High Court
Case Details
WP(C) 1430/2009 B E F O R E HON’BLE THE CHIEF JUSTICE MR. A.K.GOEL THE HO’BLE MR.JUSTICE A.K.GOSWAMI
Decision
These three writ petitions raise common questions of law and fac ts and as such, they were heard together and are being disposed of by this commo n judgement and order. 2. In these writ petitions, assessment order dated 06-01-2008 (sic 06-01-2009), passed by the Superintendent of Taxes, Unit- (cid:28)D (cid:29) levying taxes and interest and consequent demand notice dated 19-01-2009 are under challenge. W.P .(C) No. 1430 of 2009, W.P. (C) No. 1438 of 2009 and W.P. (C) No. 1440 of 2009, relate to assessment years 2006-07, 2007-08 and 2008-09, respectively, with cor responding demand of Rs. 18,24,900/-, Rs.17,14, 824/- and Rs. 3,82,860/-. Also u nder challenge is the order dated 21-11-2008 passed by the Commissioner of Taxes , Assam, respondent No.2, in exercise of powers under Section 105 of the Assam V alue Added Tax Act, 2003, for short, the Act, clarifying that aluminum rolled pr oducts such as sheets, plates and foils shall not come under Sl. No. 26 of the S chedule-II of the Act, and that such products shall be taxable at the rate of 12 .5 per cent. The petitioners also pray for a direction that aluminum rolled pro ducts such as sheets, plates, foils fall within the purview of Sl. No. 26 of th e Schedule-II of the Act and, therefore, liable to be taxed at the rate of 4 per cent. 3. The petitioner Company is engaged in the business of manufacturi ng and dealing in aluminum and its products and is registered under the provisio ns of the Act. The petitioners paid tax at the rate of 4 per cent on the sale o f aluminum rolled products manufactured by it treating the same to be covered un der Entry-26 of the Schedule-II of the Act. On 27-06-2008, the jurisdictional Su perintendent of Taxes, namely, respondent No.3, upon inspection of documents and papers in the premises of the petitioners, seized certain documents and papers on the ground that the petitioner Company had accounted the sales derived from a luminum sheets, wire rods at lower rate of tax than actually chargeable rate of tax thereon, resulting in under declaration of tax liability during the relevant periods. The respondent No. 3 served notice dated 10-07-2008, requiring the pet itioners to appear before him on 29-07-2008 and to show cause why the turnover o f the petitioners for the relevant periods shall not be charged at the rate of 1 2.5 per cent instead of 4 per cent and as to why proceedings for levying correct amount of recoverable tax along with interest and penalty as per the Act shall not be initiated against the petitioners. 4. The petitioner Company had filed a petition under Section 105 of the Act before the respondent No.2, seeking clarification as to why the aluminu m ingots, wire rods and rolled products and extrusions should not fall within th e ambit of Entry-26 of the Schedule-II of the Act. By the impugned order dated 21-11-2008, the respondent No. 2 gave his clarification. On the basis of the sai d clarification, assessment order was passed and demand notice was issued, as ha ve already been taken note of. 5. We have heard Dr. A.K. Saraf, learned senior counsel for the pet itioners and Mr. R. Dubey, learned Standing Counsel, Finance Department, appeari ng for the respondents. 6. Dr. Saraf submits that clarification of the respondent No. 2 tha t aluminum rolled products such as sheets, plates and foils did not come under Entry-26 of Schedule-II of the Act and, therefore, are taxable at the rate of 12.5 per cent, meaning thereby, that they fall in Sl. No. 1 of Schedule-V of t he Act is grossly erroneous and placing reliance on a decision of the Apex Cour t in Kali Das Sheet Metal Industry (P) Ltd.-vs- State of Kerala, reported in (20 08) 3 SCC 785, contends that having regard to the items in Entry-26, it would be apparent that the entry is much wider and more comprehensive compared to Entri es 116-A and 116-D of Schedule-I to the Kerala General Sales Tax Act, 1963 whic h were the subject matter of the aforesaid decision and that the Apex Court had rejected the contention that (cid:28)copper (cid:29) and (cid:28)brass (cid:29) would not take within its swe ep (cid:28)copper sheet (cid:29) and (cid:28)brass sheet (cid:29). The learned senior counsel also places rel iance on the judgement of the Apex Court in the case of The State of Madhya Bhar at ( now the State of Madhya Pradesh) and Others, -vs- Hiralal, reported in AIR 1966 SC 1546, where the Apex Court had rejected the contention that expression (cid:28)iron and steel (cid:29) means iron and steel in the original condition and not iron and steel in the shape of bars, flats and plates. It is submitted by him that the impugned order dated 21-11-2008 displays total non application of mind inasmuch as no reasoning whatsoever has been assigned as to why aluminum rolled products would not come under Entry-26 of Schedule-II, save and except saying that in a number of cases, it had been held that aluminum rolled products are different fr om aluminum and extrusions, without referring to even a single such purported de cided case. It is also contended that process of rolling of aluminum under high temperature does not result in any change or character or use of the basic metal , and is in no way different from extrusions. 7. In absence of any affidavit filed, Mr. R. Dubey, learned counsel appearing for the respondents, supports the impugned order of the respondent No .2 by placing reliance in the decisions of the Apex Court in Hindustan Aluminum Corporation Ltd.-vs- State of U.P. and Others, reported in (1981) 3 SCC 578 and Steel Stores and Another-vs-Commissioner of Taxes and Others, reported in (2010 ) 5 GLR 802, to contend that the authoritative pronouncements in the cases refer red to will clinch the issue in favour of the revenue. 8. The Act came into force with effect from 01-05-2005. Section 10 (1) (a) of the Act provides that every dealer, who is liable to tax, shall be li able to be taxed under the Act on the taxable turnover in respect of the goods specified in the Schedules appended at the rates specified therein. In the insta nt case, we are required to consider Schedule-II and Schedule-V. Schedule-II dea ls with goods taxable at the rate of 4 per cent at every point of sale of such g oods within the State. Schedule-V deals with all other goods not covered by the first, second, third and fourth schedules as well as Works contract and Lease tr ansactions. For ready reference, Sl. No. 26 of the Schedule-II and Sl. No. 1 of the Schedule-V, with which we are concerned, are reproduced herein below : Schedule-II Sl.No. Conditions and exception Description of goods 26 copper, zinc and extrusions of those Ferrous and non-ferrous metals and alloys, non-metals such as aluminum, All other goods not covered by First, Second, Third and Fourth Schedule Schedule-V Description Rate of Tax (Paise in the S1.No. Rupee) 1 12.5 9. -2008 of the respondent No.2 for ready reference : (cid:28) ORDER It will also be appropriate to quote below the order dated 21-11 er, 2008 Dated Dispur, the 21st Novemb No. CTS-70/2007/153 : M/s Hindalco Industries Ltd., N.S. Road, Fatasil, Guwahati-9 filed an application under Section 105 of the Assam Value Added Tax, 2003 and sought clarification of rate of tax on aluminum rolled (aluminum sheet) , wire rods and aluminum extrusions. Sri Radjeshyam Sharma, Advocate appeared on behalf of the petit ioner and placed his submissions. He submitted that entry at Sl. No. 26 of the S econd Schedule appended to the Assam Value Added Tax, 2003 reads as (cid:28) Ferrous an d non-ferrous metals and alloys, non-metals such as aluminum, copper, zinc and e xtrusions of these. (cid:29) Therefore, the word (cid:28)aluminum (cid:29) would cover aluminum in its primary form i.e. ingots/wire rods that are directly cast out of mother metal, t he words (cid:28) extrusions of those (cid:29) would mean secondary products of aluminum like s heet, plate, foil etc. The submission of the petitioner perused. The entries at Sl. No. 26 include aluminum and its extrusions. The item represented by the petitioner includes aluminum sheets, aluminum wire and rods and aluminum extrusions. In a number of Court cases, it is clarified that aluminum rolled products are differe nt from aluminum and it also does not come under (cid:28)extrusions (cid:29). Hence it is clar ified that aluminum rolled products such as sheets, plates and foils shall not c ome under entry at Sl. 26 of Second Schedule therefore taxable @ 12.5%. However, aluminum ingots and extrusions like wire and rod shall be taxable @ 4% as per the said entry. (cid:29) 10. As the learned counsel for the parties has relied on certain dec isions with regard to the interpretation that is to be given to Sl. No. 26 of Sc hedule- II, it will be appropriate, at the outset, to take note and cull out the judicial opinions from the authorities cited. 11. ass sheets are unclassified items taxable at the rate of 5 per cent. In Kali Das (Supra), in challenge was the view taken by the High Court of Kerala at Eranakulam upholding the finding of the taxing authorities t hat copper sheets and brass sheets in which the appellant dealt with fell with in the ambit of Entries 116-A and 116-D, which provided tax at the rate of 8 pe r cent on the total turnover of copper and brass, respectively. The contention a dvanced by the appellant was that Entries 116-A and 116-D took within its sweep only virgin copper and brass in solid form and, therefore, copper sheets and br The Apex Court, noting that in ordinary temperature and pressure, copper and brass, whic h are metals, occur in solid form and commercially, these metals are produced in rolling mills in the form of sheets, circles, ingots, strips or rods and availa ble in the market in any of the above form only, rejected the contention that co pper sheets and brass sheets are distinct and separate items from copper and br ass. The Apex Court had also distinguished Hindustan Aluminum Corporation Ltd.(S upra), by observing that notifications issued by the Government from time to ti me were pointer to the fact that the expression (cid:28)metal (cid:29) had been generally empl oyed to refer to the matter in its primary sense or in other words, metal in the form in which it was marketable as a primary commodity and in that backdrop, th e subsequent forms evolved from primary form and constituting distinct commoditi es, which are marketable, were regarded as new commercial commodities. The analysis above logically takes us to the factual matrix in H 12. industan Aluminum Corporation Ltd. (Supra). The appellant therein was carrying o n business of manufacturing and dealing in aluminum metal and various aluminum p roducts. In terms of a notification dated 01-12-1973 issued under Section 3-A (2 ) of the U.P. Sales Tax Act, 1948, turnover in respect of goods set forth, name ly, all kinds of minerals and ore and alloy except copper, tin, zinc, nickel or alloy of those metal only, in Item No. 6 of the attached schedule, was liable to be taxed at all points of sale at 3 ‰ per cent. On 30-05-1975, a notification was issued under the same enactment in which Item 1 of the Schedule had included all kinds of minerals, ores, metals and alloys expect those not included in oth er notification issued under the Act, and tax at the rate of 2 per cent was pres cribed by the notification. By the notification 30-05-1975, notification dated 0 1-12-1973 was amended and Item No.6 was deleted. Prior to these two notification s also, there were number of notifications issued on the related entries. The ju risdictional assessing authority applied rate of 3 per cent and 2 per cent under notification dated 01-12-1973 and notification dated 30-05-1975, respectively, to aluminum ingots only and treated the remaining products as unclassified items attracting sales tax at 7 per cent. In a writ petition filed against the provis ional assessment, which was subsequently amended to challenge the final assessme nt order also, the High Court had held that aluminum ingots, wire bars and bille ts would fall in the category of (cid:28)metals and alloys (cid:29), and that rolled products p repared by rolling ingots and extrusions manufactured from billets must be regar ded as different commercial commodities. In regard to some items, taking the vie w that further enquiry was necessary, the High Court directed the assessing auth ority to re-examine the matter. Appeal was preferred before the Apex Court agai nst that part of the judgement refusing relief in regard to rolled products and extrusions. While reiterating that there cannot be any doubt that a word describ ing a commodity in a sales tax statute should be interpreted according to its po pular sense and must be construed not in their scientific or technical sense but as understood in common parlance, the Apex Court said that the said principle w ill hold good only when where a context exists between the scientific and techno logical connotation of the word on the one hand and its understanding in common parlance on the other. Their Lordships held that expressions requiring interpret ation in the case in hand was to be construed with the inference that could be drawn from the particular arrangement of the entries in the notification. Thus, emphasis was laid on deriving the intent from a contextual scheme. It was noted that from the notifications brought on record, it was clearly discernable that the notifications followed the scheme that one clause dealt with the metal in it s original saleable form and another separate clause dealt with fabricated forms in which it was saleable as a new commodity. In the aforementioned background, it was concluded that aluminum rolled products and extrusions are regarded as d istinct commercial items from aluminum ingots and billets in the notifications i ssued under the U.P. Sales Tax Act. In the State of Madhya Bharat (Supra), the Apex Court, on a comp 13. arison of notifications dealing with the relevant entries, had held that (cid:28)iron and steel (cid:29) will include bars, flats and plates, rejecting the contention of the State to the contrary. It was held that raw materials of iron and steel, which w as exempted from tax, do not cease to be raw materials if they were processed an d given the shape of bars, flats and plates for convenience of sale. 14. In Steel Stores (Supra), in view of the various notifications i ssued by the Government, the question that had emerged for consideration was the location of aluminum plane sheets and the entry to which it could be said to ha ve been lodged during the period 01-01-2000 to 18-02-2002 for correct assessment of tax. While the assessee contended that it would be in Entry 45 (b) of the Schedule-II, the revenue wanted the Court to accept that it was encompassed in Entry-2 of residuary Schedule-III. The learned Single Judge noted the events l eading to the controversy as follows : (cid:28) 26. To reiterate, prior to the issuance of the notification dated 27- 01-2000, aluminum sheets were entered in Entry-10 of Schedule-IV of the Act. Ent ry 45 (b) in Schedule-II did not mention aluminum therein. It was only by the n otification dated 27-01-2000 w.e.f 01-02-2000 that aluminum was incorporated in entry 45 (b) as one the non-ferrous metals and their alloys as referred to ther ein excluding, however, the finished goods made there from. Significantly, alumi num sheets were withdrawn from Entry 10 of Schedule- IV and were substituted by aluminum corrugated sheets. No specific Entry for aluminum sheets was provided. Whereas Entry 45 (b) under Schedule-II remained the same, aluminum plain sheets were added to aluminum corrugated sheets in Entry 10 of Schedule-IV vide the not ification dated 15-02-2002 w.e.f 19-02-2002. (cid:29) In absence of any overwhelming evidence that the aluminum plane sheets could be decisively held to be a finished product emanating from the primary metal alumin um and the situs ascribed to it in successive notifications, it was held that du ring the relevant period, it ought to be regarded as included in Entry 45 (b) of Schedule-II and taxable at the rate of 4 per cent. 15. Section 105 (1) of the Act provides for determination of any di sputed questions, arising otherwise than in a proceeding pending before an appel late authority or an appellate tribunal or a Court, by the Commissioner, includ ing, amongst others, as to whether or not any goods is taxable, and if taxable, the point at which and the Schedule under which it is taxable and the rate there of. The Section provides that the Commissioner may, in his discretion, ask an of ficer appointed to assist him to make such enquiries as he considers necessary f or the decision of the question. Section 105 (2) provides that any registered de aler or any association of trade, commerce, industry may apply in the prescribed form for determination of such questions and the Commissioner shall, after givi ng the applicant a reasonable opportunity of being heard, make an order determin ing such question. 16. Giving of reason is an indispensable sine qua non in quasi-judic ial adjudications. We are in agreement with the learned senior counsel for the p etitioners that the order dated 21-11-2008 cannot be treated to be a reasoned or der. An omnibus observation has been made that in a number of cases aluminum rol led products had been held to be different from aluminum and that it also did no t come under extrusions. In Steel Stores (Supra), this Court had held that alumi num sheets, which are rolled products, in the absence of any evidence, cannot be said to a finished product. The contention of the petitioners that in the cont ext of entries in Entry-26 of Schedule-II, the words (cid:28)extrusions of those (cid:29) would mean secondary products of aluminum like sheets, plates, foils etc. had also no t been gone into. 16. There is no manner of doubt that aluminum is a metal. Yet in En try-26, aluminum has been dubbed as a non-metal. So also copper and zinc. There is obviously a mistake. Treating any taxable commodity for tax under a taxing statue as 17. a residuary item has to be mandated by legislative intent as well as necessitate d by the textual context. It is neither a matter of routine nor of course. Su ch a course is permissible only if the commodity or the item is not amenable to any other classification. 18. For the reasons above, we set aside and quash the order dated 21 -11-2008 as well the assessment order and the consequential notice of demand. Th e respondent No.2 will now pass a reasoned order on the application of the petit ioners after affording an opportunity of being heard to the petitioners. The ent ire exercise shall be completed within a period of three months from today. Cons equential actions be taken on the outcome of such adjudication. 19. The writ petitions are allowed to the extent indicated above. No costs.