HIND LEVERS CHEMICALS LTD Vs. STATE OF PUNJAB

JUDGEMENT

(1.) The petitioner was incorporated as Stephen Chemical Ltd. Subsequently, with the permission of the Government, its name has been changed as M/s. Hind Levers Chemicals Ltd. It is subsidiary of M/s. Hindustan Lever Ltd. It is engaged in the manufacture of soaps and detergents. In furtherance of its manufacturing activities, the petitioner entered into two separate agreements - one for processing and the other for leasing of plant building and machinery with Hindustan Lever Ltd. (for short, HLL) on 11.11.1983 for a period of five years. The period of agreements was subsequently extended upto 1993. In terms of the agreements, HLL supplied raw material to the petitioner. After converting the raw material into finished products, the petitioner used to return the same to HLL.

(2.) The assessing officer did not feel satisfied with the returns filed by M/s. Stephen Chemical Ltd. for the year 188-89. He, therefore, issued notice to the petitioner in form ST-14 requiring it to produce books of account and other relevant documents. After considering the reply filed by M/s. Stephen Chemical Ltd. and hearing its representative, the Assessing Authority-cum-Excise and Taxation Officer, Rajpura passed the order dated 28.11.1991 and held the petitioner liable to pay tax amounting to Rs. 31,57,000/-. The Assessing Authority also ordered issuance of notice for imposing penalty under Section 10(6)/10(7) and interest under Section 11-B of the Punjab General Sales Tax Act, 1948 . The petitioner filed appeal against the order of the Assessing Authority. After noticing the arguments of the petitioner, the Deputy Excise and Taxation Commissioner (Appeals) dismissed the appeal on 23.2.1993. Further appeal filed by the petitioner has been dismissed by the Tribunal on 29.5.1996.

(3.) Two-fold contentions have been advanced by Shri M.L. Sarin, learned counsel for the petitioner. His first contention is that no tax can be levied on the processing income earned by the petitioner from the works contract because what is sought to be taxed under the Act of 1948 is transfer of property in the goods used in a works contract and not the income derived from the works contract. Learned counsel argued that the Assessing Authority as well as the Appellate Authority and the Tribunal have erred in holding that the income derived from the processing is liable to tax. Shri Sarin pointed out hat the Assessing Authority and others have failed to take into consideration the fact that under the processing agreement raw material was to be supplied by HLL and the petitioner was required to process the same into finished products and further that the property in goods remained with HLL and in fact no transfer of property in goods was involved. The second contention of Shri Sarin is that the Assessing Authority as well as the Appellate Authority and the Tribunal committed serious illegality in rejecting ST-XXII forms submitted by the petitioner. He argued that if the Assessing Authority felt that if ST-XXII declaration form was not acceptable, then it should have given opportunity to the petitioner to produce proper declaration for separate quarters. The learned Deputy Advocate General argued that the processing agreement entered into between the petitioner and HLL falls within the amended definition of 'work contract' and, therefore, Assessing Authority has rightly taken action by issuing notice under ST-XIV. She argued that the petitioner had deliberately refrained from disclosing the income earned by it by the dispatch of processed goods. Mrs. Tuli argued that the Assessing Authority has rightly held that ST-XXII declarations worth Rs. 139.05 lacs procured by the petitioner from HLL were not acceptable.