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2006 DIGILAW 422 (MP)

Modi Gas Service v. State of Madhya Pradesh

2006-03-22

S.K.SETH

body2006
Judgment ( 1. ) THIS petition under Article 226/227 of the Constitution of India is directed against the notice dated July 7, 2000, issued by the Commercial Tax Officer, Indore, demanding advance payment of entry tax from October 1, 1997 on the sale of -LPG gas cylinders by the petitioner. ( 2. ) THE petitioner, a registered dealer is having distributorship of LPG cylinders marketed by the Bharat Petroleum Corporation Limited (BPCL ). It is not in dispute that LPG in bulk containers is brought within the local area of Pithampur, by the BPCL from outside the State. In Pithampur, LPG is refilled in small cylinders of 14. 2 kilograms. Petitioner purchases LPG gas cylinders for sale to customers. It is the case of petitioner that by virtue of the statutory amendments with effect from October 1,1997 in the charging section of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to as "the Entry Tax Act", for short), entry of LPG in the course of business of a dealer for sale, use or consumption in a local area became taxable under Section 3 (1) (a) of the Entry Tax Act. According to the petitioner, LPG in bulk containers is entered into the State of Madhya Pradesh by the BPCL and after refilling, it is sold to the petitioner in small containers, popularly known as gas cylinders. According to the petitioner no entry tax is payable by the petitioner on the subsequent sale of LPG gas cylinders and demand raised by the impugned notice for the payment of entry tax from October 1, 1997 is illegal. The demand for payment of advance entry tax without assessment of tax liability is also illegal and unsustainable. Petitioner also denied the liability to pay entry tax based upon the memo dated June 16,1998 (annexure B) which relies upon the definition of "manufacture of gas" as contained in Rule 2 (xxv) of the Gas Cylinders Rules, 1981. ( 3. ) THE respondents filed their reply in support of the impugned demand and denied the claim of the petitioner. According to reply, in view of the wide amplitude of definition "manufacture" as given in Section 2 (o) of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 (hereinafter referred to as "the Commercial Tax Act", for short), the process of refilling from bulk containers into small LPG cylinders amounts to manufacture. According to reply, in view of the wide amplitude of definition "manufacture" as given in Section 2 (o) of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 (hereinafter referred to as "the Commercial Tax Act", for short), the process of refilling from bulk containers into small LPG cylinders amounts to manufacture. Thus, the petitioner cannot escape from the liability to pay the entry tax after October 1, 1997. Hence, the impugned notice demanding advance payment of the entry tax is not illegal. ( 4. ) THE word "manufacture" is not defined under the Entry Tax Act. Subsection (2) of Section 2 of the Entry Tax Act, assigns the same meaning to all those undefined expressions that are used in the Entry Tax Act but are defined in the Commercial Tax Act, except the expression "goods" and "sale". Expression "manufacture" is defined in Section 2 (o) of the Commercial Tax Act, which reads as under: 2 (o) manufacture includes any process or manner of producing, collecting, extracting, preparing or making any goods, but does not include such manufacture or manufacturing process as may be notified. ( 5. ) IT is an accepted position that under Section 2 (o) of the Commercial Tax Act, the State Government has issued a Notification No. A-5-2-94-St-V (18) dated April 1, 1995 relevant extract whereof reads as under: The State Government hereby directs that the following manufacture or manufacturing process shall not be manufacture for the purpose of said clause, namely: (i)-(xx ). . . (xxi) Repacking of goods. ( 6. ) IN the admitted factual context of the case in hand, it is clear that the BPCL is the first dealer to cause entry of LPG into the local area for sale on payment of entry tax. LPG in bulk containers is thereafter refilled in small cylinders. Thus there is only change of receptacles through refilling before selling small LPG cylinders to the petitioner for sale during the course of latters business to its customers. Containers whether bulk or small unit cylinders, are both enclosed receptacles for containing LPG. LPG in bulk containers is thereafter refilled in small cylinders. Thus there is only change of receptacles through refilling before selling small LPG cylinders to the petitioner for sale during the course of latters business to its customers. Containers whether bulk or small unit cylinders, are both enclosed receptacles for containing LPG. There is no doubt that refilling is not "use, consumption or sale" as contemplated in Section 3 (1) (a) of the Entry Tax Act, but, in fact, is repacking as was held by the Supreme Court in HMM Limited v. Administrator, Bangalore City Corporation reported in AIR1990 SC 47 , 1997 (91 )ELT27 (SC ), JT1989 (4 )SC 147 , (1989 )4 SCC640 , [1989 ]supp1 SCR353. Similarly refilling is not "manufacture" as contemplated in Section 2 (o) of the Commercial Tax Act because it does not involve change in the chemical or physical properties of the LPG. Refilling does not produce a new marketable commodity. The expression "manufacture" despite its wide amplitude, does contemplate a commercial and distinct marketable commodity with some alteration in the nature or character of goods. Manufacture implies some change, yet every change is not manufacture. There must be such a transformation that a new and different article must emerge having distinct name, character and use. Refilling of LPG into small cylinders does not amount to "manufacture". It involves only a change of receptacle. I am fortified by the decision in MVR Gas v. Commissioner of Commercial Tax, Bangalore reported in [2006] 144 STC 446 (Karn ). In that case, assessee was claiming concessional rate of tax on purchase of certain machinery and parts required for refilling of LPG into small cylinders, on the ground that refilling of LPG from bulk containers into small cylinders amounts to "manufacture or processing". Reliance in support of that claim was also placed on the definition of "manufacture of gas" as given in the Gas Cylinders Rules, 1981. Repelling contentions, the division Bench speaking through R. V. Raveendran J. (as his Lordship then was) held that refilling of LPG into small cylinders does not bring about a new commodity having distinctive name, character, or use, consequently the claim that it amounted manufacturing or processing was turned down. Similar view is taken in State of Gujarat v. Kosan Gas Company [1992] 87 STC 236 (Guj) and State of Gujarat v. Asian Aerosol [1994] 92 STC 539 (Guj ). Similar view is taken in State of Gujarat v. Kosan Gas Company [1992] 87 STC 236 (Guj) and State of Gujarat v. Asian Aerosol [1994] 92 STC 539 (Guj ). In view of the above, I have no hesitation to hold that refilling of LPG from bulk container into small cylinder is not manufacture. Likewise, the Revenue cannot resort to the definition of "manufacture of gas" as contained in the Gas Cylinders Rules, 1981 in view of the provisions of Section 2 (2) of the Entry Tax Act read with Section 2 (o) of the Commercial Tax Act, because it is well-settled that definition of a word given for specific purpose in an enactment cannot be relied upon to interpret the said word used in a general sense in another statute. This leaves the last contention whether without making an assessment, are respondents justified in demanding advance entry tax from the petitioner. Answer has to be in negative and suffice it to say that undisputedly the petitioner filed returns as per statutory requirement. There is no provision to demand tax in advance of an assessment except in cases covered by Section 33 of the Commercial Tax Act. The petitioners case is not covered by Section 33 ibid. Legal position in this regard is clear from the decision of this Court reported in Fabworth (India) Ltd. v. Commercial Tax Officer, Raipur [2000] 25 TLD 254. ( 7. ) IN view of the foregoing discussion, impugned demand for the advance payment of tax could not be sustained from any angle and it has to be quashed. ( 8. ) CONSEQUENTLY, impugned notice dated July 7, 2000 (annexure A) is hereby set aside. The respondents, shall, however be free to make assessment in accordance with law and to raise demand or recover tax as may be found due. Accordingly this petition is allowed, however, there shall be no order as to costs.