- (1.) THIS application for revision is directed against the order of the Deputy Commissioner, Excise and Taxation (Appeals) Jaipur dated the 1st November, 1961, whereby he only partially accepted the applicant's appeal against the order of the Sales Tax Officer, Sawai Madhopur dated the 13th January, 1961.
(2.) THE applicant doing business under the name and style of the "jaipur Udyog Limited'* is registered u/s. 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act.) In the certificate of registration the business of the applicant was shown as "wholly manufacture of Cement" and the place of business is shown as Sawai Madhopur. According to this certificate the applicant is entitled to pay tax for his purchases in the course of inter-state trade at the preferential rate of 1% prescribed in sec. 8 (1) of the Act in respect of certain goods required for use in manufacture that have been specified in the certificate. THE relevant item for the purpose of deciding this revision is "machineries". THE goods in respect of which the preferential rate of tax is available have been described in sec. 8 sub-sec. (3) cl. (b) of the Act which is reproduced below : - In 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 ruler made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining of in the generation or distribution of electricity of any other form of power". The learned Sales Tax Officer held that the applicant was not entitled to a preferential rate of tax in respect of his purchases of dumpers, bull-dozers and tipping wagons used for quarrying lime stone at the quarries owned by the applicant or for transporting the lime-stone so quarried. His reason was that the applicant is registered only as a manufacturer of cement, that the quarries owned by the applicant are far off from the applicant's cement factory and that it cannot be said that the quarrying of lime-stone and its transportation take place "in the manufacture" of cement as contended by the applicant. The learned Sales Tax Officer, therefore, assessed the difference between the preferential rate at which tax had been paid and the ordinary rate at which the tax according to him have been paid, and also imposed a penalty in the like amount under sec. 10-A of the Act. In appeal the learned Deputy Commissioner modified the order of the learned Sales Tax Officer in so far as penalty had been levied under sec. 10-A of the Act in respect of the applicant's purchases before 1. 10. 1958 from which date sec. 10-A was brought into force. In all other respects the appeal was rejected. It has been urged before us by the learned counsel for the applicant, firstly, that bull-dozers, dumpers and tipping wagons are " machineries" used in or in the process of manufacture of cement, and, secondly, that no false representation within the meaning of sec. 10 (b) of the Act was involved in the purchases of bull dozers, dumpers and tipping wagons on payment of the preferential rate of tax. He has admitted before us that the quarries of the applicant are situated in village Phalodia about ten miles away from the applicant's cement manufacturing plant at Sawai Madhopur, and, further, that while the bull-dozers, and dumpers are used in the process of quarrying the limestone, the dumpers and tipping wagons are employed for carrying the lime-stone to the rail head from where it is transported to Sawai Madhopur. There is no doubt that bull-dozers and dumpers are machineries in that these are mechanically operated. In common pat lance these are known as earth-moving machineries. The tipping wagons are also mechanically operated and propelled and must be construed to be "machineries". The question is whether these machineries are employed "in the manufacture" of cement as contended by the learned counsel for the applicant. He has submitted an uncertified copy of an unreported case decided by a Division Bench of the Patna High Court, namely, "indian Copper Corporation Ltd. vs. Commissioner of Commercial Taxes, Bihar etc. " We, however, find that this decision does not help him. In that case it was held that motor vehicles and locomotives which were used after the mining operation was concluded and before the manufacturing process started could not be included in the certificate of registration for the purpose of payment of tax at the preferential rate. It was also held that such inclusion could not be claimed for locomotives and motor vehicles used in carrying finished goods from the factory after the conclusion of the process of manufacture. In the present case before us, the bull-dozers, dumpers and tipping wagons in question were employed either in the process of excavating lime-stone at distant quarries owned by the applicant or in transporting the lime-stone from the quarries to the rail-head for onward transportation to the cement manufacturing plant at Sawai Madhopur. Undoubtedly, lime-stone is the basic raw material for the manufacture of cement, but this does not mean that the bull-dozers, dumpers and tipping wagons used at quarries or between the quarries and the rail-head far away from Sawai Madhopur are used "in the manufacture" of cement in the manufacturing plant at Sawai Madhopur. The expression "in the manufacture" has to be given its proper meaning and its scope has to be restricted to what is intimately involved in the process of conversion of lime-stone into cement. This is also the view taken in the Calcutta High Court decision reported at 1956 S. T. C. page 527. The applicant is registered as a manufacturer of cement and it is by all means entitled to claim the benefit of the preferential rate of tax in respect of machineries intimately involved in the manufacture of cement, but it cannot be said that the preferential rate is available to it in respect of bull dozers, dumpers and tipping wagons in question. The other contention of the learned counsel for the applicant is that his client made no false representation that he was covered by the Registration certificate in respect of the purchases of dumpers, bull dozers and tipping wagons. The relevant provision is sec. 10 (b) of the Central Sales Tax Act which is reproduced below : - "10 (b) If any person being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration ; be shall be punishable with simple imprisonment which may extend to six months, or with fine, or with both ; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues. " The learned counsel says that the quarrying of lime stone and the conversion of lime-stone so quarried into cement are integrated processes, and that on this basis his client was justified in purchasing the machineries used for the excavation of lime stone at the quarries site on payment of the preferential rate of tax on grounds of the entry of "machineries" in his registration certificate. He further says that in any case no mala fide intent was involved. These arguments cannot be upheld. The production of the registration certificate with a view to avoiding the higher rate of tax and getting the benefit of the preferential rate of tax at the time of purchase was a deliberate act and the applicant must take all the consequences of that deliberate act. In the view that has been taken here regarding the admissibility of the preferential rate of tax, the false representation was inherent in the transaction. An assessee cannot appropriate a concession by interpreting a fiscal statute to his own benefit, and at the same time escape the consequences by pleading that there was no malafide intent. The act of taking the concession in such a case is a deliberate act and if the concession claimed is legally inadmissible, the act of obtaining the concession ipso facto proceeds from a false representation. In this view of the matter the penalty imposed by the learned Deputy Commissioner cannot be assailed as illegal. In view of the foregoing discussion this application for revision should be dismissed. Per Shri Khem Chand :- I have read with great respect the order which my learned brother Shri R. N. Madhok proposes to make in this case, I have also given it my earnest consideration but I regret to say I have not been able to persuade myself to concur with him in his views. The conclusions which I have reached are totally opposite and under these circumstances I proceed to set out the order which I would propose to make in this case. Since the facts of the case are clearly stated in my learned brother's order I need not repeat them here. The two questions which arise for determination in this case are whether the bulldozers, dumpers and tipping wagons in question were required by the petitioner in the manufacture of cement or not ? The next question is whether the petitioner made any false representation in regard to them and incurred a penalty under section 10 (b) of the Central Sales Tax Act. Taking up the first question I am inclined to think that no proper answer to the question before us can be found unless the concept of "wholly manufacture of cement" which was the petitioner's business disclosed in his certificate of registration is clearly understood. The facts of this case are that the "factory" of the petitioner is situated at Sawai Madhopur. The function of this factory is to grind or process the lime stone which is brought to it. The lime stone in this case is brought from certain quarries where lime stone is excavated by the petitioner himself. The view taken by the lower courts that the quarrying of lime stone which is admittedly raw material for manufacture of cement is a separate business and is not covered by the petitioner's business as disclosed in his certificate of registration. The learned Advocate General also supports this view by urging before us that mining is a separate industry and the petitioner would have been well within the bounds of law had he obtained separate certificate of registration for this purpose. The learned counsel for the petitioner Shri S. K. Kapur met this argument by inviting our attention to the report of Tariff Commission 1961 para 6. 2. where mining for the type of business with which the petitioner is concerned is described as the integral part of that business. I am inclined to agree with this view. The quarrying or mining of stone certainly would have been a separate business, so far as the petitioner is concerned, had he been disposing of the lime stone quarried at those mines in some other form except "manufacture". I would have also agreed with the view of the learned Advocate General had this raw-material been available for the manufacture of cement to the petitioner in the open market. But as it stands the petitioners could not have undertaken his business which is wholly manufacture of cement unless he himself excavated the lime stone at the mines. 1 have not been able to clearly see the line of demarcation in the manufacture of cement between the two activities of obtaining the raw material and processing the raw material. At the quarries the raw material is obtained and at the factory it is processed and according to view I take both the processes are an integral part of the same business which finally becomes the manufacture of cement. 1 am therefore inclined to think that if we concede that the bull dozers, dumpers and tipping wagons etc. are the machineries and were used at the mines for excavating the lime stone which was subsequently processed at the factory the machineries in question were utilised in the manufacture of cement. Similar line of approach was taken in the Indian Copper Corporation Ltd. vs. Commissioner of Commercial Taxes, Bihar by Justice C. J. Ramaswami who decided this case. In this case the petitioner had asked for a number of articles to be included in his registration certificate. The learned judge examined the case of every article and finally accepted the petitioners claim in respect of some articles rejected in case of some others. I, in my humble way, have tried to follow this approach and have come to the conclusion that it is not possible to separate the two processes i. e. the process of excavating the lime stone at the quarry and grinding it at the factory. I therefore hold that the courts below were in error in holding that mining so far as the petitioner is concerned is separate and independent business from the manufacturing of cement. Taking up the second question i. e. of penalty I am absolutely clear that here a manifest error of law has been committed by both the courts below. Before a person can be held guilty of an offence his "mens rea" has to be clearly determined. It must be definitely found that in doing of the act complained of there was no element of inadvertence, accident or an honest error of judgment. Both the courts below have not gone at all into this aspect of the question. From the material which is available on the record I am unable to come to the finding that there was no honest error of judgment on the part of the petitioner. To my mind the petitioner according to the circumstances of this case could have been under an honest impression that his certificate of registration where the word 'machinery' clearly occurs entitled him to purchase these articles on the strength of 'c' form i. e. on concessional rate of tax. In this view of the matter I hold that the penalty imposed is not maintainable and bad in the eye of law. I, therefore, in the result hold that this revision should be accepted, the orders of the courts below set aside and if tax of the full rates and penalty have been recovered from the petitioner they should be refunded to him. Per Shri Ujjwal - This revision against the order dated 1. 11. 61 passed by the learned Deputy Commissioner, Excise and Taxation (Appeals), Ajmer Division, Jaipur has come up before this Single Bench because of difference of opinion between my learned brothers Shri Khem Chand and Shri R. N. Madhok, who constituted a Division Bench in the first instance for hearing this revision. Before setting out the points on which my learned brothers differed, I consider it proper to give the facts of the case in outline as the details need no repetition. M/s. Jaipur Udyog Limited having their place of business at Sawai Madhopur registered as "wholly Manufacture of Cement under sec. 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act) paid sales tax at the concessional rate on the purchase of bull dozers, dumpers and tipping wagons. The learned Sales Tax Officer, Sawai Madhopur held that the firm is not entitled to concession in sales tax on these items and that it is liable to pay penalty under sec. 10a of the Act. The order directed the firm to pay Rs, as difference of sales tax and Rs. 50,000/as penalty.
(3.) THE Deputy Commissioner before whom the firm preferred an appeal reduced the amount of tax and penalty to Rs. 28,018/- and Rs. 28,000/- respectively and the firm came up in revision to the Board. My learned brother Shri R. N. Madhok upheld the decision of the appellate court while my learned brother Shri Khem Chand has absolved the firm from the liability to pay additional tax or penalty. The question on which my learned brothers differ may be briefly stated - (1) Whether dumpers, bull-dozers and tipping wagons purchased by the registered dealer are used by him in the manufacture of cement (which is wholly his business) within the meaning of Clause (b) of sub-Sec. (3) of sec, 3 of the Act? (2) Whether in the circumstances of the case penalty under sec. 10-A can be imposed upon the dealer for non payment of tax at the full rate on the above goods? I have carefully examined the orders pronounced by my learned brothers, perused the record of the case including the orders of the Sales Tax Officer and the learned Deputy Commissioner and heard the parties. It is admitted on all hands that the disputed items of machinery were used for quarrying lime stone at the dealer's quarries situated at Phalodia which is at some distance from Sawai Madhopur and for transferring it to the cement factory at Sawai Madhopur. It is also manifest that lime stone is one of the principal raw materials in the manufacture of cement. The question to be examined is whether in the circumstances of the case processes conducted for obtaining raw materials from the quarries by excavation etc. and its transportation to the factory can be deemed to be included in the process of manufacture of cement. Processes adopted in the manufacture of cement have to be differentiated from the processes required for obtaining, transporting and making available raw material for the purpose of manufacture, if some complicated and absurd results are to be avoided. If in the manufacture' of an article is deemed to include mining of raw material, it is difficult to draw a lime from which manufacture can be said to start and the time at which it ends. Were the term in the manufacture' as comprehensive as that, there would be no need for including the words or processes of goods. . . or any mining in the above mentioned clause (b ). The expression 'in the manufacture' has necessarily to be deemed to be restricted to the processes of converting lime stone into cement. The learned counsel for the applicant urged that the process of quarrying lime stone and its transportation should be deemed to be in the manufacture of cement in view of - (1) the decision of a Division Bench of the Patna High Court (1962) 13 STC 494 in the case Indian Copper Corporation Ltd. versus The Commissioner of Commercial Taxes, Bihar and others, and (2) the observations of the Tariff Commission 1961. At the time of citing the Patna decision before my learned brothers the counsel merely produced an uncertified copy. He has now produced a copy of Sales Tax Cases in which this case has been reported. I have carefully gone through the judgment and agree with my learned brother Shri Madhok that this decision does not lend support to the applicant's contention. It has nowhere been observed by the learned Judges that the manufacturing process can be deemed to cover as vast a field as the applicant would want me to believe. On the contrary the judgment indicates that the operation of mining is separated from starting of the process of manufacture by the operation of transport of raw materials for starting manufacture, vehicles used before the starting of the process of manufacture and after finishing of mining operations have been held as not entitled to be included in the certificate of registration. I am unable to agree, as my learned brother Shri Khem Chand seems to have done that the obtaining of raw materials at the quarry and the process of raw material at the factory are both operations in the manufacture of cement. I distinguish between the conducting of operations to obtain raw material for starting the process of manufacture and the various processes in manufacture proper. ;