OSWAL AGRO FURNACE LIMITED Vs. STATE OF PUNJAB

JUDGEMENT

(1.) THIS petition has been fixed to quash the notice Annexure P-4, dated 6. 1. 1989 issued by respondent No. 3 and to restrain the respondents from levying and collecting purchase tax on the paddy procured by the petitioner. In order to determine whether the petitioner is entitled to the relief claimed for, we deem it necessary to set out the facts on which the petitioner's claim is founded. The petitioner has set up a unit for manufacture of furfural and edible Rice Bran Oil at Dhuri, District Sangrur, named as Oswal Agro Furana Limited in which Punjab State Industrial Development Corporation Limited has 26% share. M/s Oswal Agro Mills Limited and its associates have 25% share and the remaining shares are owned by the Public. Industrial licence was granted to the petitioner by the Government of India on 19. 5. 1986 under the provision of Industries (Development and Regulation) Act, 1951. The factory of the petitioner was inaugurated in November, 1988. Raw material used for manufacture of furfural is the rice husk which is obtained from paddy which the petitioner procures from the state agencies like Food Corporation of India and open market. It is said that the Paddy supplied by the Food Corporation of India is processed by the petitioner. Paddy procured from the market is also processed in the Rice Mill and the rice is released to the open market. The petitioner says that on 6. 1. 1989, respondent No. 3 issued a notice under Section 10 calling upon it to pay purchase Tax amounting to Rs. 14,42,600/- on Rs. 2,12,149. 95 quintals of paddy purchased during the year 1987-88. The petitioner was also called upon to show cause why penal action may not be taken against it under Section 10 (6) of the Punjab General Sales Tax Act, 1948 besides levy of interest under Section 11-D of 1948 Act, The petitioner has challenged this notice, Annexure P-l, as being without jurisdiction by pleading that the provisions contained in 1948 Act regarding levy and collection of purchase tax is not applicable to it. The petitioner says that under Section 4-B, purchase tax is leviable only if dealer purchases goods for use within the State in the manufacture of some other goods and as it is 100% export oriented unit, the goods supplied to it should be treated as a part of the export and, therefore, it cannot be made to pay the purchase tax. The respondents have contested the writ petition by raising a preliminary objection to the maintainability of the writ petition on the ground that the petitioner has failed to avail the alternative remedy of appeal available to it under Section 20 of 1948 Act. On merits, the respondents have stated that tax on paddy is levied under Section 4 read with Section 2 (ff) and Schedule-C of 1948 Act and not under Section 4-B and the petitioner has no right to claim exemption from payment of purchase tax on the amount of paddy purchased by it.

(2.) SHRI Sibal argued that being a 100% export oriented unit, which has been granted under the Industries (Development and Regulation) Act, 1951, the petitioner is not liable to pay purchase tax, particularly, when the Government of India has laid down an explicit policy granting exemption from payment of tax by the industry like the petitioner. Shri Sibal argued that paddy was purchased by the petitioner for exporting furfural and as the entire quantity of furfural is being exported the petitioner cannot be held responsible to pay tax. Shri Sibal invited our attention to para 9 of the application filed by the Punjab State Industrial licence to manufacture 600 MT of furfural and also to para 13 (a) of application form as well as the letter, Annexure P-3, dated 19th May, 1986 and argued that in view of unequivocal policy laid down by the Government of India Vide Annexure P-l, the petitioner cannot be saddled with the liability to pay purchase tax. Learned counsel argued that by virtue of the policy decision taken by the Government of India granting exemption to the 100% export oriented unit from payment of sales tax, the levy of purchase tax is liable to be nullified being wholly without jurisdiction. Shri M. L. Sarin, Advocate General, Punjab argued that export-import policy formulated by the Government of India may grant exemption to the petitioner from payment of tax which can be levied by the Government of India and not by the Government of Punjab. He submitted that there is no reference to the clement of sales tax in the policy formulated by the Government of India which by itself is indicative of the Government's intention that Government of India did not intend to interfere with the levy of sales tax. The learned Advocate General further argued that purchase lax is being levied on the paddy purchased by the petitioner and such tax is leviable under the provisions of 1948 Act.

(3.) IN this case also the tax being levied by the respondents is on the paddy purchased by the petitioner and not the goods manufactured by it and, therefore, the mere fact that the petitioner is manufacturing furfural for the purpose of export cannot make it immune from the liability to pay purchase tax leviable upon it under Section 4 of 1948 Act.