Heard Sri Avanish Kumar Singh, Advocate and Avanindra Singh Parihar, Advocate for the revisionists and Sri Rohit Nandan Shukla, learned Addl. C.S.C.
Both the above revisions arise from a common judgment, therefore, both are being decided together. For reference Trade Tax Revision No. - 145 of 2016, M/S Green Gas Ltd. v. Commissioner Of Commercial Tax U.P., Lucknow, is being taken as the leading case.
The revisions are admitted on the following question of law:
"Whether the revisionist is a manufacturer of Compressed Natural Gas (C.N.G.) and Piped Natural Gas (P.N.G.) in terms of section 2 of the U.P. Tax on Entry of Goods Act 2000 (hereinafter referred as 'Act 2000') read with section 2(ee) and section 2(e-1) of the U.P. Trade Tax Act 1948 (hereinafter referred as ''Act 1948') so as to be eligible for the benefit of exemption from payment of entry tax on capital goods or machinery brought into the local area from any place outside that local area for use in manufacturing of the aforesaid C.N.G. and P.N.G., under the Notification dated 18.2.2003 issued under section 4-B of the Act 2000 ?"
The counsel for the revisionist as also the Standing Counsel for the State Sri Rohit Nandan Shukla have agreed to argue out the matter finally today itself, considering the question involved herein.
It is not in dispute that the revisionist brought certain capital goods or machinery i.e. pipes, fittings, valves, compressors, cascades in the local area from outside the State. It is also not out of place to mention that on purchase of natural gas purchase-tax was paid by the revisionist, but, when a doubt arose as to whether it was liable for sales-tax on sale of C.N.G. and P.N.G. produced from the natural gas purchased by it after converting the same to C.N.G. and P.N.G., proceedings were initiated by the revisionist under section 35 of the Act 1948 and the Addl. Commissioner vide his determination dated 20 April 2007 in T.T.A. No.5 of 2006 accepted the version of the Addl. Commissioner (Grade-I), Trade Tax, Lucknow Zone, Lucknow, that the revisionist herein who was the applicant before the Addl. Commissioner, was a manufacturer of C.N.G. and P.N.G. Relevant extract of the said determination is quoted hereinbelow.
Þ1& ;g izkFkZuk i= loZJh xzhu xSl fy0- [email protected] foosd [k.M xkserh uxj y[kuÅ] )kjk O;kikj dj vf/kfu;e dh /kkjk& 35 ds vUrxZr fnukad 16&5&06 dks izLrqr fd;k x;k gSA izkFkhZ )kjk /kkjk&35 ds vUrxZr fn;s x;s izkFkZuk&i= esa fuEufyf[kr iz'u fu.kZ; gsrq izLrqr fd;k gS %& ¼1½ D;k dj iznRr [kjhns uspqjy xSl dks dEizsl djds dEizsl uSpqjy xSl ds :i esa cspus ij dj dk nkf;Ro gS \ ¼2½ ;fn dj dk nkf;Ro gS rks dj dh ns;rk fdrus izfr'kr gS \ 2& O;kikjh )kjk vius izkFkZuk i= esa bl rF; dk mYys[k fd;k x;k gS fd muds )kjk uspqjy xSl dh dj iznRr [kjhn dh tkrh gS ftls cgqr ÅWps ncko ij dEizsl djds ¼200&250 ckj½ lh,uth ds :i esa ifjofrZr fd;k tkrk gS ftldh fcdzh Q~;wy ds :i esa dh tkrh gSA dEizs'k ls dksbZ dsfedy psat ugha gksrk gS rFkk dksbZ fQftdy psat Hkh ugha gksrk gS blfy, lh,uth vkSj uspqjy xSl dksbZ vyx&vyx dkef'kZ;y oLrq ugha gSa ,oa u gh uSpqjy xSl dEizs'k djus ij dksbZ ubZ oLrq dk fuekZ.k gksrk gSA bl izfdz;k esa dksbZ fuekZ.k ugha gksrk gSaA O;kikjh )kjk loZJh pkSxys ,aM da0 izk0 fy0 cuke ;wfu;e vkQ bf.M;k &1931 ¼63½ , vkbZ vkj ¼,l lh½ 1014 dk mYys[k fd;k x;k gS ftlesa ;s fu.kZ; fn;k x;k gS fd tc rd fdlh ifjorZu vFkok ifjorZu dh Ja[kyk ls dksbZ oLrq fcYdqy ubZ ugha cu tkrh gS rc rd fuekZ.k ugha ekuk tk ldrk gSA muds )kjk ekuuh; mPp U;k;ky; )kjk dfe'uj O;kikj dj cuke loZJh v'kksd x`g m|ksx dsUnz ¼izk0½ ¼fy0½ ¼2004 ;wihVhlh &1327½ esa fn;s x;s fu.kZ; dk mYys[k fd;k x;k gSA 3& bl lEcU/k eas ,Mh'kuy dfe'uj ¼xzsM&1½ O;kikj dj] y[kuÅ tksu] y[kuÅ tksu ls vk[;k izkIr dh xbZA TokbUV dfe'uj ¼dk;Zikyd½ O;kikj dj] y[kuÅ laHkkx ch y[kuÅ )kjk izsf"kr vk[;k esa bl rF; dk mYys[k fd;k x;k gS fd O;kikjh )kjk xsy ls tks uspqjy xSl izkIr dh tkrh gS og 16 ls 19 [email protected] daizs'kj ij izkIr dh tkrh gS ftls og daizs'kj )kjk daizs'k djds 250 [email protected] LdkO;j ds izs'kj ij ys tkrs gSa fQj mls LVs'kujh LVksj djds fQj 200 [email protected] LdkO;j ij Hkjrs gSaA bl izdkj O;kikjh )kjk tks daizsLM uspqjy xSl dk fuekZ.k fd;k tkrk gS og ewy uspqjy xSl ds ncko esa ,oa rkieku eas fHkUu gksrk gS rFkk dkef'kZ;yh fHkUu oLrq gks tkrh gS D;ksafd fcuk gkbZ daizs'kj ds O;kikjh )kjk [kjhnh tkus okyh uspqjy xSl fcdzh ;ksX; ugha jgrh gSA izsf"kr vk[;k esa mnkgj.k fn;k x;k gS fd ikuh djeqDr oLrq gS ijUrq ikuh dks tc rkieku de djds mls cQZ cuk fn;k tkrk gS rc cQZ dj;ksX; oLrq gks tkrh gS tc fd ikuh o cQZ ds djVªkbfLVd esa dksbZ vUrj ugha gSA 4& O;kikjh )kjk izLrqr /kkjk&35 ds izkFkZuk i= rFkk TokbUV dfe'uj ¼dk;Zikyd½ uspqjy xSl dks ftl izkslsl )kjk lh,uth cuk;k tkrk gS mlds QyLo:i uspqjy xSl ,oa lh,uth ds rkieku rFkk fQftdy dkef'kZ;yh dkQh vUrj vk tkrk gS ,oa fuf'pr :i ls uspqjy xSl ,oa lh,uth dkef'kZ;yh nksuksa fHkUu oLrq;sa gSaA ;g vko';d ugha gS fd fuekZ.k izfdz;kW esa dksbZ vko';d psat vfuok;Z gksA vr% uspqjy xSl ,oa O;kikjh )kjk fcdzhr lh,uth dkef'kZ;yh nks fHkUu oLrq;sa gSa ,oa bls ,d ugh ekuk tk ldrk gSA tgkW rd dj dh nj dk iz'u gS D;ksafd lh,uth O;kikj dj f'kM;wy esa foKkfir ugha gS vr% bl ij djns;rk voxhZd`r oLrq dh Hkkafr 10 izfr'kr gksxhA 5& O;kikjh ds iz'uksa dk mRrj mijksDrkuqlkj fn;k tkrk gSA 6& bl fu.kZ; dh ,d izfr izkFkhZ dks rFkk ,d izfr lEcfU/kr dj fu/kZjd vf/kdkjh dks vko';d dk;Zokgh gsrq Hksth tk;Aß Surprisingly the stand of the revisionist in the said proceedings was that the process of compressing natural gas to convert C.N.G. and P.N.G. did not involve any chemical change nor physical change, therefore, as C.N.G. and P.N.G. was not a chemically different identity than natural gas, it did not amount to ''manufacturing' of C.N.G. or P.N.G., therefore, not liable to trade-tax and the stand of the department as evinced in the report requisitioned under section 35 by the Additional Commissioner (Law), Trade Tax, as mentioned in his order was that the process involved was a ''manufacture', however, before this Court when the question of entry-tax being levied has arisen, the stand is diametrically opposed, i.e. the revisionist, based on the order under section 35 dated 20.4.2007 and even otherwise, now says that it is a ''manufacturer' and had imported the capital goods and machinery from outside the State in the local area for manufacturing C.N.G. and P.N.G., therefore, in view of the Notification dated 18.2.2003 it was exempt from the said tax, whereas, the Tribunal has opined that it is not a ''manufacture'.
The two revisions at hand pertain to the assessment years 2005-06 and 2006-07. The Assessing Authority ruled against the revisionist and held it to be liable to entry-tax on the aforesaid equipments/goods. In the first appeal, for the first time, the revisionist raised the plea of exemption from entry tax under the Notification dated 18.2.2003 which was repelled vide judgment dated 24.10.2011. In the second appeal filed by the revisionist the Tribunal again repelled the said contention on the ground that both C.N.G. and P.N.G. were nothing but natural gas, therefore, there was no manufacturing involved.
The notification dated 18.2.2003 relied upon by the revisionist reads as under:
"KA.NI.-2-927/XI-9-(81)/91-U.P. Act-12-2000-Order (6)-2003 Dated : Lucknow : February 18, 2003 Whereas, State Government is satisfied that it is expedient in the public interest so to do.
Now, therefore, in exercise of the powers under section 4-B of the Uttar Pradesh Tax on Entry of Goods Act, 2000 (U.P. Act No.12 of 2000), the Governor is pleased to direct that with effect from February 18, 2003, no tax, under the said Act shall be levied and collected from all class of small, medium and large manufacturing dealers, on entry of capital goods, plant, machinery and spare parts into the local area from any place outside that local area, for use in their manufacturing."
As would be evident from the aforesaid notification capital goods, plant, machinery and spare-parts are not liable to entry-tax on entry into the local area from any place outside that local area, for use in their manufacturing, thus, the key issue for being eligible for exemption under the said Notification is as to whether the goods in question were brought from outside the State into the local area and, secondly, whether this was for use in manufacturing by the revisionist or not. Regarding the first issue there is no dispute that the goods or machinery were brought into the local area from outside.
As regards the second issue, section 2(2) of the Act 2000 reads as under:
"Section 2(2). Words and expressions, used in this Act, but not defined shall have the meaning assigned to them in the Uttar Pradesh Trade Tax Act, 1948."
The Notification dated 18.2.2003 isued under section 4-B of the Act, 2000 exempts certain manufacturing dealers from Entry Tax if the goods etc. referred therein are brought into a local area from outside for use in their manufacturing i.e. for manufacture by such industries. Now, the term ''Manufacture' has not been defined in the Act 2000, however, as it has been used in the Notification dated 18.2.2003 issued under section 4-B, therefore, in view of section 2(2) of the Act 2000 it will have to be understood in the light of section 2(e-1) and 2(ee) of the Act 1948 which contains a definition of ''Manufacture' and ''Manufacturer'.
In view of the aforesaid provision it is necessary to see the definition of "Manufacture" and "Manufacturer" as contained in section 2(e-1) and 2(ee) of the Act 1948, which reads as under.
"Section 2(e-1). ''Manufacture' means producing, making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed.
Section 2(ee). ''Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture and includes:
(i) a dealer who sells bicycles in completely knocked down form;
(ii) a dealer who makes purchases from any other dealer not liable to tax on his sale under the Act other than sales exempted under section 4,4-A and 4-AAA."
It is not in dispute that the revisionist is a dealer within the meaning of section 2(b) of the Act 2000.
As would be evident from the definition of "Manufacture" quoted hereinabove, it is of a wide amplitude, especially as it also means "making", "otherwise processing", "treating or adopting any goods", as has also been held by the Supreme Court in the case of Kumar Motors Bareilly v. Commissioner of Sales Tax, U.P., 2007 (4) SCC 140, relevant extract of which are quoted hereinbelow :
17. A bare comparison of the definitions of the said term under the Rajasthan Act and the U.P. Act categorically points out that the definition of "manufacture" under the letter is wider. This has been so held in Sonebhadra Fuels vs. Commr., Trade Tax, (2006) 7 SCC 322, in the following terms : (SCC pp.328-29, paras 22 and 25) "22. We may mention that, as noted above, decisions construing the word ''manufacture' in other statutes are not necessarily applicable when interpreting Section 2(e-I) of the U.P. Trade Tax Act. As stated above, the definition of ''manufacture' in Section 2(e-I) of the U.P. Trade Tax Act is very wide, which includes processing, treating or adapting any goods. Hence, in our opinion, the expression ''manufacture' covers within its sweep not only such activities which bring into existence a new commercial commodity different from the articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence an article different from the articles on which such activity was carried on. For example, the activity of ornamenting of goods does not result in manufacturing any goods which are commercially different from the goods which had been subjected to ornamentation, but yet it will amount to manufacture within the meaning of Section 2(e-I) of the U.P. Trade Tax Act since an artificial meaning of ''manufacture' is given in Section 2(e-I). Hence, whether the commercial identity of the goods subjected to the processing, treating or adapting changes or not, is not very material.
25. Learned counsel for the appellant, Shri Rakesh Dwivedi submitted that coal briquettes are produced merely by using a binding material such as clay or molasses along with the coal, and hence he submitted that the identity does not change. We regret, we cannot agree with his submission. Firstly, we do not agree that the coal briquettes are the same commercial commodity as coal. In our view, coal is a raw material for making coal briquettes. The method of manufacturing coal briquettes has been stated above, and this certainly is processing, treating or adapting the coal. The appellant manufactures coal briquettes by compiling the hard coke breeze mechanically with the help of cinders, which is usually 5% of the total hard coke breeze. In the compilation of the hard coke breeze, 95% of the hard coke breeze, which is known as coal dust or breeze coke is taken which is compiled with the help of clay and molasses. Hence, in our opinion, coal briquettes is a different commercial commodity from coal. Moreover, even if it is not a different commercial commodity, the process of making coal briquettes will amount to a ''manufacture' as it is processing, treating or adapting coal. In our opinion, by the processing of coal to make coal briquettes, the coal dust loses its identity. Coal briquettes and coal dust are two different commodities in substance as well as in characteristics. The coal briquettes are altogether in different shape, form and moisture as well as characteristics, as compared to coal dust."
As would be evident from the relevant extract of the decision in Sonbhadra Funds v. Commissioner of Trade Tax quoted in Kumar Motors (supra) the definition of ''Manufacture' in section 2(e-1) covers even such activities which do not necessarily result in a commercially different item.
In this case the First Appellate Authority and the Tribunal i.e. the Second Appellate Authority, have been persuaded by the fact that both C.N.G. and P.N.G. are natural gases, therefore, by mere compression of Natural Gas what comes out is also Natural Gas, and not any other new goods with a different commercial entity. Both the Tribunal and the First Appellate Authority have erred in arriving at this conclusion, firstly, for the reason some sanctity has to be attached to a determination under section 35 of the Act 1948 by the Commissioner as the very purpose of the said provision is to remove doubts in the mind of any person as to leviability of tax under the said Act and if in this process it has been already held that the revisionist is a ''Manufacturer' of C.N.G. and P.N.G., then another view could not have been taken in proceedings arising out of the Act 2000, firstly, by the First Appellate Authority and, thereafter, by the Tribunal in the context of payment of Entry Tax as the said Act 2000 does not define the term ''Manufacture' differently and in fact by virtue of section 2(2) thereof the definition in section 2(e-1) of the Act 1948 gets imported.
The other reason which prevails upon this Court to take this view is that the definition of ''Manufacture' being so wide under section 2(e-1) of the Act 1948, and as it applies to the proceedings under the Act 2000 also by virtue of section 2(2) of the Act 2000, it is difficult to accept that natural gas which is purchased by the revisionist, on being converted into C.N.G. and P.N.G. by a process of compression as detailed in the order dated 20 April, 2007 quoted hereinabove, does not involve a process of "making or processing or treating or adopting" natural gas so as not to fall within the meaning of the said term nor that such C.N.G. and P.N.G. do not have an identity different from natural gas in ordinary commercial parlance and are not commercially different items. For convenience the stand of the department in this regard as referred in the order under section 35 dated 20.4.2007 is again being quoted :
Þ3& bl lEcU/k eas ,Mh'kuy dfe'uj ¼xzsM&1½ O;kikj dj] y[kuÅ tksu] y[kuÅ tksu ls vk[;k izkIr dh xbZA TokbUV dfe'uj ¼dk;Zikyd½ O;kikj dj] y[kuÅ laHkkx ch y[kuÅ )kjk izsf"kr vk[;k esa bl rF; dk mYys[k fd;k x;k gS fd O;kikjh )kjk xsy ls tks uspqjy xSl izkIr dh tkrh gS og 16 ls 19 [email protected] daizs'kj ij izkIr dh tkrh gS ftls og daizs'kj )kjk daizs'k djds 250 [email protected] LdkO;j ds izs'kj ij ys tkrs gSa fQj mls LVs'kujh LVksj djds fQj 200 [email protected] LdkO;j ij Hkjrs gSaA bl izdkj O;kikjh )kjk tks daizsLM uspqjy xSl dk fuekZ.k fd;k tkrk gS og ewy uspqjy xSl ds ncko esa ,oa rkieku eas fHkUu gksrk gS rFkk dkef'kZ;yh fHkUu oLrq gks tkrh gS D;ksafd fcuk gkbZ daizs'kj ds O;kikjh )kjk [kjhnh tkus okyh uspqjy xSl fcdzh ;ksX; ugha jgrh gSA izsf"kr vk[;k esa mnkgj.k fn;k x;k gS fd ikuh djeqDr oLrq gS ijUrq ikuh dks tc rkieku de djds mls cQZ cuk fn;k tkrk gS rc cQZ dj;ksX; oLrq gks tkrh gS tc fd ikuh o cQZ ds djVªkbfLVd esa dksbZ vUrj ugha gSAß After compressing the natural gas by a process which has been dealt with in the order of the Commissioner dated 20.4.2007 quoted hereinabove the same is ready for being sold as "fuel." Without such process of compression, Natural Gas cannot be sold as fuel nor as P.N.G. to be transmitted to households through pipelines for cooking. If a person wants to buy C.N.G. or P.N.G., he will have to be sold the said goods, and not natural gas in its natural form.
The Tribunal has gravely erred in being persuaded by the definition of ''Natural Gas' as contained in the petroleum and Natural Gas Laboratories Board Act 2006, consequently, it has arrived at an erroneous conclusion. The process involved in making C.N.G. and P.N.G. as referred hereinabove involves its manufacture and the product has a different commercial identify. Even if it did not have a different commercial identity, even then, in view of the decision in the case of Kumar Motors (supra) referred above, it would still be a ''manufacture' within the meaning of section 2(2) of the Act 2000 read with section 2(e-1) of the Act 1948.
The Court also finds that the revisionist has been issued a license under Rule 9 of the Central Excise Rules 2002 made under the Central Excise Act for operating as a manufacturer of excisable goods at "C.N.G. Mother Station etc.", a copy of which is annexed as Annexure-6 to the writ petition, which also goes to show that he is a manufacturer even as per the definition of the term under the Excise Act and the Rules thereunder, but the Court is not persuaded only by this document, rather, it is persuaded by the reasoning already given hereinabove.
The view being taken by this Court is also supported by a Division Bench judgment of this Court, albeit, in an Income Tax Appeal bearing No.224 of 2014, wherein, it has been held that Natural Gas and Compressed Natural Gas (C.N.G. and P.N.G.) are two different products being taxable at different rates of tax under the U.P. Value Added Tax Act 2008 and that the Trade Tax Authorities had passed an order in the case of the appellant before it in which it had been held that conversion of Natural Gas into C.N.G. amounts to manufacture.
A similar view has been taken by a Coordinate Bench of this Court in Sales/Trade Tax Revision No.9 of 2017, M/s Bhushan Steel Ltd. v. The Commissioner, Commercial Taxes, in the context of leviability of sales tax on Re-Gassified Liquified Natural Gas.
It is not the case of the opposite parties that the goods or machineries which were imported in the local area from outside the State by the revisionist, were not meant for making C.N.G. and P.N.G. or that they were meant for sale or for any other purpose.
In view of what has been stated hereinabove the reasons given by the First Appellate Authority and the Tribunal cannot be sustained in the eyes of law.
The revisionist did not dispute its liability to entry tax before the Assessing Authority as it was not aware of the correct legal position, but while filing the first appeal it disputed the same based on the Notification dated 18.2.2003 and even thereafter before the Tribunal it disputed its liability, therefore, the passing observation in the order of the Tribunal that by depositing the entry tax the revisionist had admitted its liability in this regard, is misconceived, especially as there can be no estoppel against law, considering the fact that the Notification dated 18.2.2003 had been issued under section 4-B of the Act 2000 and had the force of law.
In view of the above, judgment of the Tribunal in which the judgments of the First Appellate Authority and the Assessing Authority have merged, is quashed. It is held that the revisionist is a manufacturer of C.N.G. and P.N.G. and consequently it is entitled to the benefit of notification dated 18.2.2003 quoted hereinabove, and as it had paid the entry tax to avoid unnecessary hassles, therefore, it is entitled to refund of the entry tax paid, with bank interest thereon.
With the above observations, both the revisions are allowed.
Order Date :- 23.2.2018 A.Nigam (Rajan Roy,J.)