ORIENT PAPER MILLS Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE Petitioner, a registered company, claims to have established its plant in 1937 to manufacture paper and pulp. The case of the Petitioner is that as there was erratic supply of power by the State, it wanted to establish new captive power generation plant under which the power would be captively used by the Petitioner's factory which is situated at Brajarajnagar. The further case of the Petitioner is that it is a registered dealer both under Orissa Sales Tax Act and Central Sales Tax Act. The relevant registration certificates of the Petitioner, both under OST and CST, show that the Petitioner is entitled to purchase among other things plants, machinery and accessories on the strength of its registration certificates. The Petitioner's own case is that on such certificate it continued to purchase for its existing power plant, machinery and articles on concessional rate of tax under Section 8(1) of the CST Act and this was done to the knowledge of opposite party No. 2 who was issuing blank 'C Forms.

(2.) THE further case of the Petitioner is that for manufacturing of paper and paper boards, both steam and electricity are essential and without which paper cannot be manufactured. The main raw materials for - manufacturing paper and paper boards being Bamboos and wood, the same are to be processed with the help of steam and chemicals. The plant and machinery, which are utilized for processing such raw materials, can be operated only with electricity. Therefore, steam and electricity are indispensable for manufacturing of paper. In view of the acute power shortage and continuous restriction on supply, the production of Petitioner's Mill was adversely affected and it was impossible for the Petitioner to run the paper mill economically without power being continuously made available to it. As such, the Petitioner applied to the Orissa State Electricity Board for permitting it, to install a new power generation complex. The Board after considering all the aspects permitted the Petitioner to install the new power generation complex. The Petitioner's case is that it has been specifically debarred by the Board from selling any electrical energy generated by new plant. Therefore, the Petitioner does not come in the category/of industry engaged in distribution of electricity or of any other form of power. According to the Petitioner, this was done by it without amending the certificate of registration and by following the accepted practice of purchasing plants and machinery and to the knowledge and acquiescence by the Revenue. It is admitted case of the Petitioner that it purchased machinery and equipments for generation of steam and electricity to the extent of Rs.706.24 lakhs which were inter -state transactions against declarations in Form 'C on payment of Sales Tax at the applicable rate of 4% and for the purpose of erection and installation of power plant, outside contractors were engaged as the Petitioner's staff had no experience at all in such erection and materials purchased against 'c' form were given to those outside contractors. But the materials and machinery issued to the contractors for erection and installation always belonged to the Petitioner and were the properties of the Petitioner and the Petitioner asserts that the use of the materials and machinery by those contractors does not amount to any sale of such machinery or materials.

(3.) PURSUANT to the said show cause notice, the Petitioner gave a detailed reply denying the allegations and praying for dropping the said show cause proceeding.