twenty five only) per tonne. ... 2(A) ....... PART - VI - Provisions relating the Rents and Royalties, Place of Payment. 1. The rents and royalties mentioned in Part-V of the Schedule shall be paid free from any more deductions to the Sub-Treasury at Salem or to such other officer and at such other place as the Government shall from time to time appoint. Provided Always and it is hereby agreed that Rs.1,000/- the balance standing to the credit of the lessee on account of the deposit made by the lessee on applying for this lease shall be retained and accepted by the Governor in satisfaction of the rents and royalties mentioned in Part-V until they reach that amount. 2. .... 3. For the purpose of computing the said Royalties the lessee shall keep a correct account of the minerals produced and despatched. The accounts as well as the weight of the minerals in stock or in the process of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not. See RENT. The same dictionary states under the heading Rent, at p. 1544: "When a mine, quarry, brick-works, or similar property is leased, the lessor usually reserves not only a fixed yearly rent but also a royalty or galeage rent, consisting of royalties (q.v.) varying with the quantity of minerals, bricks, etc., produced during each year. In this case the fixed rent is called a dead rent." 36. Royalty is defined in Jowitts Dictionary of English Law, 2nd Edn., at p. 1595, inter alia, as: "Royalty, a payment reserved by the grantor of a patent, lease of a mine or similar right, and payable proportionately to the use made of the right by the grantee. It is usually a payment of money, but may be a payment in kind, that is, of part of the produce of the exercise of the right. See Rent." Royalty is defined in Whartons Law Lexicon, 14th Edn., at p. 893, as: Royalty, payment to a patentee by agreement on every article made according to his patent; or to an author by a publisher on every copy of his book sold; or to the owner of minerals for the right of working the same on every ton or other weight raised. The definition of royalty given in Blacks Law Dictionary, 5th Edn., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se defined.A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. 39. In a mining lease the consideration usually moving from the lessee to the lessor is the rent for the area leased (often called surface rent), dead rent and royalty. Since the mining lease confers upon the lessee the right not merely to enjoy the property as under an ordinary lease but also to extract minerals from the land and to appropriate them for his own use or benefit, in addition to the usual rent for the area demised, the lessee is required to pay a certain amount in respect of the minerals extracted proportionate to the quantity so extracted. Such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peech or a judgment as though they were words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. Useful reference can be had to the judgment of the Supreme Court in the case of Haryana Financial Corpn. v. Jagdamba Oil Mills,(2002) 3 SCC 496, at page 509. 22. In the case of THE INDIA CEMENT LIMITED VS. STATE OF TAMIL NADU reported in AIR 1990 SUPREME COURT 85 relied on by the learned counsel for the petitioner, the legislative competence of the State Legislature to levy local cess and local cess surcharge on the royalty was a question raised and it was decided that the State Legislature has no such legislative competence. This decision cannot be taken in aid of the petitioner to maintain the writ petitions in the given facts of the case. 23. The assessing officer in this case has taken the royalty paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or purchase of which is totally exempted from tax at all points under section 8 or section 17(1) of the Act. The goods so exempted - not being "taxable ;goods" - cannot be brought to charge under section 7-A. The words "under the Act" include a charge created by section 7-A also. Section 7-A is a charging as well as a remedial provision. The ingredients (4) and (5) in Section 7A(1) are not mutually exclusive and the existence of one does not necessarily negate the other. Both can co-exist and in harmony. Ingredient (4) would be satisfied if it is shown that the particular goods were "taxable goods", i.e., the goods, the sale or purchase of which is generally taxable under the Ac;t. Notwithstanding the goods being "taxable goods", there may be circumstances in a given case, by reason of which the particular sale or purchase does not attract tax under section 3, 4 or 5. Section 7-A provides for such a situation and makes the purchase if such goods taxable in the case of purchasing dealer on his purchase turnover if any of the conditions (a), (b) and (c) of sub-section (1) of section 7-A is satisfied. 25. The Apex Court concluded in the said case by observing that the object of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled writ petitions in the High Court challenging the assessments among other things on the ground that the Sales Tax Officer had acted in flagrant violation of the rules of natural justice as they were deprived of their opportunity to place their case and that he was not justified in disallowing the claim for deductions. The High Court dismissed the petitions on the grounds that the assessee had a right a right of appeal and that that was not a case of inherent lack of jurisdiction. The assessee preferred petitions in the Supreme Court for special leave to appeal and an officer of the assessee-company also filed writ petitions in the Supreme Court challenging the validity of the assessment orders. In that case, the Supreme Court dismissing the petitions has held that: (i) the assessee had an equally efficacious alternative remedy by way of appeal to the prescribed authority under section 23(1) of the Act, then a second appeal to the Tribunal under section 23(3)(a), and thereafter in the event the assessee got no relief, to have a case stated to the High Court. (ii) The instant case was a case in which the entrustment of power to assess was not in dispute, and the authority wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (1997) 105 STC 318, the Supreme Court has taken the same view. That was a case in which a licence granted by the Drugs Controller under the Drugs and Cosmetics Act, 1940, the assessee was producing zinc oxide adhesive plaster, surgical wound dressing, belladona plaster, capsicum plaster and cotton crepe bandage. Prior to November 1, 1981, the respondent paid local sales tax at 6 percent and Central sales tax at 4 per cent on the sale of those goods. By Notification No.14/41/81-Fin (R&C) dated August 28, 1981, drugs and medicines were exempted from the levy of local sales tax in excess of 3 per cent and, accordingly, Central sales tax was also reduced to 3 per cent. By another Notification No.5/5/87 (R & C)-8 dated April 1, 1987, the State of Goa, in exercise of the powers under section 10 of the Goa, Daman and Diu Sales Tax Act, 1964, amended Schedule II to the Act by inserting entry 77 which specified "drugs and medicines, including all I.V. drips". By that notification such goods were totally exempted from local sales tax and the sales tax authorities ceased to collect Central Sales tax and local sales tax on the products manufactured by the respondent. The assessee claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevent disease or to restore or preserve health. These were basically questions of fact which should have been agitated before the statutory appellate authority. There was no reason for the assessee to by-pass the statutory remedy and approach the court with a writ petition and the High Court ought not to have allowed the assessee to by-pass the statutory remedies where the questions could have been properly agitated and ascertained. Thus, the Supreme Court allowed the appeal filed by the State of Goa by following its earlier judgment of Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 = 53 STC 315 , which is referred above. 30. In Union of India and others Vs. Tata Engineering & Locomotive Company Limited reported in AIR 1998 SUPREME COURT 287, aggrieved by the order of the Division Bench of Patna High Court directing the Assistant Collector of Central Excise,Jamshedpur to pass without delay appropriate final order on all the price lists submitted by the company by taking the price at which the Company sold the vehicles at the factory gate at Jamshedpur as the normal price for the purpose of computation of the value of the excisable goods and with a further dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the petitioner, the assessment order that has been inadvertently omitted, by giving one more opportunity by issuing notice, the petitioner was directed to file objections and upon filing objections, objections of the petitioner have been rejected by giving reason that the objections filed with the invoices would not any way suggest that the sale price itself included the packing and forwarding charges also. Equally this is also a factual finding, which can be agitated before the appellate authority for the reasons stated in the earlier paragraphs. So is the other; point as to whether the demand of differential duty under Section 3(4) on the exported turnover of the manufactured goods could also be questioned in in the appeal. 33. In the light of the uniform opinion expressed by the Apex Court of India by Three Judges Bench Judgment in first two of the cases above mentioned and the Division Bench judgment of the later case, I am of the view that the writ petitions cannot be maintained, particularly, when this Court has come to the conclusion that the reliance with which the petitioner heavily made on i.e., 60 STC 213 is not a comparable decision to the facts of the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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