The Commissioner of Income Tax-III, vs. Sri Prem Chand

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 1 of 30 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. :: ORDER :: 1. S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar 2. S.B.Civil VAT Revision Petition No.379/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar 3. S.B.Civil VAT Revision Petition No.505/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar 4. S.B.Civil VAT Revision Petition No.109/2007 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar 5. S.B.Civil VAT Revision Petition No.110/2007 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 2 of 30 6. S.B.Civil VAT Revision Petition No.111/2007 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar 7. S.B.Civil VAT Revision Petition No.112/2007 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar 8. S.B.Civil VAT Revision Petition No.380/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali- Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar Date of Order ::: Friday, 20th November, 2015. P R E S E N T HON'BLE DR. JUSTICE VINEET KOTHARI REPORTABLE APPEARANCE:- Mr.J.L.Purohit, Senior Advocate assisted by Mr.Rajeev Purohit & Mr.Ajay Purohit & Mr.S.K.Bissa, CA, for the petitioner-Assessee. Mr.V.K.Mathur with Mr.Dinesh Godara for the respondent- Revenue/Department. <<>>

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 3 of 30 BY THE COURT :- 1. The Assessee-M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd., Pali (PZDUSS, for short) is aggrieved by the order passed by the learned Rajasthan Tax Board, Ajmer dated 20.02.2006, upholding the orders passed by the two lower authorities and upholding the imposition of additional tax beyond the concessional rate of 4% prescribed under the notification dated 27.03.1995 on the purchase by the Assessee- P.Z.D.U.S.S. of Skimmed Milk Powder ('SMP', for short). 2. The Assessee purchased SMP as Raw Material/Processing Articles, which was used in the manufacture of milk in its Dairy for standardization of the milk at a particular level from the registered dealers in the State of Rajasthan at concessional rate of 4% against the declaration Form ST-17 issued to it by the Departmental authorities during the relevant assessment period. The said concession at the rate of 4% tax was availed by the Assessee under the Notification dated 27.03.1995, which is quoted below for ready reference:- “NOTIFICATION S.O.405-In exercise of the powers conferred by Sub Section (2) of Section 4 of Rajasthan Sales Tax Act, 1994 (Rajasthan Act No.29 of 1954),

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 4 of 30 the State Government being of the opinion that it is expedient in the public interest so to do hereby exempts from tax under the said Act the sale to or purchase by a registered dealer of raw material specified in his certificate of registration and required by him for use of manufacture of goods for sale to the extent to which the rate of tax in respect thereof exceeds 4% on the following condition:- (1) That such raw material is used in the manufacture of goods within the State of Rajasthan. (2) That such manufacturer shall issue a declaration to this effect in form S.T.17 appended to the Rajasthan Sales Tax Rules, 1955 to the selling dealer. This shall have effect from 1.4.1995.” 3. The Assessing Authority imposed additional tax on the Assessee taking it to be a case of misuse of declaration in Form ST-17, because he found that during the relevant assessment period, the purchased goods, namely, SMP was not entered as Raw Material/Processing Articles for use in the manufacture of finished goods, Milk in the registration certificate issued by the Assessing Authority. The additional tax alongwith

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 5 of 30 interest and penalty was imposed on the Assessee, against which the Assessee lost in two rounds of appeals also before the higher authorities, namely, Deputy Commissioner (Appeals) and the Tax Board, except on the ground of penalty, which was set aside by the Board. 4. The relevant findings of the learned Tax Board in the order dated 20.02.2006 dismissing the appeal of the Assessee are also quoted below for ready reference:- “ पकरण क तथ सकप म इस पकर ह कक अपलर रज.ब.क. अधन म क अनतर#त एक पजक% त ससर ह, जजसक म(ख व वस गमण कत. क द(ग उतपदक सहकर3 सघ. स द5 क कर द5 क ववक कर  तर अनतररक द5 स घ एव द(ग पउडर क न म#ण कर ववक कर  ह । आल=च अवध म उस  जसकमड ममलक पउडर (एस एम प) क क घBषण पपत एस ट3 17 क समर# स 4 पनतशत कF रर  त कर दर स कक  ह । कर न #रण अधकर3  ह म कर कक एस एम प व वहर3 क पज पमण पत म कचG मल क रप म दज# ह3 ह, घBषण पपत. क द(रप Bर कर रर  त कर दर स एस एम प खर3द र  ह, अतर कर, ब ज एव शजसत क आरBपण कक  । ववद उप (क अपलस  व वहर3 दर पसत(त अपल खररज कर द3, जजसक ववरद  ददत अपल व वहर3 कF ओर स पसत(त कF रई ह ।

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 6 of 30 हस स(  रई । अपलर व वहर3 क अधक% त पनतन ध क तक# ह कक एस एम प उसक मल  कचG मल ह, जजस द(ग सघ. स खर3द र  द5 म ममलकर वनPत म क. क द5 त र कक  जत ह । जB आवद पज हत( बकF कF ववभर म पसत(त कक  र  र, उसम पज पमण पत म दज# कर  हत5 एस एम प भ शममल र, परत( त(दटवश दद क 12.5.94 कB जB पज पमण पत जर3 कक  र , उसम ह शममल हB  स रह र  ।  पज पमण पत जर3 कर  हत( जB पर#  पत पसत(त कक , उसम भ इसक अक ह3 हB सकत तर इस त(दट क ध  द म आ  पर पज पमण पत म एस एम प कB कचG मल क रप म दज# कर  हत( दद क 21.10.2003 कB आवद कक  र  र । उ क तक# ह कक पमण पत म दज# ह3 हB  पर भ इस त स इकर ह3 कक  ज सकत कक एस एम प व वहर3 क मल  कचG मल ह, अत: वह इस रर  त कर दर पर खर3द  क पत र । कर न #रण अधकर3  अनतररक कररBपण एव शजसत क अरBपण कर अववधक आदश पररत कक  र, जजसकF प(वS कर ववद उप (क अपलस  त(दट कF ह । उ कF पर#  ह कक अपल सवकर कF जकर ववद उप (क अपलस एव कर न #रण अधकर3 क आदश अपसत कक  ज  । पत र ववभर कF ओर स उप-रजकF अधवक  कर न #रण अधकर3 दर पररत आदश. क समर#  कक  तर तक# दद  कक पज पमण पत म कचG मल क रप म एस एम प दज# ह3 हB  पर अधस5G  दद क 27.3.95 क अ (सर व वहर3 इस रर  त कर दर पर ह3 खर3द सकत र । ऐस पररजसरनत म कक  र  कररBपण आरBवपत शजसत

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 7 of 30 उधGत ह । उ कF पर#  ह कक व वहर3 कF अपल खररज कF ज  । हम  हस पर म कक  तर पतवमल . क अवलBक कक  । ह वववददत ह3 ह कक पज हत( जB आवद पत व वहर3  पसत(त कक , उसक सर सलग स5G म एस एम प भ अककत कक  र  र, परत( जB पज पमण पत व वहर3 कB दद क 12.5.94 कB जर3 कक  र , उसम कचG मल क रप म एस एम प क इदज ह3 ह ।  पज कमक जर3 कर  हत( जB आवद मर र  उसम भ एस एम प कB कचG मल क रप म दज# ह3 कक  र  । व वहर3 दर पसत(त आवद पत दद क 28.7.95 स इस त कF प(वS हBत ह तर  पज पमण पत दद क 22.5.95 कB जर3 कक  र , उसम कचG मल क कVलम म कBई भ वसत( अककत ह3 ह । पज पमण पत म एस एम प दज# कर  हत( पर#  पत परम र दद क 21.10.2003 कB पसत(त कक  र  । सपS: कचG मल क रप म एस एम प क इदज तB पज पमण पत दद क 12.5.94 म र और ह3 पज पमण पत दद क 28.7.95 म । ऐस पररजसरनत म अधस5G  दद क 27.3.95 क अतर#त कचG मल क रप म एस एम प रर  त कर दर पर खर3द  हत( अपलर व वहर3 अधक% त ह3 प  जत र तर जB अतर कर कर न #रण अधकर3  एस एम प कF खर3द पर आरBवपत कक  ह, वह उधGत प  जत ह । दद एस एम प कB व वहर3 कF खर3द पर आरBवपत कक  ह, वह उधGत प  जत ह । दद एस एम प कB व वहर3 कचG मल क रप म दज# कर  Gहत र तB उसक पस आवद दद क 28.7.95 पसत(त करत सम इस त क प #प

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 8 of 30 अवसर र, परत( उस  पसत(त आवद पत म एस एम प क इदज कचG मल क रप म ह3 कर  । ऐस पररजसरनत म ववद उप (क अपलस  अपल खररज कर कBई ववधक त(दट ह3 कF ह । जह तक र 64 रज.ब.क.अ. 1994 क अतर#त आरBवपत शजसत क पश ह, अपलर क अधक% त पनतन ध क तक# ह कक व वहर3  परम पज पमण पत लत सम ह3 कचG मल क रप म एस एम प कB दज# कर  हत( आवद कर दद  र तर एस एम प द(ग ड र3 क मल  कचG मल भ ह, अत: इस सददश क आर पर कक वह घBषण पपत एस ट3 17 क समर# स रर  त कर दर पर एस एम प खर3द  क अधकर3 ह, वववददत खर3द कF रई ह, इस रर  त कर दर पर कF रई खर3द म उसकF करपवG कF कBई मश ह3 र और ह3 ह3 कBई दBष म Bभव । इसमलए आरBवपत शजसत अववधक ह । दद तक कF रप स दख ज  तB र 64 क अतर#त घBषण पपत. क द(रप Bर म कर शजसत आरBवपत कF ज सकत ह, परत( पकरण कF पररजसरनत . म हम ह उधGत समझत ह\ कक शजसत अपसत कF जव, क .कक ज 5#झकर व वहर3  घBषण पपत एस ट3 17 क द(रप Bर ह3 कक  ह, जलक सददशस म एस एम प कB कचG मल म त ह(ए उक खर3द रर  त कर दर स कF रई ह । वस भ अपलर व वहर3 मसस# पल3 जजल द(ग उतपदक सहकर3 सघ एक सहकर3 ससर ह, जजसक दर करपवG कर  क ककस व कक ववशष कB लभ ह3 हB सकत, अत: र 64 रज.ब.क.अ. 1994 क अतर#त आरBवपत शजसत उधGत पतत ह3 हBत ।

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 9 of 30 उपरBक वववG क आर पर अपल आमशक सवकर कF जकर अपलर व वहर3 क ववरद र 64 रज.ब.क.अ. 1994 क अतर#त आरBवपत शजसत अपसत कF जत ह तर अनतररक कररBपण व उस पर आरBवपत ब ज कF प(वS कF जत ह । न ण# स(   र  । sd/- sd/- (आर.स. ज ) (वववप भट रर) सदस सदस 5. Being aggrieved by the same, the Assessee has preferred these revision petitions under Section 84 of the Rajasthan VAT Act, 2003, which are being disposed of by this common order. 6. Mr.J.L.Purohit, learned Senior Counsel assisted by Mr.Rajeev Purohit and Mr.Ajay Purohit and Mr.S.K.Bissa, Chartered Accountant representing the petitioner-Assessee urged before this Court that the original registration certificate issued by the Assistant Commissioner of the Department on 28.05.1994 with effect from 19.05.1994 (Annexure-2) included the words “Skimmed Milk Power” alongwith other commodities in the said Registration Certificate, while in the relevant column for purchase of Raw Materials/Processing Articles, the words written were, “Milk etc.”. The said Registration Certificate was required to be got amended or obtained afresh in terms of the

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 10 of 30 Circular issued by the Department on 11.12.1995, which undertook the process of introducing a scientific system upon computerization of the relevant records, and therefore, fresh registration certificates were required to be issued upon fresh applications by the Assessees, but while applying for such fresh registration in the year 1995 again, though the same were issued by the respondents-authorities on 29.08.1995 with effect from 19.05.1994, the date of the earlier registration certificate, somehow the words “Skimmed Milk Powder” was omitted in the said Registration Certificate issued, both under the Rajasthan Sales Tax Act as well as the Central Sales Tax Act. This mistake, learned Senior Counsel for the Assessee submitted, was an inadvertent omission, which was got corrected in the year 2003 and upon a rectification application dated 21.10.2003 filed by the Assessee in this regard, a fresh Registration Certificate, including the SMP as Raw Materials/Processing Articles was issued by the respondent- Department. The assessment period in the present case is between 1995 to 2003. 7. Mr.J.L.Purohit, learned Senior counsel however, contended that neither the nature of business of the Assessee changed during this interregnum period, nor the fact that the SMP was purchased by the Assessee against the declaration

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 11 of 30 Form ST-17 duly issued to it by the respondents-authorities from time to time was so purchased and was in fact so used as Raw Materials/Processing Articles for manufacture of milk by it, and therefore, the concessional rate of tax of 4% was rightly availed of by the Assessee during this period and the Assessing Authority as well as the higher Appellate Authorities fell into error in taking a hypertechnical view of the matter that during this period of about eight years, upon amendment of the registration certificate undertaken in the year 1995 at the call of the Department for upgrading their system on account of inadvertent omission or mistake on the part of the Assessee, the commodity in question, namely, SMP, could not be entered into its application/amended Registration Certificate, as Raw Materials/Processing Articles to be used in the manufacture of Milk by the Assessee. 8. Mr.J.L.Purohit, learned Senior Counsel appearing for the Assessee also relied upon the two judgments of this Court; one rendered by the Division Bench in the case of M/s.Paschimi Raj. Dugdh Utpadak Sahakari Sangh Ltd. Vs. State of Rajasthan & Anr., 2004(1) WLC (Raj.) 639, and another Singh Bench decision in the case of M/s.Udaipur Dugdh Utpadak Sahakari Sangh Ltd. Vs. The Commercial Taxes Officer (S.B.Civil Sales Tax Revision Petition

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 12 of 30 No.216/2002 decided on 22.02.2007) in support of his contentions. Mr.J.L.Purohit therefore, urged that taking a purposive and harmonious construction of the entries in the registration certificate and there being no fraudulent intention on the part of the Assessee and the lapse merely being a technical and bonafide, the Assessee deserves to be allowed the concessional rate of tax, which it availed against the duly furnished declarations in Form ST-17 during this period and the additional tax imposed, alongwith liability of interest thereon, by the authorities below deserves to be quashed. He however, submitted that since the penalty in question has already been set aside by the learned Tax Board, therefore, there is no issue involved in the present revision petitions about the penalty imposed upon the Assessee. 9. On the other hand, Mr.V.K.Mathur, learned Standing Counsel appearing for the respondent-Department supported the impugned orders and urged that taxing statutes have to be construed strictly, especially when it is a matter of exemption or concession to be allowed to the Assessee, in terms of the Notification and there is no equity about tax, and in view of the admitted fact that during the period in question, that is, eight years or so, involved in these cases, the fact remains that the SMP was not entered in the registration certificate as

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 13 of 30 Raw Material/Processing Article to be used by the Assessee for the manufacture of milk, its finished product, therefore, the imposition of additional tax with interest cannot be validly assailed by the Assessee in the present revision petitions. On the question of penalty, he however, submitted that there is no cross-objection of the respondent-Department in this matter. He, therefore, prayed for dismissal of the present revision petitions of the assessee. 10. I have heard the learned counsels of the parties at length and perused the record and the judgments cited at the Bar. 11. Firstly, the relevant extract from the judgments cited at the Bar on behalf of the Assessee are quoted below for ready reference:- In M/s.Paschimi Raj. Dugdh Utpadak Sahakari Sangh Ltd.(supra), the Division Bench of this Court held as under : “22. It is significant that under sub-sec.(1) of Sec.10, the concession in rate of tax is envisaged in respect of sale to or purchase by a registered dealer of raw materials, that is the goods as defined u/s.2(34) of the Act of 1994 as raw material viz. ingredients of end product or fuel and lubricants. How much concession of rate is to be charged is left to the State Government to be notified.

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 14 of 30 23. Thus, the statutory policy is clear that the concessional rates are applicable not only to the purchase of raw materials used in manufacture of goods but also on purchase of articles other than raw materials used in processing of goods for sale as well as for manufacturing of goods which may otherwise not qualify as raw material. This is clear from the expression used in sub-section (3) that sale to or purchase of articles (other than raw material). In other words, purchase of raw materials are subject to concessional rate of tax notified by the State Govt. under sub-sec.(1) and sale or purchase of articles other than raw materials which are used in the manufacture of or processing of goods for sale or in mining or to distribution of electricity are subject to concessional rate not exceeding u% under sub-sec.(3). 24. In contrast to sub-sec.(1), sub-sec.(3) has been made applicable specifically to sale to or purchase by a registerd dealer or articles other than raw material. This means that to avail concession in respect of any goods u/s.10(3), it is not necessary to be a part of manufacture as defined under the Act of 1994. It is not an essential condition that articles other than raw materials be also used only for manufacture of goods as defined u/s.2 (34) of the Act of 1994. Concession u/s.10(3) is much wider. If the goods sold/purchased as raw

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 15 of 30 material, obviously they refer to their user for manufacture as defined u/s.2(34). But the use of such goods falling u/s.10(3) covers many other range than manufacture, sale or purchase of any goods which are used for any of the activities referred to therein call for application of rate of tax or sale or purchase not more than 4%. 25. The expression “required by him for use in” quantifies each of the following activity independently:- (i) in manufacture of goods or; (ii) in porcessing goods for sale or; (iii) in mining or; (iv) in generation of electricity or; (v) in distribution of electricity; 26. Read in correct perspective, it can be well said that any articles purchased by or sold to a registered dealer and used by him other than raw material in processing goods for sale is to be taxed, if rate of purchase is not below 4% at 4%. 27. Importantly, it has not been left to State in cases falling in sub-sec.(3) to provide a separate lower rate. The concession is determined by Statute itself. If the ordinary rate prescribed u/s.4 on sale of such goods is less than 4%, tax at such lesser rate shall be chargeable. In case rate u/s.4 is more than 4%, the rate of tax shall not exceed 4%. Thus,

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 16 of 30 maximum chargeable rate on sale of or purchase of article falling u/s.10 is 4% unless the rate otherwise applicable to such commodity is less than 4%. 28. Therefore, in a given case, even if the articles purchased by an assessee are not used as manufacture as raw materials but are used by him for processing the goods for sale, it cannot be subjected to tax exceeding 4% in view of sub-sec. (3) of Sec.10 of the Act, 1994. 29. As it appears that the concessional rate of raw material under sub-sec.(1) has been notified at 4% and the rate of tax u/s.4 in respect of goods in question being more than 4%, whether skimmed milk is taxed as a raw material or as an article used in processing of milk for sale, it would not result in altering the determination of liability vis-a-vis the assessee in question, in view of the fact that the skimmed milk is used for processing the natural milk for sale being not in dispute at any stage. As a matter of fact, it appears from the assessment order itself that skimmed milk is used for processing the milk for marketing. 30. The conclusion is irresistible that the assessee is entitled to the concessional rate of tax, if not under sub-sec.(1) of Sec.10, under sub-sec.(3) of Sec.10 of the Act, 1994.

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 17 of 30 31. We may make it clear that so far as use of skimmed milk powder for processing the natural milk to standardize its fact contents at different levels and selling the milk of varied forms at different price may not amount to manufacture, as even after the processing, the commodity commercially known for marketing remains the same viz. milk and the subject of tax has also been identified as one commodity viz.'milk' for tax also which is one of the relevant factor for determination whether a commercially distinct commodity will come into market by the dint of processing the natural milk to different fact contents; or invite different tax rates on different variety of milk so as to consider it commercially different from commodity for the purpose of levy of tax also. At the same time, it cannot be doubted that the skimmed milk powder to the extent it is used for processing the milk to bring into existence other milk products like Ghee, Lassi about which reference has been made can be considered as raw materials. Merely because at intermediary stage of processing the product is sold in market with its different varieties though commercially not different commodity. Thus, the levy on the proportionate quantity of skimmed milk, to the extent it is used for the purpose of producing milk products with the help of other commodities can be considered as raw materials also.

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 18 of 30 32. However, that difference in this case would not result in altering the tax liability. It is not necessary in this particular case to go into the further details of this question as to what extent the skimmed milk has been used as raw materials and to what extent the milk has been used as an article other than raw material for processing the milk for marketing. 33. In view of the aforesiad discussion, this appeal succeeds and is allowed. The judgment under appeal is set aside. The writ petition is allowed. The assessment order is also set aside and the Assessing Officer is directed to make fresh assessment order in accordance with law in the light of the aforesaid principles. There shall be no order as to costs.” 12. In M/s.Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), the learned Single Judge held as under :- “ In view of the above reasons, the skimmed milk may not be raw material when it is used for making a milk of different standard having different contents but still the tax liability can be not exceeding 4%. The contention of the learned counsel for the non-petitioner that the skimmed milk has not been shown as raw material in the Registration Certificate

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 19 of 30 of the assesee or that the assessee has submitted wrong declaration and has not used the commodity for the purpose for which it was purchased, under in the declaration given in form ST-17 are concerned, they in fact are not arising in the present controversy because that was not the issue before the Assessing Authority or the Deputy Commissioner (Appeals) or before the Tax Board. In view of the above discussion, all the five revision petitions are allowed. The impugned orderse of the Tax Board so far as they relate to levy of tax on purchase of skimmed milk powder exceeding 4%, are set aside in all the five cases and the Assessing Authority is directed to make fresh assessment order in accordance with law in the light of the above principle. Sd/- (PRAKASH TATIA),J.” 13. It is true that there is no equity in taxation laws and the statutory provisions in the taxing statutes and the statutory notifications in tax laws have to be construed strictly and literally, and there is neither any scope for intendment or equity, while making such interpretations. Nonetheless, even the taxing statutes do not rule out the purposive interpretation of the relevant statutory provisions and notifications.

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 20 of 30 14. In Saroj Aggarwal Vs. CIT, (1985) 156 ITR 497 (SC) at p.508, their Lordships held as under:- “Facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of the case. Whether it is possible to draw two inference from the facts and whether there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hyper- technical or legalistic approach should be avoided in looking at a provision which must be equitablly interpreted and justly administered. It is true that there must be succession by inheritance. But it is possible in a particular case without any express provision either in the deed or in writing to infer from the conduct of the parties, that there was succession, and if such a view is possible inspite of the absence of an express provision, in our opinion, such an inference could be and should be drawn. Courts should, whenever possible, unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice-oriented inference.”

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 21 of 30 15. In Bajaj Tempo Ltd. Vs. CIT, (1992) 196 ITR 188 (SC) at page 197, the Apex Court held as under:- “But, for purposes of construing the proviso in section 15C, it is not necessary to go that far as there can be no doubt that a literal construction of clause (i) of sub-section (2) was amenable to denial of benefit to the assessee even in genuine cases. For instance, an undertaking otherwise entitled to the benefit would fall within the mischief of the sub-clause if it was established in a building which was used for business purposes at any time in the remote past. Or it might have been established in a part of a building, earlier used for business purposes due to paucity of accommodation. Denying benefit to such undertaking could not have been intended when the very purpose of section 15C was to encourage industrialisation. It was for this reason that various High Court evolved the test of commercial expediency or substantial involvement valued in terms of money, etc., to interpret this clause. Adopting a literal construction in such cases would have resulted in defeating the very purpose of section 15C. Therefore, it becomes necessary to resort to a construction which is reasonable and purposive to make the provision meaningful.”

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 22 of 30 16. In Shri Sanjeev Lal Vs. CIT, 365 ITR 389 (SC), the Apex Court held as under:- “22. . . . . . .If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income Tax Act and it is also said that equity and tax are strangers to each other, still this Court has often observed that purposive interpretation should be given to the provisions of the Act. In the case of Oxford University Press V. Commissioner of Income Tax, (2001) 3 SCC 359, this Court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions which

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 23 of 30 subserve the object and purpose should also be made while construing any of the provisions of the Act and more particularly when one is concerned with exemption from payment of tax. Considering the aforestated observations and the principles with regard to the interpretation of Statute pertaining to the tax laws, one can very well interpret the provisions of Section 54 read with Section 2(47) of the Act, i.e. definition of “transfer”, which would enable the appellants to get the benefit under Section 54 of the Act.” 17. In view of the facts and legal position narrated above, there being little dispute or debate about the facts in the present case and they are clear and to reiterate in an encapsulated form, the SMP was purchased by the Assessee during this period as raw material/processing articles for being mixed in the process of manufacturing of standardized milk. There is no dispute that the Assessee purchased such SMP at the concessional rate of tax of 4% by duly furnishing the proper declaration Form in ST-17 to the selling dealers. There is neither any case set up by Revenue, that there was any misuse of these declarations by the Assessee, nor any dispute regarding its actual user in the manufacture of standardized milk by using the same as raw material/processing articles is

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 24 of 30 there. The additional tax, which is sought to be levied by the authorities of the Department is solely on account of the fact of the omission in the Registration Certificate operative for the period of these eight years. There is also no dispute that earlier the said commodity was mentioned in the originally issued Registration Certificate of 1994, but in the process of amendment sought at the call of the Revenue Department itself, there occurred an inadvertent omission on the part of the Assessee and somehow the SMP was not included in the registration certificate, either as Raw Material or as Processing Article for being used in manufacture of milk, which mistake was corrected only in the year 2003. 18. The Division Bench of this Court in M/s.Paschimi Raj. Dugdh Utpadak Sahakari Sangh Ltd.(supra), has clearly held that concessional rate of tax is applicable not only to the purchase of raw material being used in manufacture of goods, but also on the purchase of processing articles other than raw material, used in the processing of goods for sale as well as for manufacturing of goods which may otherwise not qualify as raw material. It may be noted here that Section 10 of the Rajasthan Sales Tax Act, 1994, which provides for such concessional rates of tax on the purchase of raw materials and processing articles, deals with both these classes of goods, namely, raw

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 25 of 30 materials exigible to tax at the concessional rate, as may be notified by the State Government under Section 10(1) of the Act, while processing articles other than raw material are entitled to concessional rate, not exceeding 4%, subject to lower concessional rates prescribed by the State, if any, under Section 10(3) of the Act. Section 10(2) and Section 10(4) appended just after Sections 10(1) and 10(3) respectively deal with a situation, if the conditions of availing such concessional rate of tax stands violated by the Assessee and in that situation, it is provided that the Assessee would be liable to pay the difference of the full rate and the concessional rate, invoking the provisions of Sections 10(2) and 10(4) respectively (for raw materials and for processing articles, other than raw materials). 19. The commodity in the present case is SMP, which can be treated, both as the raw material for manufacture of milk and also as processing article for manufacture of standardized milk, as held by the coordinate Bench in the case of M/s.Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra) also, vide the quoted portion above. Therefore, for invoking Section 10(4) of the Act for imposing the additional tax, the condition necessary to be established and the burden of proving the same definitely lying upon the Revenue, is that, “while purchasing any articles, he represents wrongly that such

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 26 of 30 articles are covered by his Certificate of Registration as specified in sub-section (3)”. The other condition for invoking Section 10(4) is where the articles so purchased are utilized by purchasing dealer for any purpose other than those specified in the said sub-section, is not applicable in the present case, and the case of the Revenue, as contended by Mr.V.K.Mathur, learned Standing Counsel is that in view of the fact that the registration certificate during the relevant period did not include the SMP as either Raw Materials or Processing Articles, therefore, the representation made by the Asssessee in the declaration Form ST-17, that this SMP was duly entered in its registration certificate, was obviously wrong, and therefore, the Assessing Authortiy as well as the Appellate Authorities were perfectly justified in imposing such additional tax. This Court however, is not inclined to accept this submission of Revenue, which though appears to be attractive, but falls to the ground, if a purposive interpretation of the relevant provisions of the Act read with Notification dated 27.03.1995 is taken by this Court, particularly in the light of the fact that the omission in the registration certificate of SMP was on account of a bona fide error or omission on the part of the Assessee, which was sought to be corrected in the year 2003 at the instance of the Assessee and the Department accepted this position in the year

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 27 of 30 2003. The contention of the learned Senior Counsel, Mr.J.L.Purohit is not that the SMP is not raw material or processing article used by the Assessee, but the contention is about the non-mention of the same in the registration certificate. This Court cannot lose sight of the fact that the amendment in the registration certificate in the year 1995 was undertaken and made by the Assessee and the Departmental Authorities, as required by the Department itself under the Circular dated 11.12.1995, while they were upgrading their system in the process of computerization, which they undertook at the relevant point of time. The Assessee's registration certificate issued originally in the year 1994, included SMP vide Annexure-2 dated 28.05.1994, albeit, in the first category of its finished goods alongwith several other commodities and the relevant column for raw materials and processing articles, the words used were “Milk etc.”, which was also wide enough to cover SMP. 20. In view of the undisputed position that the SMP was purchased by the Assessee against duly issued ST-17 declaration forms and was also in fact used by it as raw material/processing articles during the relevant period, this Court would not like to avoid a purposive and beneficial interpretation in favour of the Assessee, merely on account of

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 28 of 30 its inadvertent omission to get the same incorporated specially in the amended registration certificate issued in the year 1995 at the call of the Department itself. Though the error and omission is admitted by the assessee, but it cannot be said to be a wrong representation made by the Assessee. It is not a case of consciously made wrong representation by the Assessee, but a case of inadvertent omission, for which taking a hypertechnical view, the stand of the Assessee does not deserve to be defeated by this Court. The aforecited Supreme Court decisions are quite helpful to the assessee, to take this purposive interpretation. 21. This Court is also conscious of the fact that the Assessee is a cooperative society registered under the provisions of the Cooperative Societies Act and ultimately works for the common and larger benefit of milkmen of the concerned area and by producing various finished goods, like Milk, Ghee etc., even though they might be working on the principles of commercial considerations, they are not like any other private enterprises, who work only for higher profits and the imposition of such additional tax, the brunt of which on the present Assessee can be very heavy, which alongwith heavy burden of interest can even amount to its closure. However, the stakes of quantum of the revenue is not very material consideration, while

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 29 of 30 taking the aforesaid purposive interpretation in the light of the inadvertent omission on the part of the Assessee. This Court also takes into account the subsequent correction in the registration certificate and the same concession being allowed to the Assessee on the purchase of SMP against the similar declaration in Form ST-17 for the period after 2003 and also for the period prior to 1995, and therefore, the dispute only is for the period between 1995 to 2003, for which the additional tax was imposed by the Assessing Authority, and upheld by the Appellate Authorities also only for this period. 22. Therefore, respectfully following the judgments cited at the Bar and taking a purposive interpretation of the provisions of the law and the relevant notification, this Court is inclined to hold that the SMP purchased by the Assessee during the aforesaid period between 1995 to 2003 against declaration Form ST-17 was entitled to be purchased at the concessional rate of 4%, and there was neither any misuse, nor any wrongful representation was made by the Assessee in such declaration forms, and therefore, the levy of additional tax and interest thereon by the Revenue Authorities for this period, was not justified.

S.B.Civil VAT Revision Petition No.381/2006 M/s.Pali Zila Dughdh Utpadak Sahkari Sangh Ltd, Pali-Marwar Vs. Commercial Taxes Officer, Special Circle, Pali Marwar & 07 other connected matters Order, Friday dated 20.11.2015 30 of 30 23. Accordingly, all these revision petitions of the assessee are allowed and the impugned orders passed by the authorities below of the Department from Assessing Authority to the learned Tax Board are quashed and set aside. No costs. Copy of this order may be sent to the concerned parties as well as the authorities below. (Dr. VINEET KOTHARI), J. /skant//122-128(s) & 01(c) /