9911796707
TMI Blog2007 (2) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... tment dated October 23, 1997. Subsequently, by Government Order in G.O. Ms. No. 234, Environment and Forest Department, dated August 6, 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 November 24, 2002 agreeing to all the conditions contained therein and the conditions in respect of payment of rent and royalty reserved therein. For the assessment year 1999-2000, the petitioner filed the monthly return in form A1 under the TNGST Act reporting their total and taxable turnover of Rs. 2,61,85,450.48 and Rs. 2,58,28,274.32 claiming exemption over a turnover of Rs. 3,57,176.16. The petitioner's books of account were called for and checked for framing of the assessment by the second respondent, the assessing officer. Upon checking of the returns filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 60,63,294 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 per cent. Thus, among other things, by pointing out the above three defects, the second respondent called upon the petitioner to file their objections, if any, to the proposal prior to December 30, 2002. The petitioner on December 29, 2002 filed their objections to the proposal. In respect of the proposal of levying tax under section 7A, the dominant objection of the petitioner was that inasmuch as the taxable goods raw magnesite was quarried from the petitioner's leasehold land and consumed in petitioner's factory, the taxable goods was petitioner's own goods and there was no element of purchase and in that event of the matter, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en rejected and the said turnover has been brought to tax at 11 per cent. That portion of the order is challenged in W.P. No. 2359 of 2006. The royalty paid, which has been regarded as purchase consideration and assessed to tax under section 7A, in respect of the assessment year 2000-2001, is put in issue in W.P. No. 2631 of 2006. It is contended on behalf of the petitioner that the second respondent has no jurisdiction to levy purchase tax under section 7A 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 August 6, 1998, the petitioner became a lessee of the forest land for the purpose of mining magnesite. There was no sale by the State to the petitioner. The basic ingredient of purchase is absent in the case on hand. Hence, the invocation of section 7A of the TNGST Act is not applicable. In order to sustain his argument, the learned counsel relied on the case of the Supreme Court of India in the case of State of Orissa v. Titaghur Paper Mills Co. Ltd. reported in [1985] 60 STC 213 and also India Cement Ltd. v. State of Tami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the 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 to reimburse the sales tax to the forest department. Trees which were agreed to be severed and which were exigible to sales tax also became exigible to purchase tax under the notifications. In common parlance, trees or bamboos after they are severed are timber and bamboos, respectively. The nature and character of the felled trees and bamboos do not change when they are brought outside the forest for the purpose of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n profit a prendre and, as such, were against the provisions of the Act. On the abovesaid reasoning, the High Court quashed the notifications. The Revenue carried the above matter on appeal to the Supreme Court and the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 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 bamboo contract was not a contract for the sale of goods. The bamboo contract was not a lease or the grant of an easement; it conferred upon the company a benefit to arise out of land, namely, the right to cut and remove bamboos, which would grow from the soil coupled with ancillary rights and was thus a grant of a profit a prendre. Any attempt on the part of the State Government to tax the amounts payable under the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onne . . . 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 export may be checked by any officer authorised by the Government or the Central Government. Part-VII The covenants of the lessee/lessees, to pay rents, royalties, rates and taxes. The lessee shall pay the rents and royalty reserved by this lease at the times and in the manner provided in Parts V and VI and shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 Jowitt's Dictionary of English Law, Second Edition, at page 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 Wharton's Law Lexicon, 14th Edition, at page 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 Black's Law Dictionary, 5th Edition at page 1195, is as follows: 'Royalty. Compensation for the use of property, usually copyrighted material or natural resources, expressed as a percentage of receipts from using the property or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 extrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgments of courts are not to be construed as statutes. There is always peril in treating the words of a speech 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. In the case of India Cement Ltd. v. State of Tamil Nadu reported in AIR 1990 SC 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under the Act qualify the term goods and exclude by necessary implication goods, the sale 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 7A. The words under the Act include a charge created by section 7A also. Section 7A 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 Act. 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 7A provides for such a situation and makes the purchase of 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 7A is sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales to registered dealers as the prescribed declarations had not been produced. Thereupon the assessee filed 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 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 36 to the Tribunal. In a comparable factual situation, in the case of State of Goa v. Leukoplast (India) Ltd. reported in [1997] 105 STC 318, the Supreme Court has taken the same view. That was a case in which under 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 per cent and Central sales tax at four 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 three 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive function was to be found out. It had to be decided whether they could be called medicament at all, and whether they were used to cure or alleviate or 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] 53 STC 315 (SC); [1983] 2 SCC 433 which is referred above. In Union of India v. Tata Engineering Locomotive Company Limited reported in AIR 1998 SC 287, aggrieved by the order of the Division Bench of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he pre-assessment notice dated December 16, 2002 proposed to include the turnover relating to packing and forwarding charges and objections have been filed 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 in 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 the appeal. In the light of the uniform opinion expressed by the apex court of India by the three-Judge Bench Judgment in first two of the cases abovementioned and the Division Bench judgment of the latter case, I am of the view that the writ petitions cannot be maintained, particularly, when this court has come t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
