Allowed

Tvl.Dalmia Cement (Bharath) v. the State of Tamilnadu

Madras HC21 Feb 2024TC(MD)/129/2012

Case brief

AI extract

What is this about?

Tax revision concerning concessional sales tax on fire bricks and castables used to line a cement kiln. The High Court held these are goods used in the manufacturing process, not plant accessories, and granted the concession under Section 3(3) TNGST Act.

What did the court decide?

Concessional rate of tax under Section 3(3) TNGST Act allowed for fire bricks and castables; Tribunal order set aside; no costs; connected MP closed.

Tvl.Dalmia Cement (Bharath) Vs the State of Tamilnadu — GST and Indirect Tax | Madras HC (2024)

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T.C.(MD)No.129 of 2012

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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

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DATED: 21.02.2024

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CORAM:

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THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN AND

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THE HONOURABLE MR.JUSTICE K.K. RAMAKRISHNAN

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T.C.(MD)No.129 of 2012 and M.P.(MD)No.1 of 2012

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Tvl.Dalmia Cement (Bharath) Limited, Dalmiapuram,

Trichy – 621 651.

...Petitioner

/Vs./

The State of Tamilnadu, Rep. By the Deputy Commercial Tax Officer, Lalgudy.

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...Respondent

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PRAYER:- Revision Petition - filed under Section 38 of the TNGST Act, 1959, to revise the order of the Sales Tax Appellate Tribunal (Addl. Bench) Madurai, dated 17.10.2002 passed in Madurai Tribunal Appeal No.10 of 1991.

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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For Petitioner : Mr.P.Radhakrishnan For Respondent : Mr.A.K.Manikkam Special Government Pleader

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JUDGMENT

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(Order of the Court was delivered by V.BHAVANI SUBBAROYAN, J.)

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An interesting question of law has been raised in this tax case (revision) to decide whether fire bricks and castables used for lining the kiln for manufacturing cement will fall within the expression 'any goods used in manufacture and assembling, packing or labelling in connection with manufacturing as employed in Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as “Act” for brevity) for seeking concessional rate of sales tax.

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2. The petitioner herein is a manufacturer of cement. For the purpose of manufacturing cement, fire bricks and castables have been purchased from M/s.Shree Nataraj Ceramics and Chemical Industries Limited, producing Form XVII so as to avail concession under Section

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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3(3) of the Act. According to the petitioner / trader, fire bricks and castables are used in kiln as goods in the process of manufacturing cement and therefore the dealer is entitled for concessional rate of tax. This contention was not accepted by the assessing authority and therefore, the assessing authority, for the assessment year 1986-87, imposed tax at the rate of 5% & 12% for the respective materials.

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3. This demand of assessing officer / Deputy Commercial Tax Officer (DCTO) was challenged before the appellate authority, who confirmed the order of the assessing authority by reducing the penalty from 150% to 100% stating that the dealer has not proved that they have used the fire bricks and castables in the manufacture of cement. This issue was further agitated before the Sales Tax Appellate Tribunal by the State. The tribunal vide order dated 17.10.2002 confirmed the findings of the appellate authority and also the order of the assessing officer. Thus, the question whether the fire bricks and castables are necessary components for manufacturing cement or not is subject to test.

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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4. The learned counsel appearing for the petitioner / trader / assessee submitted that the authorities has not properly considered the contents contained in Section 3(3) of the Act. The fire bricks and castables purchased at concessional rate is in tune with Section 3(3) of the Act and therefore, there cannot be any penalty. Hence, he seeks for setting aside the order of the sales tax appellate tribunal.

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5. The learned Additional Government Pleader appearing for

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the State submitted that the fire bricks and castables used for lining the kiln are neither raw material nor products used for manufacturing the cement. It is yet another accessory to the plant, which is considered under Section 3(2) of the Act. Hence, the order of the sales tax appellate tribunal has to be upheld.

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6. Section 3(2) of the Act reads as below:-

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“ Notwithstanding anything contained in sub-section (1) in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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by a dealer at the rate and at the point specified therein on the turnover in each year relating to such goods whatever be the quantum of his turnover in that year.”

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7. Section 3(3) of the Act reads as below-

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“ Notwithstanding anything contained in subsection(2),(2-A) or (2-C), but subject to the provisions of sub-section (1), the tax payable by a dealer in respect of sale of any goods including consumables, packing materials and labels, but excluding plant and machinery, to another dealer for use by the latter in the manufacture, and assembling, packing or labeling in connection with such manufacture inside the Sate, for sale by him of any goods other than ethyl alcohol, absolute alcohol, methyl alcohol, rectified spirit, neutral spirit and denatured spirit, goods falling under Part A of the Third Schedule, goods falling under item 1 of the Sixth Schedule and arrack, shall be at the rate of only three percent on the turnover relating to such sale.”

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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8. Concessional rate of tax under Section 3(3) of the Act is subject to Section 3(2) of the Act. If the fire bricks and castables are taken as accessories to the plant or a component to the plant, the trader cannot take advantage of seeking concession. If it is considered as packing material in the manufacturing and assembling, then, the trader / assessee will be entitled for the concessional rate of tax.

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9. On examining the purpose of fire bricks and castables, it has

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been clearly understood by the authorities below that it is a material used for lining kiln to preserve heat and temperature. It is neither a spare part nor accessory to the kiln. It is goods or material used for lining the kiln in the process of manufacturing cement. Further, castable is nothing but refractory material that has a bonding agent added and can be mixed with water and poured in a mold to set and the castable also comes within the purview of material. Therefore, in the opinion of this Court, the trader / assessee must be given advantage of tax concession under Section 3(3) of the Act for purchase of fire bricks and castables

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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under concessional rate of tax. Therefore, the order of the sales tax appellate tribunal dated 17.10.2002, which was arisen out of the orders passed by the assessing authority and also the appellate authority dated 08.08.1988 & 01.11.1990 is set aside. Accordingly, this tax case (revision) is allowed. No costs. Consequently, connected miscellaneous petition is closed.

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(V.B.S.J.) & (K.K.R.K.J.) 21.02.2024

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NCC :Yes/No Index :Yes/No Internet :Yes sm

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https://www.mhc.tn.gov.in/judis

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T.C.(MD)No.129 of 2012

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V.BHAVANI SUBBAROYAN, J. and K.K. RAMAKRISHNAN, J.

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TO:-

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The Deputy Commercial Tax Officer, Lalgudy.

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Judgment made in T.C.(MD)No.129 of 2012

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Dated: 21.02.2024

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https://www.mhc.tn.gov.in/judis

Tvl.Dalmia Cement (Bharath) v. the State of Tamilnadu

Case brief

What is this about?

What did the court decide?

Tvl.Dalmia Cement (Bharath) v. the State of Tamilnadu

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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