The Commissioner of Sales Tax, Maharastra State vs Ghatge Patil Industries Ltd.

Swatanter Kumar, C.J.—By this common judgment, we will dispose of the above three Sales Tax Applications preferred by the Revenue u/s 61 of the Bombay Sales Tax Act, 1959 (hereinafter referred to as "the Bombay Act").

The facts falling in narrow compass are that and which are common to all these Applications, though they relate to different assessment years, are that the Respondent in these Applications, M/s. Ghatge Patil Industries Ltd. (hereinafter referred to as "the Company") is carrying on business of manufacture and sale of cast iron castings, engineering goods, automobiles parts at Uchagaon, Taluka Karveer, District Kolhapur. The Company is also registered under the State as well as the Central Sales Tax Act, 1956 (hereinafter referred to as "the Central Act"). The Company received an order from M/s Bharat Earth Movers Limited of Kolar Gold Field, a Government of India undertaking, which in turn is selling the bulldozers and earth movers. M/s Bharat Earth Movers Limited had placed an order with the Company for supply of clutch assembly and various other assemblies. They had agreed to supply certain imported parts, such as discs and bearings imported by them and requested the assessee to insert the same in the assembly during the process of manufacture. These parts were referred as "assistance material" which were supplied free of cost. The Commissioner of Central Excise, Pune-II, came to the opinion that insertion in the assembly by the assessee company before delivery of the assembly should form part of assessment value. Thus he concluded that there was evasion of excise duty and accordingly issued a show cause notice on 2nd December 1997 for the purpose of levy of excise duty. The assessee denied its liability which ultimately resulted in the passing of the order of assessment for the period 1994-95 determining a sum of Rs. 3,57,919/- as refundable on merits but simultaneously raising demand under the Central Act demanding Rs. 84,94,093/- by way of tax including interest u/s 36(3)(b) of the Bombay Act read with Section 9(2) of the Central Act. Aggrieved from this order, Appeals were preferred before the Deputy Commissioner of Sales Tax, Pune, which Appellate Authority remanded the matter. In the meanwhile, order for the year 1995-96 demanding a sum of Rs. 86,52,176/- on the same basis was passed. Aggrieved from the order dated 30thy January 1999, an Appeal was filed by the assessee which also ultimately was remanded by the Appellate Authority.

In the meantime, the Assessing Officer issued a show cause notice dated 12th October 2000 for the period 1994-95 calling upon the assessee to show cause why the value of assistance material received from the Company should not be included in the final sale amount along with the amount of additional excise duty payable on the said amount and taxed at 10 per cent as declaration in Form "C" does not include the cost of said material. The said notice also contained a proposal to charge penalty u/s 36(2)(c) and interest u/s 36(3)(d) of the Bombay Act. This notice was replied to and the Senior Assistant Commissioner of Sales Tax passed an order of reassessment on 13th December 2000 by rejecting all the submissions and the Appeals were dismissed. Against the said order, Second Appeals were also filed by the assessee. These Appeals relating to accessibility to tax of the assistance material supplied free of cost by M/s Bharat Earth Movers Limited to the assessee company was decided in favour of the assessee in Second Appeal Nos. 320 to 327 of 2002 and it was held as under:

Second Appeal Nos. 320 to 327 of 2002 in the case of Ghatge Patil Industries Limited are allowed. The orders passed by the first appellate authority are hereby set aside. It is held that the return of assistance material supplied free of cost by BEML to the appellant M/s Ghatge Patil Industries Limited does not amount to sale. The matters are remanded to the assessing authority to recompute the liability as to the levy of tax as well as consequential interest and penalty. The assessing authority is directed to refund the amount, if any, to the appellant as per the provisions of law.

Aggrieved by the above order, the Revenue Department, Commissioner of Sales Tax filed Applications u/s 61(1) of the Bombay Act requiring the Tribunal to submit the Statement of Case and refer the question of law to the High Court in terms of the said provisions. This request, in all the Appeals, was rejected by the Maharashtra Sales Tax Tribunal, Mumbai vide its order dated 28th September 2007 which has been impugned in the present Appeals. Aggrieved by the said order, the Commissioner of Sales Tax, Mumbai has filed the present Sales Tax Application Nos. 31, 32 and 34 of 2008 u/s 61(2) of the Bombay Act for a direction to the Tribunal for submission of statement of case and reference of question of law.

The short question that was contended was that case of the assessee is not covered by the judgment in The State of Madras Vs. Gannon Dunkerley and Co., (Madras) Ltd., and the findings recorded by the Tribunal are erroneous and the Tribunal should have referred the question of law framed in paragraph 7 of the Application before this Court. The assistance material which was supplied by M/s Bharat Earth Movers Limited to the assessee company according to the assessee was not liable to tax as they were supplied free of cost and the finished goods qua the company were not open to liability. The contention as already noticed by the Deputy Commissioner of Sales Tax was that the raw material used in manufacture of the finished goods was liable to be considered for the entire value of the finished goods and tax ought to have been determined on that basis. Reliance have been placed on various judgments.

Having heard the learned Counsel appearing for the parties and keeping in view the various judgments relied upon by the respective Counsel, we are of the considered view that the Application filed u/s 61(2) of the Bombay Sales Tax Act, 1959 by the Commissioner of Sales Tax, Maharashtra, deserves to be allowed. Consequently, we direct the Maharashtra Sales Tax Tribunal to submit the statement of case and refer the question of law in the above Sales Tax Applications to this Court expeditiously.

Sales Tax Applications disposed of accordingly. No order as to costs.