Citation Codes

Equivalent Citations

citation codes

Case Number

Misc. Judicial Case No. 602 of 1961

Judges

V. Ramaswami, C.J
N.L Untwalia, J.

Acts

Section 3 of the Rating and Valuation (Apportionment) Act, 1928.20.
Section 8(3)(b) of the Central Sales Tax Act, read with Rule 13:(1)
provisions of the Central Sales Tax Act (Act No. 74 of 1956)
section 8(3)(b) of the Central Sales Tax Act.5. Cause
Section 8(3)(b) of the Central Sales Tax Act.8.
section 8(3)(b) of the Central Sales Tax Act
Section 7(1) of the Central Sales Tax Act
sub-section (1) of Section 8.10. Section 8
clause (b) of sub-section (3) of section 8
section 8(3)(b) of the Sales Tax Act
clause (b) of sub-section (1):********(b)
turnover.11. Section 8(3)(b)
prescribed.9. Section 7(3)
Section 13(1)(e)
section 8(3)(b)

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Smart Summary

Case Summary — Indian Copper Corporation Limited (Petitioner)

Factual and Procedural Background

The petitioner, Indian Copper Corporation Limited, an incorporated company with its registered office at Ghatsila (State of Bihar), applied for registration under the Central Sales Tax Act (Act No. 74 of 1956) to the Superintendent of Sales Tax, Jamshedpur on 30 April 1957. The petitioner stated that it purchased various goods for use in manufacture and mining (copper and kaynite mines and factory).

On 11 July 1957 the Superintendent granted a registration certificate but declined to specify certain goods in the certificate as goods required for use in manufacture. The petitioner sought inclusion of seven categories of goods under section 8(3)(b) of the Central Sales Tax Act: (i) locomotives and motor vehicles; (ii) accessories and spare parts for motor vehicles and locomotives; (iii) household, laboratory, hospital and general furnishing and fittings; (iv) medical supplies; (v) stationery; (vi) tyres and tubes for motor vehicles; and (vii) cane baskets.

The Assistant Commissioner of Sales Tax, by order dated 9 March 1959, held that the petitioner was not entitled to specification of household, laboratory, hospital and general furnishing and fittings; medical supplies; and stationery. By a subsequent order dated 14 January 1961, the Additional Superintendent of Sales Tax held that the petitioner was not entitled to have the other items included. These administrative orders were challenged: the petitioner obtained a rule from the High Court seeking a writ in the nature of mandamus to compel the respondents to specify all the claimed goods in the registration certificate under section 8(3)(b).

The respondents (to whom notice of the High Court rule was given) showed cause through the learned Government Advocate. Annexure B-2 to the petition set out the petitioner's factual explanations for each class of goods and the uses claimed.

Legal Issues Presented

Whether the petitioner is entitled, under section 8(3)(b) of the Central Sales Tax Act read with Rule 13 made under section 13(1)(e), to have the specified categories of goods included in its certificate of registration as goods intended for use in the manufacture or processing of goods for sale or in mining.
Whether the registering authority may specify goods in the registration certificate beyond the classes enumerated by the Central Government in Rule 13 made under section 13(1)(e).
Whether particular items (hospital equipment, medical supplies, sanitary cane baskets, stationery, locomotives/motor vehicles, accessories/spare parts, tyres/tubes, laboratory fittings) fall within the scope of clause (b) of section 8(3) as qualified by Rule 13.

Arguments of the Parties

Petitioner's Arguments

The petitioner sought inclusion of seven categories of goods on the ground that they were required for use in manufacture or processing for sale or in mining operations; Annexure B-2 described how each item was used in mining, manufacture, or in operations incidental to those processes.
Items Nos. 1 (locomotives and motor vehicles), 2 (accessories and spare parts), 6 (tyres and tubes), and 7 (cane baskets used for carrying ores) were said to be directly within the language of section 8(3)(b) because they were intended for use in manufacture or mining.
For hospital equipment (part of item 3), medical supplies (item 4), and cane baskets used by the sanitary department (part of item 7), counsel argued that statutory duties imposed on the petitioner to provide hospitals and sanitary arrangements for workers made those supplies necessarily incidental to the manufacturing/mining process; therefore those items should be included under section 8(3)(b).
The petitioner's written statement (Annexure B-2) detailed practical uses: transport of raw materials and finished goods, maintenance of vehicles, hospital and medical uses for workforce health, laboratory fittings for sampling and analysis, record-keeping stationery, and cane baskets for carrying ores and sanitary refuse.

Respondents' Position

The opinion records that the respondents showed cause by the learned Government Advocate, but it does not present a detailed account of the respondents' legal arguments in opposition.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Divisional Acton Corporation v. West Middlesex Assessment Committee, 1949-2 KB 10 (King's Bench)	Support for the proposition that testing or analysis of properties can be an essential part of the manufacturing process (testing was treated as part of manufacture for rating/valuation purposes).	The Court relied on this authority to support the conclusion that laboratory fittings used for sampling and analysis of ores and raw materials are an essential part of the normal process of manufacture/mining and therefore may be specified under section 8(3)(b) read with Rule 13.

Court's Reasoning and Analysis

The Court set out the statutory framework before undertaking application of the law to the facts. Key provisions reproduced and relied on in the analysis were:

Section 7(1) and 7(3) (registration procedure and the requirement that the certificate specify the class or classes of goods for the purposes of section 8).
Section 8(1)(b) and section 8(3)(b) (defining goods within clause (b) as goods intended for resale or for use by the purchaser in manufacture/processing/mining, “subject to any rules made by the Central Government in this behalf”).
Section 13(1)(e) (rule-making power delegated to the Central Government to enumerate goods or classes of goods used in manufacture/processing/mining/etc.).
Rule 13 (promulgated under section 13(1)(e)) which enumerates categories of goods that a registered dealer may purchase for use in manufacture/processing/mining, including raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel, and lubricants.

The Court emphasised the significance of the delegated rule-making power in section 13(1)(e). It held that the registering authority's power to include goods under section 8(3)(b) is subject to the Central Government's enumeration in Rule 13. Consequently, the registering authority cannot include goods or classes of goods beyond the categories specified in Rule 13.

Applying that principle:

The Court considered and (for the purpose of argument) accepted the petitioner's factual submissions that there may be a statutory duty and that hospital equipment, medical supplies, and sanitary cane baskets were incidental to manufacture/mining. Even so, those items were not within the categories enumerated by Rule 13; therefore they could not be included in the registration certificate under section 8(3)(b).
Stationery was likewise not within the enumerated categories of Rule 13 and therefore also could not be specified.
For locomotives and motor vehicles, the Court distinguished between (a) vehicles actively used in the mining process or actually used during the process of manufacture (including carrying and removing raw materials during manufacture), and (b) vehicles used after conclusion of mining but before manufacture or used to carry finished products after manufacture. Only the former were within Rule 13's scope as "machinery, plant, equipment" used in mining or in manufacturing/processing; the latter were excluded.
Accessories, spare parts, and tyres/tubes that pertain to the locomotives and motor vehicles that are themselves within the permitted uses were held to fall within Rule 13 (as "spare parts", "accessories", "stores").
Laboratory fittings used for sampling and analysis of ores and other raw materials at the initial stages of mining and in the manufacturing process were held to be an essential part of the normal process (not merely incidental). To support that view the Court relied on the English authority cited (Divisional Acton Corporation v. West Middlesex Assessment Committee) which treated testing as part of manufacture; the Court therefore concluded laboratory fittings may be specified.
The Court expressly rejected the petitioner's claim for inclusion of cane baskets used for sanitary purposes and stationery, and also rejected the claim for cane baskets used to carry ores (item 7 first part) as not falling within Rule 13.

Holding and Implications

PARTLY ALLOWED

The Court issued a writ in the nature of mandamus directing respondent No. 3 (the Additional Superintendent of Sales Tax, Singhbhum, Jamshedpur) to specify the following goods in the petitioner's certificate of registration under section 8(3)(b) of the Central Sales Tax Act read with Rule 13:

Locomotives and motor vehicles actually used in carrying and removing raw materials during the process of manufacture;
Locomotives and motor vehicles used both underground and on surface during mining operations;
Accessories and spare parts for such locomotives and motor vehicles;
Tyres and tubes for such motor vehicles;
Laboratory fittings used for the sampling and analysis of ores and other raw materials in the initial stages of mining operations and in the process of manufacture.

The Court refused to direct inclusion of household/hospital/general furnishings and fittings, medical supplies, stationery, and cane baskets used for sanitary purposes; it also rejected the claim for cane baskets used for carrying ores and certain uses of vehicles (those used after mining and before manufacture or used to transport finished products after manufacture).

Direct consequences: respondent No. 3 must amend the registration certificate to include the five categories listed above. The application was allowed only to that limited extent. There was no order as to costs.

The opinion does not discuss broader doctrinal or precedent-setting implications beyond the application of the statute and Rule 13 to the facts; it therefore does not announce a new legal principle beyond the application of the statute and rules to the items claimed.

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Indian Copper Corporation Ltd. v. Commissioner Of Commercial Taxes, Bihar And Others

Ramaswami, C.J:— In this case the petitioner is an incorporated company under the name and title of Indian Copper Corporation Limited and has its registered office in Ghatsila in the State of Bihar. In accordance with the provisions of the Central Sales Tax Act (Act No. 74 of 1956) the petitioner applied for registration to the Superintendent of Sales Tax, Jamshedpur, on the 30th April, 1957. The case of the petitioner is that it is purchasing different kinds of goods for use in manufacture in its copper and kaynite mines and factory. On the 11th July, 1957, the petitioner was granted a registration certificate by the Superintendent of Sales Tax, Jamshedpur but the Superintendent of Sales Tax rejected the claim of the petitioner that certain goods should be specified in the registration certificate as being required for use in manufacture. The petitioner again applied to the Sales Tax authorities for inclusion of the goods in the certificate of registration under section 8(3)(b) of the Sales Tax Act as being required for use in manufacture. The petitioner claimed that the following goods should be specified in the registration certificate, namely,

(i) Locomotives and motor vehicles,

(ii) Accessories and spare parts for motor vehicles and locomotives,

(iii) Household, laboratory, hospital and general furnishing and fittings,

(iv) Medical supplies,

(v) Stationery,

(vi) Tyres and tubes for motor vehicles, and

(vii) Cane baskets.

2. The case of the petitioner is that these goods were intended for use in the manufacture or processing of goods for sale and in mining, which included (1) mining ores, (ii) copper refining, and (iii) manufacture of brass sheets. By his order dated the 9th March, 1959, the Assistant Commissioner of Sales Tax held that the petitioner was not entitled to the specification of the following goods in the registration certificate:—

(i) Household, laboratory, hospital and general furnishing and fitting,

(ii) Medical supplies,

(iii) Stationery.

3. By another order dated the 14th January, 1961, the Additional Superintendent of Sales Tax held that the petitioner was not entitled to have the other items of goods included in the certificate of registration under section 8(3)(b) of the Central Sales Tax Act. The orders of the Assistant Commissioner of Sales Tax, dated the 9th March, 1959, and of the Additional Superintendent of Sales Tax, dated the 14th January, 1961, are annexuree C and D to the application.

4. The petitioner has now obtained a rule from the High Court calling upon the respondents to show cause why a writ in the nature of mandamus should not be granted commanding the respondents to specify all the goods in the registration certificate as being required for use by the petitioner in the manufacture and processing of goods for sale or in mining within the meaning of section 8(3)(b) of the Central Sales Tax Act.

5. Cause has been shown by the learned Government Advocate on behalf of the respondents to whom notice of the rule was ordered to be given.

6. The reasons given by the petitioner for incorporation of the goods in the registration certificate are given in annexure B-2 to the application which states as follows:—

“1. Locomotives and motor vehicles.

They are used in actually carrying raw materials and removing materials during the process of manufacture and thereafter to different places and also used both underground and on surface in mining operations and the transport of crude ores, a primary operation in the process of manutacture. Also for the transport of necessary stores for mining operations.

2. Accessories and spare parts for locomotives and motor vehicles.

The above are absolutely necessary for maintenance and ensuring continual operation of the locomotives and motor vehicles.

3. Hospital equipment with furnishings and fittings are necessary for the hospitals which are run by the corporation for the benefit of the workers in the process of manutacture and maintaining the health and fitness of persons employed in mining operations and immediate part in the manufacture of goods.

Laboratory fittings are essential for the sampling and analysis of the ores and other raw materials in, initial stages of mining operation and in the process of manufacture.

4. Medical Supplies.

These are necessary for the hospital above-mentioned for treatment of the workers employed in the mining of Ores and manufacture of goods.

5. Stationery.

Necessary for the maintenance of records, furnishing returns to various Government Departments, also Muster Rolls, payment of wages registers and all necessary forms and schedules under the Mines and Factory Acts.

Progress reports and records of work done in the foundry and factory for the manufacture of goods.

6. Tyres and tubes for motor vehicles.

Necessary for the maintenance of motor vehicles as given in 2 above.

7. Cane baskets.

They are necessary for carrying ores and other materials which are used in manufacture and also are used by the sanitary department for collecting refuse to protect the health and cleanliness of the colony and the workmen employed in the manufacture of goods.

Summing up:— all the items are required in connection with the operations relating to the production of copper and for the labour employed in those operations.”

7. On behalf of the petitioner the submission of learned counsel is that items Nos. 1, 2, 6 and 7 are directly covered by the language of section 8(3)(b), as they are intended for use by the petitioner in the manufacture of processing of goods for sale or in the mining process. As regards item No. 3 — hospital equipment, item No. 4— medical supplies, and item No. 7 (second part)— cane baskets used by the sanitary Department, the argument of learned counsel for the petitioner is that there is a duty imposed upon the petitioner by various statutes to provide hospital equipment and sanitary fittings for the workers employed in the mine or the factory, and without compliance of these statutory requirements the petitioner cannot carry on the work of the mine or the factory. It was, therefore, ??? that the provision of the hospital equipment, medical supplies and sanitary fittings was necessarily incidental to the manufacturing or mining process and, therefore, the petitioner is entitled to have these items also included in the certificate of registration under section 8(3)(b) of the Central Sales Tax Act.

8. It is necessary at this stage to reproduce the relevant statutory provisions. Section 7(1) of the Central Sales Tax Act provides for registration of dealers and is to the following effect:

“7. Registration of dealers; (1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particular as may be prescribed.”

9. Section 7(3) states as follows:

“7(3). If the authority to whom an application under sub-section (1) or sub-section (2) is made is satisfied that the application is in conformity with the provisions of this Act and the rules made thereunder, he shall register the applicant and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of sub-section (1) of Section 8.”

10. Section 8 is the charging section and deals with the rates of tax on sales in the course of interstate trade or commerce, section 8(1) is to the following effect:

“8.(1) Every dealer, who in the course of inter-State trade or commerce—

XXXXX.

(b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3):

shall be liable to pay tax under this Act, which shall be one per cent of his turnover.”

11. section 8(3)(b) is to the following effect:

“8(3). The goods referred to in clause (b) of sub-section (1):

********

(b) to the case of goods other than declared goods are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.”

12. I am unable to accept the argument put forward on behalf of the petitioner that item No. 3—hospital equipment, item No. 4—medical supplies, and item No. 7 (second part)—cane baskets for sanitary use, fall within the language of section 8(3)(b) of the Central Sales Tax Act and that the petitioner is entitled to have them included in the certificate of registration under this section. I shall assume in favour of the petitioner that there is a statutory duty imposed upon the petitioner to provide hospital equipment for the workers and also to provide cane baskets for protecting the health and cleanliness of the workers employed in the mine or the factory. I shall also assume in favour of the petitioner that the provision of hospital equipment, medical supplies and sanitary equipment is incidental to the manufacturing of mining proceess carried on by the petitioner. Even so, I am of the opinion that the petitioner is not entitled to have these items included in the certificate of registration under section 8(3)(b) of the Act. The reason is that section 8(3)(b) empowers the registering authority to include goods intended by the dealer for use by him in the manufacture or processing of goods for sale or in mining “subject to any rules made by the Central Government in this behalf”.

13. The meaning of section 8(3)(b) is made clear by reference to Section 13(1)(e) which grants the rule making power to the Central Government on this point. Section 13(1)(e) states as follows:

“13. Power to make rules— (1) The Central Government may, by notification by the official Gazette, make rules providing for—

(e) the enumeration of goods or class of goods used in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power”.

14. In the exercise of the rule making power the Central Government has now made rule 13 which is to the following effect:

“13. Prescription of goods for certain purposes. The goods referred to in clause (b) of sub-section (3) of section 8 which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts accessories, fuel, or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power.”

15. The nature of the rule making power under Section 13(1)(e) and the language of rule 13 itself furnish the key to the meaning and significance of section 8(3)(b) of the statute. The power of enumeration of goods or class of goods used in the manufacture or processing of goods for sale or in mining conferred by the Central Government by Section 13(1)(e) of the Act is a matter of great significance, and it is manifest that the registering authority cannot except any goods or class of goods under S. 8(3)(b) of the Act unless those particular goods or class of goods are enumerated by the Central Government in the rule. In other words, the registering authority cannot go beyond the enumeration of the categories mentioned by the Central Government in rule 13. If this view is correct, it is manifest that the petitioner is not entitled to claim specification in the registration certificate item No. 3 hospital equipment, item No. 4—medical supplies, and item No. 7 (second part)—cane baskets for Sanitary use it follow's that the petitioner is not entitled to item no. 5 stationery, also. I would, therefore, reject the argument of learned Counsel for the petitioner on this aspect of the case.

16. The claim of the petitioner with regard to items Nos. 1, 2, 6 and 7 (first part) stands on a different footing. As regards item No. 1—locomotives and motor vehicles, it was contended on behalf of the petitioner that locomotives and motor vehicles are used in carrying ores and raw materials to the site of manufacture and also used for transport of the finished goods after the process, of manufacture, and so they may be specified in the registration certificate. The question presented for determination is whether the claim of the petitioner falls within the language of rule 13, and whether motor vehicles and locomotives used for carrying Ores and raw materials to the factory before the actual process of manufacture state, can be said to be locomotives and motor vehicles intended for use “in the manufacture or processing of goods for sale or in mining”.

17. It is manifest that if the motor vehicles or locomotives are used in the actual mining process the petitioner is entitled to have such equipment or machinery specified in the certificate of registration. It is also obvious that if the motor vehicles and locomotives are used by the petitioner in the course of manufacture or in the course of processing goods for sale, then it is entitled to have such machinery or equipment Specified in the certificate of registration. The difficulty arises in the case of motor vehicles and locomotives which are used by the petitioner after the mining operation is concluded and before the manufacturing process starts. In my opinion the petitioner is not entitled to have such machinery and equipment specified in the certificate of registration under section 8(3)(b) of the Act read with the language of Rule 13. Similarly, the petitioner is not entitled to claim the inclusion of locomotives and, motor vehicles used in carrying finished products from the factory after the conclusion of the process of manufacture. With regard to item No. 1 therefore, I consider that the petitioner is entitled to specification in the registration certificate under Section, 8(3)(b) of the locomotives and motor vehicles used “in carrying raw materials and removing raw materials during the process of manufacture” and also “used both underground and on surface in mining operations”.

18. As regards item No. 2 and item No. 8 the petitioner is entitled to specification of accessories and spare parts of such locomotives and such motor vehicles and also tyres and tubes of such motor vehicles as are mentioned above. I do not think item No. 7 (first part)— cane baskets for carrying ores and raw materials — comes within the language of pule 13, and I would, therefore, reject the claim of the petitioner for Inclusion of item no. 7, (first part) in the registration certificate.

19. As regards item No. 3 (second part) — laboratory fittings — the claim of the petitioner is that they are essential for the sampling and analysis of the or-es and other raw materials in the initial stages of the mining operation and in the process of manufacture. I think that the petitioner is entitled to have this item specified in the registration certificate. The reason is that analysis and sampling of ores are not merely incidental to manufacture or mining but they are essential part of the normal process of manufacture or mining so that the petitioner may make sure that the ores come up to a particular specification or the goods are manufactured according to the terms of the contract. I am, therefore, of the opinion that the petitioner is entitled to have item No. 3 (second part) — laboratory fittings — specified in the certificate of registration. The view that I have expressed is supported by a decision of the King's Bench Divisional Acton Corporation v. West Middlesex Assessment Committee, 1949-2 KB 10 where it was held that the testing of the properties is an essential part of the process of their manufacture, and the hereditament where the propellers were tested was an “industrial hereditament” within the meaning of Section 3 of the Rating and Valuation (Apportionment) Act, 1928.

20. For these reasons I hold that this application must be party allowed and a writ in the nature of mandamus should be issued commanding respondent No. 3, namely, the Additional Superintendent of Sales Tax, Singhbhum, Jamshedpur, to specify the following goods in the certificate of registration under section 8(3)(b) of the Central Sales Tax Act, read with Rule 13:

(1) Locomotives and motor vehicles actually used in carrying and removing raw materials during the process of manufacture:

(2) Locomotives and motor vehicles used both underground and on surface during mining operations:

(3) Accessories and spare parts for such locomotives and such motor vehicles:

(4) Tyres and tubes for such motor vehicles;

(5) Laboratory fittings used for the sampling and analysis of the ores and other raw materials in the initial stages or mining operation and in the process of manufacture.

21. I would accordingly allow the application to the above extent. There will be no order as to costs.

Untwalia, J.:— I agree.

BF/M/K.S.B

22. Petition partly allowed.

Indian Copper Corporation Ltd. v. Commissioner Of Commercial Taxes, Bihar And Others

Case Summary — Indian Copper Corporation Limited (Petitioner)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Respondents' Position

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Indian Copper Corporation Ltd. v. Commissioner Of Commercial Taxes, Bihar And Others

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