THE STATE OF BIHAR AND ORS.versusMIS. UNIVERSAL HYDROCARBONS CO. LTD. AND ANR.

                  THE STATE OF BIHAR AND ORS.                                    A
                                      v.
    MIS. UNIVERSAL HYDROCARBONS CO. LTD. AND ANR.

                             AUGUST 12, 1994

          (M.N. VENKATACHALlAH ANDS. MOHAN, JJ.]                                 B

      Central Sales Tax Act, 1956 : Section 14-Goods-Classification as
declared goods-Object of

     Entry ( 1-Ar'Coal including coke in all its fonn but excluding              C
charcoal'-Scope of

       Section 15(a)(b )--Exemption/Reimbursement under-Benefit of-
Where assessee was purchasing Raw Petroleum Coke ·and after subjecting it
to manufactun"ng process was producing Calcined Petroleum Coke, held
entitled to benefit under section 15(b ).                                        D
       The respondent was purchasing Raw Petroleum Coke (RPC) and
after subjecting It to a process of manufacture was producing Calcined
Petroleum Coke(CPC). On the sale of CPC it was subjected to Sales Tax
 under the Bihar Finance Act, 1981 as well as Central Sales Tax Act 1956.        E
Respondent filed an application for refund of sales tax under section 15(b)
of the 1956 Act,read with Rule 35 of the Bihar Sales Tax Rules 1983 on the
ground that both these items (RPC and CPC) fall under Section 14(1-A)
of the Central Sales Tax Act, 1956. The claim was rejected by the Joint
Commissioner holding that (I) though RPC an CPC both are declared
goods under section 14(1-a) yet for the purpose of sales tax they are two        F
separate commercial commodities; (ii) since the benefit under Section
15 (b) of the Act could be availed of only if the same goods are subject to
interstate levy of tax the respondent was not entitled to this benefit because
by the process of manufacture RPC loses Its original Identity and emerges
as a new product viz. CPC.                                                       G
      The High Court held that CPC Is a form of RPC and therefore
respondent was entitled to exemption/reimbursement under section 15-b
of the 1956 Act.

      In appeal to this 1.t was contended on behalf of the appellant-state H
                                    627
    628                   SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R.

A that no doubt the entry under section 14(1a) of the Act says 'Coal'
    including coke in its form but excluding Charcoal' but in view of the
    judgment of this Court in State of Tamil Nadu v. Pyare Lal Malhotra, A.l.R.
    (1976) SC 800 it should be held that since RPC under goes the process of
    manufacture and emerges as a new product i.e. CPC, It should be treated
B   a different product for the purpose of taxation.

           On behalf of the respondent it was contended that there is a wide
    distinctio11 between entry under section 14(1-a) of the Central Sales Tax
    relating to coke in all forms and Section 14(iv)-iron and steel, 'that is to
    say'. Because of this peculiar phraseology 'that is to say', the ruling in
C   Pyare Lal case came to.be so laid down. But in this case, there is no such
    difficulty, havi11g regard to the nature of the entry.

          Dismissing the appeal, this Court

          HELD : 1. When the entry relating to coke occurring under section
D 14(1-a) of the Central Sales Tax Act, 1956 says 'coke in all its forms', there
    Is no possibility of bringing coke of different forms except under this entry.
    Once the entry is 'coke in all its forms' irrespective of the fact Raw
    Petroleum Coke loses its original identity or in the process of manufacture
    Calcined Petroleum Coke is produced, cannot take Calcined Petroleum
    Code out of the purview of this entry. The fact that Calcined Petroleum
E   Coke is a different commodity is of little consequence. Consequently, the
    judgment of the High Court is upheld. (633-F, 634-A, El

           2. Pyare Lal Malhotra's case dealt with the scope of the entry 14(iv)
    of the Act, Iron and steel 'that is to say' and in that the Interpretation of
F   the phrase 'that is to say' loomed large. The position here is entirely
    differenl There is no such phrase under Section 149(1-a) of the Act. This
    vital distinction cannot be lost sight of. (635-E, 636-C, Fl

          Indian Carbon Ltd. v. Superintendent of Taxes, Guwahati & Ors.,
    A.l.R. (1972) SC 154 and State of Tamil Nadu v. Mahi Traders, (1989) 1
G   sec 724, relied on.
          State of Tamil Nadu v. Pyare Lal Malhotra, A.l.R. (1976) SC 800 and
    Sait Rikhaji Furtamal and Anr. v. State of Andhra Pradesh, (1991] Supp. 1
    S.C.C. 202, explained and distinguished.

H         CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6073-74
    STATE v. UNNERSALHYDROCARBONS CO. LTD. [MOHAN, J.] 629

of 1994.                                                                       A
      From the Judgment and Order dated 10.4.92 of the Patna High Court
in C.W J.C. No. 415/92 & 7549 of 1990.

      H.L. Aggarwal and B.B. Singh for the Appellants.
                                                                               B
      P.P. Rao, Vivek Gambhir and Suman Khaitan for Mis. Khaitan &
Co. for the Respondents.

      The Judgment of the Court was delivered by

      MOHAN, J. Leave granted.                                                 c
      Respondent No. 1 is a private company. The respondent No. 2 of
the director-cum-shareholders.

     The respondent purchases raw petroleum product. This product
under goes a process of manufacture in the factory. The ultimate com-          D
modity is Calcined Petroleum Coke (hereinafter referred to 'C.P.C.').

      The respondent was subject to Sales Tax under Bihar Finance Act,
1981, Act (hereinafter referred to as Finance Act) on the sale of C.P.C. as
well as the Central Sales Tax Act, 1956 (hereinafter referred to as 'the       E
Act). The respondent stated that he missed to claim the adjustment of sales
tax paid on the purchase of raw materials in the returns filed or the months
of July and August, 1990. The admitted tax due thereon was paid. In terms
of Section 15(b) of the act, the respondent was entitled to refund of sale
tax paid under Finance Act. While filing the return for the month of
September, 1990, the respondent did not pay the admitted tax of Rs.            F
1,96,072 but claimed refund of Rs. 5,22,728 which would be adjusted
towards the admitted tax of 1, 96,072 and the balance of Rs. 3,26,656. was
to be refunded on account of Bihar Sales Tax paid on the direct raw
materials purchased for the months of July, August and September, 1990.
                                                                               G
      The application for refund was considered by the Assistant Commis-
sioner and the same was dismissed since the claim for refund was against
law. By order dated 8.11.1990, a penalty of Rs. 9,852.85 was imposed.
Against this order, respondent preferred C.W.J.C. No. 7549/90.

      Thereafter the respondent filed an application of refund for Rs.         H


                                                                                   :
    630                   SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.

A 19,22,340.12 for the period 1985-86 and Rs. 17,65,987.01 for the period
    1986-87 under Section 15(b) of the Act read with Rule 35 of Bihar Sales
    Tax Rules 1983. By notice dated 2.2.1991, the dealers was called upon to
    substantiate his claim. While that application was. pending, he preferred
    C.W.J.C. No. 5813/91 before the High Court of Patna. While disposing of
    the writ petition, the High Court ordered 5.9.1991 to consider the claim of
B
    refund and pass orders. On a consideration of the matter, the Joint
    Commissioner by order dated 16.12.1991 rejected the claim. Thereupon,
    the respondent preferred C.W.J.C. 415 of 1992.

          Both C.W.J.C. Nos.7549/90 and 415/92 came to be disposed of under
C   a common order dated 10.4.92 which impugned in this civil appeal. Ac-
    cordingly, the writ petitions were allowed.

          The High Court set aside the findings of the Joint Commissioner in
    so far as he held that R.P.C. and C.P.C. though different commercial
    commodities, are declared goods under Section 14(1-a) of the Act. The
D   petition wa~ liable to be reject on the ground that raw petroleum coke has
    undergone a process of manufacture. On this line of reasoning, the High .
    Court took the view that C.P.C. is a form of R.P.C. and, therefore,
    petitioners before it, would be entitled to exemption/reimbursement under
    Section 15(b) of the Act.
E         In this civil appeal before us, the only contention urged by the State
    of Bihar is that no doubt the entry under Section 14 (1-a) of the Act says
    'Coal', including coke in all its forms, but excluding 'charcoal'. Having
    regard to the ruling of this Court in State of Tamil Nadu v. Pyare Lal
    Malhotra, AIR (1976) SC 800 it should be held if R.P.C. has undergone a
F   process of manufacture which ultimately results in C.P.C., it is a different
    product for the purpose of taxation. In the field of taxation, the State has
    a wide choice in choosing the object of taxation. In this case, one added
    feature is that for the purpose of excise duty, R.P.C. is treated different.
    than C.P.C. both the products being subject to separate excise duty.
G   Therefore, it is prayed that the judgment of the High Court be set-aside
    and the order of the Joint Commissioner be restored.

           In opposition to this, the learned counsel for the respondents urges
    that there is a wide distinction between entry under Section 14(1-a) of the
    Central .Sales tax relating to cock in all forms an Section 14(iv) iron and
H   steel, 'that is to say'. Because of this peculiar phraseology 'that is to say',
    STATEv. UNIVERSAL HYDROCARBONS CO. LID. [MOHAN, J.] 631

the ruling of Pyare Lal case (supra) came to be so laid down. But here, A
there is no such difficulty, having regard to the nature of the entry. the
same principle same to be ado.pted with regard to "oil and seeds" in Sait
Rikhaji Furtamal and another v. State of Andhra Pradesh, [1991] Supp. 1
SCC 202. As a matter of fact, India Carbon Ltd. v. Superintendent of Taxes,
Gauhati and others, AIR (1972) SC 154 fully supports the stand of the .B
respondents. The High Court was justified in relaying on this ruling. This
decision also refers to Pyare Lal's ruling (supra).

       Further, in State of Tamil Nadu v. Mahi Traders, [1989] 1 SCC 724
in relation to Hides & Skins, at page 734 the the test of different commer-
cial commodities has been categorically rejected.                              C

      In other to appreciate this controversy, we will now refer to the
relevant provisions of the Act.

      Section 14 of the Act catalogues certain goods of special importance
in inter-state trade or commerce. They are commonly called 'declared           D
goods'. Item (i-a) read as follows :

           ."Coal, including coke in all its form, but excluding charcoal:

            Provided that during the period commencing on the 23rd day
        of February 1967 and ending with the date of Commencement of           E
        Section 11 of the Central Sales Tax (Amendment) Act, 1972 (61
        of 1972), this clauses shall have effect subject to the modification
        that the words "but excluding charcoal" shall be omitted."

      The object of classifying the goods as 'declared goods' can be
gathered from Section 15 of the Act. This Section imposes restrictions and     F
conditions with regard to tax on sale an purchase of 'declared goods' within
a State. Clauses (a) & (b) of the said Section read as follows:

            'The tax payable under That law in respect· of any sale of
        purchase of such goods inside the State shall not exceed (four per G
        cent) or the sale or purchase price thereof, and such tax shall not
        be levied at more than on stage;

            Where a tax has been levied under that law in respect of the
        sale of purposes inside the State of any declared goods and such
        goods are sold in the course of inter- state trade of commerce, and    H
    632                  SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A           tax has been paid under this Act in respect of the sale of much
            goods in the course of inter-State trade or commerce, the tax levied
            under such law shall be reimbursed to the person making such sale
            in the course of inter- State trade or commerce in such manner
            and subject to such conditions as may be provided in any law in
            force in that State."
B
          In the instant case, the respondent purchases R.P.C. and after sub-
    jecting that to a process of manufacture C.P.C. is produced. When exemp-
    tion was sought to be claimed on the ground that both these items will fall
    under Section 14(1-a) of the Act, that was rejected by the Joint Cominis-
C   sioner. He took the following view:

                "It is not disputed that the Raw Petroleum Coke and the
            Calcined Petroleum Coke, though different commercial com-
            modities are both declared goods. In order to entitle inter- State
            Sale of such goods to avail the benefit of Section 15(b) of the
D
            Central Sales Tax Act, the same goods as subjected to inter State
            levy of tax must be sold in course of inter-State trade or commerce.
            The expression 'such goods used in section 15(b) quoted above
            and underlined by me is very significant in the matter.

E                Once the particular goods which had earlier been subjected to
            inter:State tax in the State was again put to a process of manufac-
            ture, it loses it original identity and emerges as another from of
            finished product though still remaining a declared goods. The cite
            an example, case of steel scrap of billets rolled into different kinds
F           of steel materials may be taken. When these are purchased as raw
            materials within a State after being subjected to State Tax at 4 per
            cent being declared goods and are then rolled into rods, channels,
            wire etc., they become different commercial commodity though
            still remaining declared goods as defined under Section 14 of the
            Central Sales tax Act. In the instant case, the Raw Petroleum Coke,
G           a declared good is put tot he process of production by the dealer
            in his factory called Universal Hydrocarbons Co. Pvt. Ltd. and
            another commercial commodity, namely, calcined petroleum coke,
            again a declared goods in terms of Section 14 (la) is produced.
            Therefore, the original identity of Raw Petroleum Coke is lost and
H           than Calcined Petroleum Coke is the outcome of the process of
         STATEv. UNNERSALHYDROCARBONSCO.LTD.[MOHAN.J.j 633

             manufacture.''                                                            A

,         Jn supporting the reasoning, reliance is placed on Pyare Lal's case
    (supra). The ultimate finding given by him is as under :

                 'That though Raw Petroleum Coke and Calcined Petroleum
             Coke both commodities are declared goods under Section 14(1-a)            B
             of the Central Sales Tax Act in the light of judgment of the Hon'ble
             Supreme Court in the case of India Carbon Co. dated 18.8.1997
             for the purposes of sales tax they are two separate commercial
             commodities.

                That the raw Petroleum Coke has not been sold in course of
                                                                                       c
             Inter·State trade or commerce in the San1e Fonns in terms of
             Section 15(b) of the Central Sales Tax Act rather it has undergone
             a process of manufacture in a factory and the commodity turned
             out thereby is Calcined Petroleum Coke which is a different
             Commercial commodity proved by levy of separate central excise            D
             duty at both the points of production of raw petroleum Coke and
             Calcined Petroleum Coke."

           Jn rendering this finding reliance is placed on the purchase bills, sales
    bills and registration certificate.                                                E
          The High Court in the Impugned judgment considered the scope of
    the phrase 'that is to say'. Thereafter it proceeded to hold that C.P.C. is a
    form of R.P.C. and, therefore, the exemption under Section 15(b) of the
    Act would be available.
                                                                                       F
          We have already referred to entry relating to coke occurring under
    Section 14(1-a) of the Act. When the entry says~' coke' in all its forms', there
    is no possibility of bringing coke of different forms except under this entry.
    The Joint Commissioner has clearly held that both Raw Petroleum Coke
    and Calcined Petroleum Coke, though different commercial commodities               G
    are 'declared goods'. However, he held that by process of manufacture,
    Raw Petroleum Coke has lost its original identity and has resulted in a new
    product, namely, Calcined Petroleum Coke. Therefore, according to him,
    the benefit under Section 15(b) of the Act could be availed of only If the
    same goods are subject to inter-State levy of tax. He opined the use of
    words 'such goods' under Section 15(b) of the Act are of significance.             H
    634                   SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.

A         We ar~ totally unable accept this line of reasoning. Once the entry
    is "coke in all its forms" irrespective of the Raw Petroleum Coke loses its
    original identity or in the process of manufacture Calcined Petroleum Coke
    is produced, cannot take Calcined Petroleu.m Coke out of the purview of
    this entry. In more of less identicai situation, this Court held in India
    Carbons; case (supra) that Petroleum Coke is one form the coal governed
B
    by the expression 'coal' within Sections 14(1-a). The relevant extract of the
    judgment is as under :

                "It is not disputed that petroleum coke is covered by Clauses(i)
            of Section 14 which reads "coal including coke in all its forms" the
c           State was not competent to levy tax at a rate exceeding the one
            given in Section 15 (a) of the Central Act.

                 The High Court was of the view that the word 'coal' includes
             coke in all its forms in clause (i) of Section 14 of the Central Act
             and must be taken to mean coke derived from coal. In other words
D            it must be coke which had been derived or acquired from coal by
             following the usual process of heating or burning. The contention,
             therefore, of the appellant was negatived that petroleum coke was
             cove~ed by the aforesaid provision of the Central Act."


          This decision fully supports the respondent. The fact that Calcined
E
    Petroleum Coke is a different commodity is of little consequence. Jn
    interpreting the scope of Hides and Skins which fail under Section
    14(1)(iii) of the Act, this Court in Mahi Traders :case (supra) held at pages
    734-35 as under :

F                "According to him the products purchased and sold are not
             differnnt even under the classification by way of the dichotomy
             between raw and dressed hides and skins under the Tamil Nadu
             General Sales Tax Act. Under the Central Sales Tax Act, the
             appellant is in a much better position, because all the hides and
             skins are brought together in one entry. Whether raw or dressed, the
G            product falls under the same entry.

                 The operations involved in leather manufacture however fall
             into three groups. Pre-tanning operations includes soaking, liming,
             de-liming, bating and pickling, and post -tanning operations are
H            splitting and shaving, neutralising, bleaching, dyeing, fat-liquoring
        STATE v. UNIVERSAL HYDROCARBONS CO. LTD. (MOHAN, J.]               635

         and stuffing, setting out, samming, drying, staking and finishing. A
         These operations bring about chemical changes in the leather
         substance and influence the physical characteristics of the leather,
         and different varieties of commercial leather are obtained by
         suitably adjusting the manufacturing operations. These processes
         need not be gone into in detail but the passages relied upon clearly B
         show that hides and skins are termed 'leather' even as soon as the
         process of tanning is over and the danger of their putrefaction is
         put an end to. The entry in the CST Act, however, includes within
         its scope hides and skins until they are 'dressed'. This, as we have
         seen, represents the stage when they undergo the process of
         finishing and assume a form in which they can be readily utilised C
         for manufacture of various commercial articles. In this view, it is
        hardly material that coloured leather may be form of leather or may
        even be said to represent a different commercial commodity. The
         statutory entry is comprehensive enough to include the products
         emerging from hides and skins until the process of dressing or           D
         finishing is done." (emphasis supplied)

      This is enough to conclude the case against the ajiiJ'ollant. However,
since reliance is placed on Pyare Lal Malhotra's case (supra), we have to
make a brief reference to the same. That case dealt with the scope of the
entry 14(iv) of the Act, Iron and steel 'that is to say'. The interpretation of   E
this phrase 'that is to say' loomed large. It was held in p)u'agraph 13 & 14
as under:

            "It is true that the question whether goods to be taxed have
        subjected to a manufacturing process so as to produce a new               F
        marketable commodity, is the decisive test in determining whether
        an excise duty is leviable or not on certain goods. No doubt, in the
        law dealing with the sales tax the taxabie event is the sale an not
        the manufacture of goods. Nevertheless, if the question is whether
        a new commercial commodity has come into existence or not, so             G
        that its sale is a new taxable event, in the Sales Tax law, it may
        also become necessary to consider whether a manufacturing
        process, which has altered the identity of the commercial com-
        modity, has taken place. The law of sales tax is also concerned with
        "goods' of various descriptions. It, therefore, becomes necessary
        to determine when the cease to be goods of one taxable description        H
    636                   SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.

A            and become those of a commercially different category and
             description.

                 It appears to us that the position has been simplified by the
             amendment of the law, as indicated above, so that each of the
             categories falling under "Iron and Steel" constitutes new species
B            of commercial commodity more clearly now. It follows that when
             one commercial commodity is transformed into another, it be-
             comes a separate commodity for purposes of sales tax."

        The position hereis entirely different. There is no such phrase under
C Section 14(ia) of the Act. In the case of 'Oil' an seeds' occurring under
  namely, 'that is to say' occurs. This Court in State of A.P. (supra) held in
  paragraph 4 as under :

                '"Mr. Rangam appearing in support of the appeals contended
             that there was a circular of Government of India with reference
D
             to the provisions of the Central Sales Tax Act as to what would
             be included within the meaning of oil seeds and all the five items
             referred to here were included in the circular as being oil seeds.
             It is difficult for us to accept his submission that after the Act has
             been amended reliance is available to be placed on the circular.
E            On the basis of the test indicated by this Court in State of Tamil
             Nadu v. Pyare /al Malhotra, we must hold that the expression 'that
             is to say' employed in the definition in the statnte with reference
             to oil seed is exhaustive and is not illustrative. Since on amendment
             these five items were no more included in oil seeds, the appellant
F            is not entitled to claim the benefit."
                ,,.
          This vital distinction cannot be lost sight of. Therefore, the argument
    of the appellant has to be rejected. In the result, upholding the judgment
    of the High Court, we find no merit in this appeal which is accordingly
    dismissed. However, there shall be no order as to costs.
G
    T.N.A.                                                    Appeals dismissed.