The State Of Bihar Through Pri vs M/S New Swadeshi Distillery
2024 Latest Caselaw 261 Patna

Patna High Court

The State Of Bihar Through Pri vs M/S New Swadeshi Distillery on 11 January, 2024

Bench: Chief Justice, Rajiv Roy

    IN THE HIGH COURT OF JUDICATURE AT PATNA
                  Miscellaneous Appeal No.143 of 2011
======================================================
The State of Bihar through Principal Secretary, Commercial Taxes, Bihar,
Patna.

                                                        ... ... Appellant/s
                                 Versus
M/S New Swadeshi Distillery, Narkatiyaganj, West Champaran, Bettiah.

                                                       ... ... Respondent/s
======================================================
                                    with
                   Miscellaneous Appeal No. 168 of 2011
======================================================
1. The State of Bihar through Principal Secretary, Commercial Taxes, Bihar,
Patna.
2. The Joint Commissioner of Commercial Taxes, Tirhut Division,
Muzaffarpur.
3. The Assistant Commissioner, Commercial Taxes, Bettiah.

                                                              ... ... Appellant/s
                                 Versus
MS New Swadeshi Distillery, Narkatiyaganj, West Champaran, Bettiah.

                                          ... ... Respondent/s
======================================================
Appearance :
(In Miscellaneous Appeal No. 143 of 2011)
For the Appellant/s    :        Mr.Vikash Kumar, Advocate
For the Respondent/s   :        Mr. R.K.Agrawal, Advocate
                                Mr. Sanjeev Kumar, Advocate
(In Miscellaneous Appeal No. 168 of 2011)
For the Appellant/s    :        Mr.Vikash Kumar, Advocate
For the Respondent/s   :        Mr. R.K.Agrawal, Advocate
                                Mr. Sanjeev Kumar, Advocate
======================================================
CORAM: HONOURABLE THE CHIEF JUSTICE
        and
        HONOURABLE MR. JUSTICE RAJIV ROY
ORAL JUDGMENT

(Per: HONOURABLE THE CHIEF JUSTICE)

Date : 11-01-2024

The assessment years are 1997-98 and 1998-99.

The respondent, the assessee, is a registered dealer carrying on

manufacture and sale of methylated spirit. In the subject Patna High Court MA No.143 of 2011 dt.11-01-2024

assessment years, the assessment was completed on 08.03.2021

under Section 17(2)(a) of the Bihar Finance Act, 1981 (in short

the 'Act'). The sale of methylated spirit to one M/s Waxpol

Industry Ltd., duly registered under Section 13(1) of the Act,

against supply of statutory Form-IX, was assessed at the rate of

2% under Section 13 of the Act. Wherever the statutory forms

were not produced, assessment was @ 25%. A re-assessment

was initiated under Section 19(1) (b) of the Act and completed,

resulting in a demand of additional tax for the subject

assessment years, assessing the entire sale of methylated spirit

at the rate of 25% under Section 12 of the Act. The assessee was

unsuccessful in first appeal, which orders of the first appellate

authority and the original authority were overturned by the

Tribunal. The order of the Tribunal is challenged before us by

the State.

2. The learned Government Advocate points out

from Section 13 that the proviso enables any goods or category

of goods to be removed from the purview of Section 13. Such

goods removed from the purview of Section 13 even if sold as a

raw material would be assessed at the higher rate under Section

12, as notified by the State Government. The relevant

notifications were pointed out to buttress the contention. Patna High Court MA No.143 of 2011 dt.11-01-2024

3. The learned counsel appearing for the assessee

before us argued on the basis of the notifications issued under

Section 12 and 13 that the assessee had sold the methylated

spirit as a raw material and had also obtained the statutory forms

from the purchaser, which enables the assessee to be assessed at

the rate of 2% under Section 13 of the Act. It is pointed out that

the subsequent notifications removing 'Spirit, including

rectified spirit', does not change the character of the levy since

it is an admitted position that the goods were sold as a raw

material enabled assessment at the concessional rate under

Section 13 of the Act.

4. The question that arises from the order of the

Tribunal is framed as follows:-

(i) Whether the sale of methylated spirit to the purchaser for the purpose of use as a raw material, based on the notifications issued under the Act, would be covered under Section 13 or under Section 12 and if it is covered under Section 12, what would be the rate applicable to its sale?

5. The assessee had also, in the appeal before the

Tribunal, raised the question as to whether a re-assessment

could have been carried out under Section 19(1), especially Patna High Court MA No.143 of 2011 dt.11-01-2024

since it is a mere change of opinion, for reason of there being no

additional material available with the assessing officer to carry

out such re-assessment. The assessment having been carried out

levying tax at the lower rate; without any additional material,

there could not be a re-assessment carried out, which if carried

out would amount to a mere change of opinion. The Tribunal

has considered the issue elaborately and found that correcting a

human error would not come within the definition of a mere

change of opinion.

6. In the present case, the Assessing Officer had,

without adverting to the notifications, assessed it on the basis of

the statutory form produced, enabling the concessional rate for

the goods sold by the assessee as a raw material to the

purchaser. Later, the under assessment was noticed and this falls

squarely within the ambit of Section 19(1) was the finding. The

Tribunal though went ahead and found the concessional rate to

be proper, rejected the claim of the assessee that re-assessment

in the facts and circumstances would not be possible. We do not

find any cross-appeal from the above finding and we find no

reason to enter into the said controversy. We are also prima

facie satisfied that the findings of the Tribunal on that count is

perfectly legal and in order.

Patna High Court MA No.143 of 2011 dt.11-01-2024

7. The question of law raised would require

examination of the various provisions of the Bihar Finance Act.

The rate of tax to be levied under Section 3 or 4 is at the rate of

8% of the taxable income as per Section 12. The proviso to

Section 12(1), however, enables the State Government to fix a

higher rate of tax, not exceeding 25% or a lower rate of tax not

below 2%, for any class of dealers or goods, inter alia for any

goods, which rates are to be notified from time to time by the

State Government. Section 13, however, speaks of a special rate

of tax on certain sales and purchases, inter alia for goods sold or

purchased by a registered dealer, which is required by him

directly for use in the manufacture or processing of any goods

for sale.

8. The principle behind Section 13 is that the

goods purchased as raw material and used in the manufacture,

bring forth manufactured goods for sale, which would in any

event procure tax to the State Government on the sale of such

manufactured goods. This levy of tax would take in the value of

the raw materials too. This is a concession made available to the

dealers of such raw materials but, only on the terms specified

therein; which terms include the production of the statutory

form and also the continued concession extended to such goods Patna High Court MA No.143 of 2011 dt.11-01-2024

by the State Government. The continued concession is not a

mandate under Section 13 for all goods sold as a raw material,

especially looking at the proviso to sub-section 13(1) which is

extracted herein:

"Provided that the State Government may, from time to time by notification in official gazette, exclude any goods or class of description of goods from the operation of this Section".

9. Hence, any goods or class of description of

goods, if notified, under the proviso as excluded under Section

13 would attract the tax at the higher rate as notified by the State

Government.

10. With these legislative provisions in the

background we have to examine the notifications as produced in

the case. We specifically refer to the affidavit of the respondent

dated 28.04.2016, wherein the various notifications are

produced.

11. Annexure-R/4 is notification no.

Bikrikar/San.-10266/77-14549 dated 26.12.1977 which is one in

exercise of the proviso to sub-section (1) of Section 12,

excluding eleven goods from the operation of the said section.

Later by Annexure-R/8, S.O. 94 dated 21.05.1997, exercising Patna High Court MA No.143 of 2011 dt.11-01-2024

the powers under Section 12(1) of the Bihar Finance Act, 1981,

the following was added as taxable under Section 12 at the rate

of 25%:-

Molasses, Potable Spirit, Methylated Spirit, Rectified Spirit, Wine, Indian Made Foreign Liquor, Foreign Liquor, Country Liquor, Spiced Country Liquor, whether imported or manufactured inside India, Opium and Narcotics.

12. On the same day subsequent to the above

notification, by S.O. 98 dated 21.05.1997 (Annexure-R/6), an

exercise of power conferred by Section 13(1) of the Bihar

Finance Act, 1981l; 'Spirit including rectified spirit' was

included in the notification dated 26.12.1997 (Annexure-R/4)

thus excluding it from Section 12.

13. Hence, what has transpired on 21.05.1997 is

that a number of goods including potable spirit, methylated

spirit, rectified spirit etc., were included under Section 12 with

the rate of tax specified in the schedule at 25%.. On the same

day, subsequent to such inclusion, 'Spirit including rectified

spirit' alone was included in the notification under Section 13.

Hence the intention of the Government was to include the goods

as specified in S.O. 94 under Section 12(1), to be taxed at 25%

and exclude only 'Spirit including rectified spirit' from the levy Patna High Court MA No.143 of 2011 dt.11-01-2024

of 25%; by reason of the inclusion under Section 13 by a later

notification on the same date (S.O. 98-R/6).

14. Hence, 'Spirit including rectified spirit' can

only be considered as taxable under Section 13 at the rate of

2%.

15. We find no reason to interfere with the order

of the Tribunal but we make it clear that the same shall be

applicable only with respect to the quantum for which the

statutory forms as prescribed under Section 13 were produced

before the assessing authority.

16. We reject the appeal, answering the question

of law in favour of the assessee, finding the levy for methylated

spirit which would be within the words employed, of 'Spirit

including rectified spirit' as excluded from Section 12 and

included under Section 13 by S.O. 98 dated 21.05.1997.

17. The appeals stand dismissed.

                                             (K. Vinod Chandran, CJ)


                                                      (Rajiv Roy, J)
Sujit/Aditya
AFR/NAFR                NAFR
CAV DATE
Uploading Date          16.01.2024
Transmission Date