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TMI Blog2021 (11) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery - The furnace in question is not covered under machinery under Entry 70 List-C of Schedule of rates and therefore, is not exigible to sales tax. The contract involving receipt of lease rent for leasing of the flameless furnace does not constitute sale or resale of goods within the meaning of sale under Section 2(g) of the OST Act - Leasing of flameless furnace cannot be the subject matter of taxation since it has suffered Orissa Sales Tax at an interior stage in view of Section 8 of the Orissa Sales Tax Act. The impugned orders which hold to the contrary shall stand set aside - revision petitions are disposed of. - STREV Nos.6 of 2005, 25 of 2010 and 26 of 2010 - - - Dated:- 26-10-2021 - CHIEF JUSTICE S. MURALIDHAR AND JUSTICE B. P. ROUTRAY Advocates, appeared in these cases: For Petitioner(s) : Mr. Jagabandhu Sahoo Senior Advocate For Opposite Parties : Mr. S.S. Padhy Additional Standing Counsel JUDGMENT Dr. S. Muralidhar, CJ. 1. These three revision petitions raise similar questions of law for consideration and are accordingly being disposed of by this common judgment. Background facts in STREV 6 of 2005 2. STREV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods. This Court disposed of the said writ petition on 13th August 1997 permitting JSCPL to file an appeal before the appellate authority. 6. JSCPL s appeal, STA No.135 of 1997-98, was dismissed by the ACST by an order dated 22nd December, 1998 thereby affirming the order of the AA. According to JSCPL although the ACST took note of the mode of construction of the furnace, he erroneously held that the accessories sold by JSCPL to CFL were in fact machinery . 7. JSCPL then filed a further appeal, S.A. No.439 of 1999-2000, before the Tribunal and raised the following two issues: (a) Whether furnace in not a machinery liable to sales tax as such under the Orissa Sales Tax Act? (b) Whether furnace being an immovable property the sale price of it is not liable to tax under the Act? 8. The Tribunal by order dated 28th September, 2004 in S.A. No.439 of 1999-2000 held that the furnace was in fact machinery was liable to sales tax. The Tribunal rejected the contention of JSCPL that the furnace was an immovable property, embedded to the earth, and therefore not amenable to sales tax. 9. In STREV No.6 of 2005, while admitting the revision petition on 16th July, 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV? 14. In its judgment dated 8th August 2007, the Tribunal considered the earlier order dated 30th October, 2006 passed by the Full Bench of the Tribunal in SA 1323 of 2006 in the case of the CFL itself for the year 1995-96 which in turn had followed the decision dated 28th September, 2004 of the Tribunal in S.A. No.439 of 1999-2000 (being the case of JSCPL and which is the subject matter of STREV No. 6 of 2005). It also took note of another decision dated 28th June 1999 of the Full Bench of the Tribunal in M/s. Kotak Mahindra Finance Corporation Ltd. v. State of Orissa which had held that transfer of the right to use goods is a separate transaction distinct from the sale of goods and therefore even if the goods had suffered tax at the first point of sale, again lease rentals received on account of the goods subsequently can be taxed as a separate transaction. It was further held by the Tribunal in M/s. Kotak Mahindra Finance Corporation Ltd. v. State of Orissa that since there is no specific entry in the schedule of rate of tax for leasing transactions, the rate would be that applicable to unspecified goods in terms of the decision of the High Court of Orissa i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 8 of the Orissa Sales Tax Act? 3. Whether concessional rate of tax against declaration Form IV is allowable against deemed sale transaction constituting lease of furnaces? 19. This Court has heard the submissions of Mr. Jagabandhu Sahoo, learned Senior Counsel appearing for the Petitioners in all these cases and Mr. S.S. Padhy, learned Additional Standing Counsel for the Opposite Parties (Department). 20. As regards the first question whether the furnace embedded to the earth is to be considered immoveable property, there are a series of judgments of the Sup reme Court beginning with Quality Steel and Tubes (P) Ltd. v. Collector of Central Excise (1995) 75 ELT 17. In that case the Appellant was engaged in manufacture of welded steel pipes and tubes which were classified before 1st August 1983 under Item No.28AA of the first Schedule to the Central Excises and Salt Act, 1944 ( CE Act ). Later on, the said items were classified under Tariff Item 25 of the Schedule. The steel tubes and pipes produced by the Appellant were exempt from duty as they were produced out of duty paid raw material. For the manufacture of the items the Appellant had set up plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e railings as well as the wheels formed an integral part of the submerged electrical arc furnace. The entire mass was baked by burning and heating for 20 days. It was held by the Supreme Court that the construction of the electric arc furnace had taken place simultaneously with the civil work and the foundation has not acted as a base for laying the machinery. The item had come into existence along with civil work. It could not be dismantled and on such dismantling only spare parts were recoverable. It was accordingly held that it was not exigible to excise duty. 22. The later decisions including those in Mittal Engineering Works Pvt. Ltd. v. CCE, Meerut 1996 (88) ELT 622 (SC), Sirpur Paper Mills Ltd. v. CCE, Hyderabad 1998 (97) ELT 3 (SC), Duncan Industries Ltd. v. CCE, Mumbai 2000 (88) ECR 19 (SC), Triveni Engineering Industries Ltd. v. CCE 2000 (120) ELT 273 (SC) CCE, Jaipur v. Man Structurals Ltd. 2001 (130) ELT 401 (SC) and TTG Industries Ltd. V. Collector of Central Excise (2004) 4 SCC 751 have reiterated the above legal position vis- -vis different kinds of plant and machinery that on account of their nature of being embedded to the earth cannot be considered moveab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. 24. In its judgment in Commissioner of Central Excise, Indore v. Virdi Brothers 2007 (207) E.L.T. 321 (S.C.) the Supreme Court while dealing with the correctness of the order passed by the CEGAT holding that refrigeration plant/cold storage plant which were fabricated out of duty paid materials would be subject to excise duty, held that these plants are basically systems comprising of various components and are thus in the nature of systems and are not machines as a whole. Therefore, they could not be considered to be excisable goods. The Supreme Court accordingly dismissed the Department s appeal. 25. A similar view was held in Commissioner of Central Excise, Indore v. Cethar Vessels Ltd. 2007 (212) E.L.T. 454 (S.C.) and Ibex Gallaghar Pvt. Ltd. v. Commissioner of Central Excise, Bangalore 2007 (215) ELT 161 (SC). This Court followed the above decisions and held likewise in Srei International Financial Ltd. v. State of Odisha (2008) 16 VST 193 (Ori). 25.1 The last-mentioned judgment requires a detailed di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbedded to the earth. This being a lease of immovable property, the transaction was not exigible to sales tax under the OST Act. The third contention was that the agreement of lease was signed in West Bengal and the Assessing Officer in Odisha has no jurisdiction to tax the lease rental. 25.6 Reliance was placed before this Court on a decision in ITC Classic Finance and Services v. Commissioner of Commercial Taxes (1995) 97 STC 330 (AP) which was affirmed by the Supreme Court dismissing the appeal filed by the State of Andhra Pradesh. 25.7 In Srei International Financial Ltd. v. State of Odisha , this Court examined the following questions: (i) Whether the exhaustion of statutory remedy can be a bar in this case for this Court to exercise its jurisdiction under Article226 of the Constitution? (ii) Whether a dealer is liable to pay tax on the ground that he admitted to pay tax on a certain transaction even if the said transaction is not taxable within the provisions of the OST Act? (iii) Whether the-lease rental received by the Petitioner from IMFA is exigible to tax under the provisions of the OST Act? 25.8 As regards question (i), this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment referred to the decisions of the Supreme Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998) 1 SCC 400. The said decision was already taken note of in the circular issued by the Department in 2002 which has been extracted hereinbefore. The said circular thereafter accepted the proposition advocated by the Petitioners in these cases. 27. Mr. Padhy, learned ASC also referred to the decision of the Supreme Court in Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works (2010) 5 SCC 122 . There the question was about exigibility to excise duty on the ground that assembling, installation and commissioning of asphalt drum/hot mix plants amounted to manufacture inasmuch as the plant that eventually came into existence was a new product with a distinct name, character and use different from what went into its manufacture. On the facts of that case it was held that what is attached can be easily detached from the foundation and therefore, that need not be said to be attached to the earth within the meaning of Section 3 of the Transfer of Property Act. It was held to the fact of that case that the machine is fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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