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TMI Blog2005 (10) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... refining. However, with a view to find out a better market for the oil, petitioners carry on activity of refining of oil only to put the oil purchased in a more acceptable condition. The petitioners, during the calendar year 1981, under legal advice based on the judgment of the Supreme Court in the case of Tungabhadra Industries v. Commercial Tax Officer, Kurnool [1960] 11 STC 827, that the process of refining oil does not amount to manufacture, did not pay tax on the sale of the oil which was purchased from the registered dealers in the State of Maharashtra; on which tax was paid at the time of purchase because they were entitled to claim resale without payment of tax by virtue of section 8 of the Act. 4.. The petitioners also stated that from the year 1981 onwards they have been claiming resale under section 8(ii) of the Act in respect of unrefined oil purchased by them from the registered dealers in the State of Maharashtra and which has been sold after refining. The assessing authority did not accept this claim and the petitioners were required to file appeals under section 55 of the Act to the appellate authority. The petitioners' assessments up to and including the year end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Schedule C. There shall be levied a sales tax on the turnover of sales of goods specified in Schedule C at the rate set out against each of them in column 3 thereof, but after deducting from such turnover, (i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under section 14; (ii) resales of goods, purchased by the dealer on or after the appointed day from a registered dealer, otherwise than on a declaration furnished under section 11 or 12, if the requirements of section 12A are satisfied: (Provided that, resales of goods purchased by the dealer from a registered dealer during the period commencing on the 1st July, 1981 and ending on the day immediately preceding the date of commencement of the Maharashtra Tax Laws (Levy and Amendment) Act, 1988, on a declaration furnished under section 8A shall not be deducted from such turnover). (iii) resale of goods purchased by the dealer on or after the appointed day from a dealer liable to pay tax under section 4, if a certificate as provided in sub-section (2) of section 12A is furnished; and (iv) sales of goods or resales of goods to which clause (ii) or clause (iii) does not apply, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submits that a five Judge Bench of the Supreme Court in the case of Tungabhadra Industries Ltd. [1960] 11 STC 827, held that hydrogenated groundnut oil commonly called vanaspati is groundnut oil within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. According to him, the case of the petitioners is squarely covered by this decision. He submits, this judgment has been applied and followed in several cases, viz., Panchalingal Carbonic Gas Pvt. Ltd. v. State of Andhra Pradesh [2005] 141 STC 161 (AP) [FB], Raj Solvex Ltd. v. Additional Commissioner, Commercial Taxes [2003] 133 STC 333 (RTT), Teejan Beverages Ltd. v. State of Kerala [2003] 131 STC 538 (Ker), Commissioner of Sales Tax v. Oil Processors Pvt. Ltd. [1998] 108 STC 44 (Bom), New Nagpur Copra Industries v. State of Maharashtra [1985] 60 STC 380 (Bom). 14.. Mr. Jetly submits that the subsequent decision of the Supreme Court in B.P. Oil Mills Ltd. v. Sales Tax Tribunal [1998] 111 STC 188 has overlooked the import of its earlier decision in the case of Tungabhadra Industries Ltd. [1960] 11 STC 827. He submits that the decision of the apex Court in the case of Tungabhadra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of vegetable oil has all along been treated as manufacture, attracting 4 per cent tax under the sales tax law. This well established procedure has recently been upset by a decision of the Sales Tax Tribunal holding that refining of sunflower oil would not amount to manufacture. Since tax has been collected for many years now on such refining of oil and the judgment has serious revenue implications, SI propose to make an explicit statutory retrospective amendment clarifying that refining of oil is a manufacturing process." 18.. Mr. Nair further submits that retrospective effect was required to be given from January 1, 1960 as the scheme for levy of tax was changed from 1960. Since that date consistent view of the Government was that refining process of oil was a manufacturing activity. He pointed out that the Tribunal had also taken a similar view on the basis of unamended definition of the word "manufacture" in S.A. No. 1978 of 1974 (Kisangopal Shrikisandas Domani v. State of Maharashtra) decided on February 28, 1975 and S.A. No. 53 of 1976 (Rajini Oil Industries v. State of Maharashtra) decided on September 24, 1978. 19.. Mr. Nair, submits that because of the decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned amendment and whether or not the retrospective effect given to the amending provision is justified. 23.. Before adverting to the above questions, it is necessary to consider the circumstances leading to the amendment to section 2(17) of the Act with retrospective effect, keeping in mind the rival submissions advanced by learned counsel appearing for the rival parties. 24.. It is not in dispute that for a considerable long time judicial view of the Tribunal was that the crude cotton seeds oil washed with caustic soda to obtain refined cotton seed oil did amount to "manufacture" within the meaning of unamended section 2(17) of the Act [see Kisangopal Shrikisandas case (supra)]. It is also not in dispute that for a considerable long time it was the judicial view that the crude oil and washed oil are two different commercial commodities [see Rajani Oil Industries (supra)]. 25.. In S.A. No. 53 of 1976, the then fourth Bench of the Tribunal for the first time in the year 1978 formed a view that the decision given by the Tribunal in the case of Rajani Oil Industries (supra), Kisangopal Shrikisandas case (supra) and Vengoils Limited v. State of Maharashtra (Appeal No. 100 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment made by the subsequent Act; but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act." (Price at p. 392). 29.. Maxwell states in his work on Interpretation of Statutes (12th Edn.) that the rule against retrospective operation is a presumption only, and as such it "may be overcome, not only by express words in the Act but also by circumstances sufficiently strong to displace it" (p. 225). If the dominant intention of the Legislature can be clearly and doubtlessly spelt out, the inhibition contained in the rule against perpetuity becomes of doubtful applicability as the "inhibition of the rule" is a matter of degree, which would "vary secundum materiam" (p. 226). Sometimes, where the sense of the statute demands it or where there has been an obvious mistake in drafting, a court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act. (p. 231). 30.. Keeping the above principles in mind, let us consider and compare the original unamended definition of the word "manufacture" appearing in section 2(17) to examine justification in favour of ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respective parties, apex Court noted at page 596 of the Report (page 794 of AIR 1963 SC), the contention on behalf of the Revenue that manufacture was complete as soon as by the application of one or more processes, the raw material underwent some change. It further stated: "To say this is to equate 'processing' to 'manufacture' and for this we can find no warrant in law. The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance', however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American judgment. The passage runs thus: 'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." 33.. Hence, according to this decision of the apex Court, if a new substance is brought into existence or if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld apply. "A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole." 37.. In the case of Jawaharmal v. State of Rajasthan AIR 1966 SC 764, the apex Court held: "We have already stated that the power to make laws involves the power to make them effective prospectively as well as retrospectively, and tax laws are no exception to this rule. So, it would be idle to contend that merely because a taxing statute purports to operate retrospectively, the retrospective operation per se involves contravention of the fundamental right of the citizen taxed under article 19(1)(f) or (g). It is true that cases may conceivably occur where the court may have to consider the question as to whether excessive retrospective operation prescribed by a taxing statute amounts to the contravention of the citizens' fundamental right; and in dealing with such a question, the court ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t clarificatory amendment to the fiscal legislation with retrospective effect is usually held not to be unreasonable or arbitrary. In the case of any validating Act, the intention of the Legislature is generally made sufficiently clear in the section or in the Act which is declared invalid on account of some flaw or defect which is within the competence of the Legislature. The clarificatory amendments, it may be observed, do not in fact have the effect of imposing a fresh tax with retrospective effect. They only clarify the levy which was already imposed. There is in effect and substance no imposition of any new tax for the earlier years by virtue of the retrospective operation and the retrospective operation merely validates the levy already imposed and possibly collected. 42.. Let us now consider the reasonableness of the retrospective part of the amendment in question. 43.. Imposition of sales tax by legislation permits the dealers to pass on the liability on the customers. In other words, the sales tax legislation permits recovery of tax from the subjects. It is well recognised that the tax may be recovered retrospectively. It is also well-settled that recovery of tax by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering, ornamenting, finishing or otherwise processing, treating, or adapting any goods but did not include such manufactures or manufacturing process as may be prescribed. What is excluded by rule 3 is a minor process which does not result in change of altogether a different marketable commodity. But so far as the process of refining or extracting some crude material therefrom was all the while treated as manufacturing process. Considered from this aspect and in the context of the earlier judgments of the Tribunal in the case of Kisangopal Shrikisandas case (supra) and others referred to hereinabove, there is no injustice or hardship to the petitioners or the manufacturers or the refiners of the oil. 46.. At this juncture, it will not be out of place to mention that the very same question whether definition of "manufacture" under section 2(e-1) of the U.P. Trade Tax Act, 1948 envisages processing was raised before the Allahabad High Court in the case of B.P. Oil Mills Ltd. [1998] 111 STC 188, wherein it was held that where any commodity is subjected to a process or treatment with a view to market it, it would amount to processing. Therefore, the nature and extent of the process t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly came up for interpretation in that case. 49.. The apex Court in the above case, while dealing with Sterling Foods' case [1986] 63 STC 239; (1986) 3 SCC 469, observed that the question that arose for determination was whether shrimps, prawns and lobsters subjected to processing like cutting of heads and tails, peeling, deveining, cleaning and freezing cease to be the same commodity and become a different commodity within the meaning of section 5 of the Central Sales Tax Act, 1956. While answering this question, the apex Court applied the "commercial parlance" test and relied upon its earlier judgment in Deputy Commissioner of Sales Tax (Law) v. Pio Food Packers [1980] 46 STC 63 (SC); (1980) 3 SCR 1271 to hold that processed shrimps, prawns and lobsters were not a new and distinct commodity but they retained the same character as the original shrimps, prawns and lobsters even after the processing. It was, thus, held that the reliance on the case of Sterling Foods case [1986] 63 STC 239; (1986) 3 SCC 469 was misplaced. In this backdrop, it was observed that the crude oil does not at all retain its earlier characters after processing. 50.. The apex Court, so far as Shiv D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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