PDP Steels Limited vs State of Assam and Others

Prasanta Kumar Saikia, J.—This writ petition has been filed challenging the Clarificatory Order No. CTS-91/2002/322 dated February 7, 2015, rendered by the Commissioner of Taxes, Assam holding that PDP Steel Ltd. (here-in-after referred to as the petitioner) shall not be entitled for exemption for payment of "entry tax" under section 3(2) of the Assam Entry Tax Act, 2008 (in short, "the Act of 2008") since the imported hot rolled sheets in coil when processed to cold rolled sheets in coil form, it no longer remains the same specified goods as mentioned in entry at serial No. 50(iv) to the Schedule attached to the Act of 2008. We have heard Dr. A. Saraf, learned senior counsel, assisted by Mr. A. Goyal, Mr. P. Baruah, Mr. Z. Islam and Mr. P. Das, learned counsel for the petitioner. Also heard Mr. S. Chetia, learned Standing Counsel, Finance Department.

The facts, necessary for disposal of the present writ petition, in short, are that the petitioner-company deals in the business of cold rolled sheets in coil form. In course of its business, the petitioner-company purchased hot-rolled sheets in coil form and after its purchase, thickness of the same is reduced through some process in the industrial unit of the petitioner-company and thereafter, such product is sold in the market which is called as cold rolled coil.

At the time of purchase of the same by the company, such goods are billed as hot rolled coil while at the time of selling the same in the State of Assam after being processed in the industrial unit of the company, such goods is billed as cold rolled coil. According to the petitioner, hot rolled coil despite being processed to cold rolled coil does not cease to be a specified goods as mentioned in entry at serial No. 50(iv) to the Schedule attached to the Act of 2008.

It has been contended that in terms of section 3(2) of the Act of 2008, no entry tax shall be payable on the goods, specified in the schedule, attached to the Act of 2008, if such specified goods are brought into local area and sold inside the State in the form of same specified goods and if tax is payable on sale of such specified goods under the Act of 2003.

It has been stated that both hot rolled coil and cold rolled coil are covered by entry at serial No. 50(iv) in the Schedule attached to the Act of 2008. A perusal of entry at serial No. 50(iv) to the Schedule attached to the Act of 2008 would make such a position very clear. Being so, in terms of section 3(2) of the Act of 2008, no entry tax shall be payable on the entry of such specified goods into the local area since tax is also payable on sale of such specified goods under the Act of 2003--argues learned senior counsel appearing for the petitioner.

In support of its contention, learned senior counsel appearing for the petitioner, has relied on the decision of apex court in the case of State of Bihar and others Vs. M/s. Universal Hydrocarbons Co. Ltd. and another, AIR 1995 SC 991 : (1994) 6 JT 118 : (1994) 4 SCALE 159 : (1994) 3 SCC 621 Supp : (1994) 2 SCR 627 Supp : (1995) 96 STC 204 ; [1994] supp (3) SC 621 as well as decision of this court in the case of Tata Tea Ltd. v. State of Assam [2015] 81 VST 442 (Gauhati) (W.P. (C) No. 3938 of 2009).

Such contention was considered by the Commissioner of Tax but he refused to accept the same on holding that once the hot rolled coil is processed into cold rolled coil in the industrial plant of the petitioner, same no longer remains a goods, so specified at Sl. No. 50(iv) of the Schedule attached to the Act of 2008. As such, exemption from entry tax under section 3(2) of the Act of 2008 cannot be claimed in respect of sale of such goods. The relevant part of the judgment is reproduced below:

"Now, the incidence of entry tax as contemplated by the Act arises on the entry of specified goods into any local area for consumption, use or sale therein. The goods hot rolled coil is specifically enumerated under the Schedule of the Act. There is also no dispute that the petitioner imports specified goods into local area of Assam. His claim of exemption from entry tax is based on the argument that here occurs no consumption or lose of hot rolled coil in his activity of processing hot rolled coil into cold rolled coil. The chemical properties of both hot rolled coil and cold rolled coil are the same. The only difference is in their thickness. Therefore, according to him, the specified goods, namely, hot rolled coil imported by him are not for any consumption or use but for sale. Further, it does not attract liability to pay entry tax in view of the exemption provisions contained in section 3(2)(i) of the Act. To arrive at the correct conclusion, it would be necessary to make a close examination of the charging provisions as well as the exemption situation incorporated therein. Section 3(2)(i) reads as follows: ''if such specified goods are brought into any local area by a dealer registered under the Assam Value Added Tax Act, 2003 for the purpose of resale and such goods are sold inside the State and the dealer is liable to pay tax on the sales of such goods under the Assam Value Added Tax Act, 2003 (Assam Act VIII of 2005)'' Further the exemption on this count is made available only subject to production of documentary proof. Therefore, it is crystal clear from the schemes of the Act itself that in order to claim exemption under section 3(2)(i), specified goods must have been imported for the purpose of resale. The Legislature has used the phrase: for the purpose of resale with a manifest intention and the same is that exemption from payment of entry tax is available only when the later sale of the specified goods taxable and under the Assam Value Added Tax Act, 2003 in Assam occurs in the same form without any processing whatsoever and independently of the fact whether the process amounts to manufacture or not. According to the own admission of the petitioner, the purpose of original import of hot rolled coil into local area of Assam is not its resale as such. The petitioner rather uses or consumes hot rolled coil so imported for obtaining cold rolled coil of lesser thickness firstly by cleansing of its surface oxides by means of an acid bath called pickling and further subjected to process like annealing and tempering. Therefore, it can be conclusively determined that the petitioner, M/s. PDP Steels Ltd., is not entitled for exemption envisaged by section 3(2)(i) of the Act.

Hence it is clarified that entry tax is payable on hot rolled coil imported by M/s. PDP Steels Ltd. for the purpose of processing the same into cold rolled coil of lesser thickness and sale thereafter."

Supporting the finding of the Commissioner of Taxes, Mr. Chetia, learned Standing Counsel, Finance, submits that there is no infirmity in the judgment under challenge since the hot rolled coil when changed to cold rolled coil, it no longer remains a goods, so specified in entry at Sl. No. 50(iv) to the Schedule attached to the Act of 2008.

We have considered the rival submissions, having regard to the decisions relied on. Before we proceed further, we find it necessary to reproduce the provision of section 3 of the Act of 2008 as well as the entry at Sl. No. 50(iv) to the Schedule attached to the Act of 2003. The section 3 of the Act of 2008 is reproduced below:

"3. Levy of tax.--(1) Subject to the other provisions of this Act, there shall be levied and collected on entry tax on the entry of specified goods into any local area for consumption, use of sale therein, at the rates respectively specified against each item in the Schedule. The entry tax shall be leviable on the import value of the specified goods and shall be paid by every importer of such goods:

Provided that no entry tax shall be levied under this section on the entry of specified goods into a local area, if it is proved to the satisfaction of the assessing authority, in such manner as may be prescribed, that such goods have already been subjected to entry tax or that the entry tax has been paid by the importer or any other person under this Act in respect of the same goods.

(2) Notwithstanding anything contained in sub-section (1), and subject to production of documentary proof, no entry tax shall be levied on such specified goods, which are also taxable under the Assam Value Added Tax Act, 2003,--

(i) if such specified goods are brought into any local area by a dealer registered under the Assam Value Added Tax Act, 2003 for the purpose of resale and such goods are sold inside the State and the dealer is liable to pay tax on the sales of such goods under the Assam Value Added Tax Act, 2003;

(ii) if such specified goods are sold in the course of inter-State trade or commerce or in the course of export out of the territory of India or such goods are otherwise dispatched outside the State by way of stock transfer by a dealer registered dealer under the Central Sales Tax Act, 1956;

(iii) if such specified goods are imported into a local area in the course of import from outside the territory of India:

Provided that, if any such dealer, after importing the specified goods, consumes such goods in any form or deals with such goods in any other manner, he shall inform the assessing authority before the 21st day of the month, succeeding the month in which such goods are so consumed or dealt with and pay the tax, which would have been otherwise leviable under the provisions of this Act.

(3) Where the specified goods, the sales of which are exempted under the Assam Value Added Tax Act, 2003 for reasons of such goods being included in the First Schedule to the said Act, which after entry into a local area are sold by an importer in the course of inter-State trade or commerce or in the course of export out of the territory of India or are dispatched outside the State by way of stock transfer, the import value of such specified goods subsequently sold or sent out in the manner mentioned above shall, subject to production of proof, be deducted from the total import value to determine the taxable import value.

(4) The State Government may, by notification in the Official Gazette, in the public interest or taking into account the infrastructure and amenities provided or to be provided to facilitate trade and commerce, vary the rates of tax of the specified goods and on such notification being issued, the Schedule shall be deemed to have been amended accordingly:

Provided that the rate of tax to be specified or varied by the State Government in respect of any such goods shall not exceed twenty percentum."

The Provisions of entry at Sl. No. 50(iv) is also reproduced below :

"(iv) Sheets, hoops, strips and skelp, both black and galvanized, hot and cold rolled plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in riveted condition."

A conjoint reading of the above provision of law reveals that no entry tax on entry of goods, specified in Schedule, attached to the Act of 2008, which are brought into any local area is to be paid provided such specified goods are resold inside the State as the same specified goods and provided tax is payable under the Act of 2003 on the sale of such specified goods.

Coming back to our present case, it is found that hot rolled coil, imported into local area in the State of Assam and the same is sold after processing it to a product which is called as cold rolled coil. It is found that both the products aforesaid are sold in coil form. Entry at Sl. No. 50 to the Schedule aforesaid reveals that sheets, hoops, strips and skelp, both in hot rolled coil as well as cold rolled coil, are specified goods and as such, only for changing the hot rolled coil to cold rolled coil, later does not cease to be the specified goods as mentioned in aforesaid entry and as such, the benefit under section 3(2) of the Act of 2008 needs to be extended to the petitioner provided VAT is also payable in respect of sale of such goods.

Above conclusion of us finds support from the decisions of this court in the case Tata Tea Ltd. v. State of Assam [2015] 81 VST 442 (Gauhati). In Tata Tea [2015] 81 VST 442 (Gauhati), the petitioner therein imported tea from outside and blended the same with some local varieties and thereafter sold the same in packed condition inside the State and outside the State in course of inter-State trade and commerce. The petitioner sought an opinion from the Commissioner regarding applicability of the entry tax to the above goods.

The Commissioner has rendered his opinion holding that after being blended with many other local varieties, the imported tea no longer remains as tea as specified in entry at serial No. 40 to the Schedule attached to the Act of 2008 and therefore, entry tax attracts and same was accordingly levied. However, such a view was disapproved by a Division Bench of this court in the following manner (page 444 in 81 VST):

"Entry 40 of the Schedule discloses that tea is specified goods. Upon reading of sub-sections (1) and (2) of section 2, the view taken by the Commissioner does not appear to be correct. It may be that the petitioner imports the tea from outside and a part of it is sold in Assam by blending and a part of it is sold in other States as inter-State sale. He paid VAT for the sale in Assam and Central sales tax for the sale outside the State.

The view taken by the Commissioner that the tea imported should be sold in the same form in order to get exemption of entry tax does not appear to be a correct view. By blending local varieties, there is no change in the nature of the product both for the local sale of local variety and after blending with the imported goods, VAT is paid and for inter-State sale Central sales tax is paid and the tea even after blending very much remains as specified goods."

Similar view was rendered by the apex court in the case of State of Bihar and others Vs. M/s. Universal Hydrocarbons Co. Ltd. and another, AIR 1995 SC 991 : (1994) 6 JT 118 : (1994) 4 SCALE 159 : (1994) 3 SCC 621 Supp : (1994) 2 SCR 627 Supp : (1995) 96 STC 204 . The relevant part of the judgment is reproduced below (pages 209 and 210 in 96 STC):

"17. We have already referred to entry relating to coke occurring under section 14(ia) of the Act. When the entry says ''coke in all its forms'', there is no possibility of bringing coke of different forms except under this entry. The Joint Commissioner has clearly held that both raw petroleum coke and calcined petroleum coke, though different commercial commodities are ''declared goods''. However, he held that by process of manufacture, raw petroleum coke has lost its original identity and has resulted in a new product, namely, calcined petroleum coke. Therefore, according to him, the benefit under section 15(b) of the Act could be availed of only if the same goods are subject to inter-State levy of tax. He opined the use of words ''such goods'' under section 15(b) of the Act is of significance.

We are totally unable to accept this line of reasoning. Once the entry is ''coke in all its forms'' irrespective of the fact raw petroleum coke loses its original identity or in the process of manufacture calcined petroleum coke is produced, cannot take calcined petroleum coke out of the purview of this entry. In more or less identical situation, this court held in Indian Carbon Limited Vs. Superintendent of Taxes, Gauhati and Others, AIR 1972 SC 154 : (1971) 3 SCC 612 : (1972) 1 SCR 316 : (1971) 28 STC 603 : (1971) 3 UJ 817 that petroleum coke is one form of coal governed by the expression ''coal'' within section 14(ia). The relevant extract of the judgment is as under: (SCC, page 624, para 15)

''It is not disputed that if petroleum coke is covered by clause (i) of section 14 which reads "coal including coke in all its forms" the State was not competent to levy tax at a rate exceeding the one given in section 15(a) of the Central Act.

...

The High Court was of the view that the word "coal" includes coke in all its forms in clause (i) of section 14 of the Central Act and must be taken to mean coke derived from coal. In other words it must be coke which had been derived or acquired from coal by following the usual process of heating or burning. The contention, therefore, of the appellant was negatived that petroleum coke was covered by the aforesaid provision of the Central Act.''

This decision fully supports the respondent. The fact that calcined petroleum coke is a different commodity is of little consequence. In interpreting the scope of hides and skins which fall under section 14(iii) of the Act, this court in State of Tamil Nadu Vs. Mahi Traders and Others, AIR 1989 SC 1167 : (1989) 22 ECC 1 : (1989) 23 ECR 193 : (1989) 40 ELT 266 : (1989) 1 JT 196 : (1989) 1 SCALE 267 : (1989) 1 SCC 724 : (1989) 1 SCR 445 : (1989) 73 STC 228 : (1989) 1 UJ 593 ; [1989] 1 SCC 724 held at pages 236 and 237 of STC; pages 734-35 of SCC as under:

''...According to him the products purchased and sold are not different even under the classification by way of the dichotomy between raw and dressed hides and skins under the Tamil Nadu General Sales Tax Act. Under the Central Sales Tax Act, the appellant is in a much better position, because all the hides and skins are brought together in one entry. Whether raw or dressed, the product falls under the same entry.

...The operation involved in leather manufacture however fall into three groups. Pre-tanning operations includes soaking, liming, de-liming, bating and pickling, and post-tanning operations are splitting and shaving, neutralizing, bleaching, dyeing, fat-liquoring and stuffing, setting out, samming, drying, staking and finishing. These operations bring about chemical changes in the leather substance and influence the physical characteristics of the leather, and different varieties of commercial leather are obtained by suitably adjusting the manufacturing operations. These processes need not be gone into in detail but the passages relied upon clearly show that hides and skins are termed "leather" even as soon as the process of tanning is over and the danger of their putrefaction is put an end to. The entry in the CST Act, however, includes within its scope hides and skins until they are "dressed". This, as we have seen, represents the stage when they undergo the process of finishing and assume a form in which they can be readily utilized for manufacture of various commercial articles. In this view, it is hardly material that coloured leather may be a form of leather or may even be said to represent a different commercial commodity. The statutory entry is comprehensive enough to include the products emerging from hides and skins until the process of dressing or finishing is done''."

In our considered opinion, the decisions rendered in the cases, relied on by the petitioner, more particularly, the decision in Tata Tea Ltd. v. State of Assam [2015] 81 VST 442 (Gauhati) squarely cover the present case since facts and circumstances in both the cases are strikingly similar.

Being so, we are of the opinion that clarification, rendered by the Commissioner of Taxes is unsustainable and the same is liable to be quashed and set aside which we accordingly do. Resultantly, this proceeding is allowed.