Kochi Refineries Ltd., Ambalamugal, now amalgamated with Bharat Petroleum Corporation Ltd., Ambalamugal

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 13TH DAY OF JULY 2018 / 22ND ASHADHA, 1940** **S.T.Rev.No.86 of 2012** **-------------------------------** **AGAINST THE ORDER IN T.A.NO.249/2010 DATED 28-02-2012 OF THE AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM.** **[ASSESSMENT YEAR 2001-2002]** **-------------** ## **PETITIONER(S) /APPELLANT/APPELLANT/ASSESSEE:-** **---------------------------------------------------------------------------------** **KOCHI REFINERIES LTD., AMBALAMUGAL, NOW AMALGAMATED WITH BHARAT PETROLEUM CORPORATION LTD., AMBALAMUGAL.** **BY ADVS.SRI.V.V.ASOKAN (SR.) SRI.K.I.MAYANKUTTY MATHER** ## **RESPONDENT(S) /RESPONDENT/RESPONDENT/REVENUE:-** **----------------------------------------------------------------------------------------** **STATE OF KERALA, REPRESENTED BY JOINT COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM - 682 015.** **BY SENIOR GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ.** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 13-07-2018, ALONG WITH S.T.REV.NO.100 OF 2012, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:-** ## **S.T.REV.NO.86 OF 2012** ## **APPENDIX** ## **PETITIONER'S ANNEXURES:-** **------------------------------------------** **ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING AUTHORITY DT.24.12.2009.** - **ANNEXURE-B TRUE COPY OF THE ORDER OF DEPUTY COMMISSIONER (APPEALS), ERNAKULAM IN STA.51/2010 DATED 2.7.2010.** - **ANNEXURE-C TRUE COPY OF THE ORDER OF THE TRIBUNAL IN T.A.NO.249/2010 DATED 28.2.2012.** **ANNEDURE-D TRUE COPY OF THE LIST OF SRO FORM, DATED NIL. ANNEXURE-D1 TRUE COPY OF THE SRO OBTAINED FROM NH DIVISION, THRISSUR DATED 19.01.2002. ANNEXURE-D2 TRUE COPY OF THE SRO OBTAINED FROM NH DIVISION, THRISSUR DATED 9.01.2002. ANNEXURE-D3 TRUE COPY OF THE SRO OBTAINED FROM CORPORATION OF COCHIN DATED 19.03.2004. ANNEXURE-D4 TRUE COPY OF THE SRO OBTAINED FROM VENGOLA GRAMA PANCHAYAT DATED NIL. ANNEXURE-D5 TRUE COPY OF THE SRO OBTAINED FROM ANGAMALY MUNICIPALITY DATED 28.07.2005. ANNEXURE-D6 TRUE COPY OF THE SRO OBTAINED FROM DISTRICT PANCHAYATH, KOTTAYAM DATED 20.12.2001. ANNEXURE-D7 TRUE COPY OF THE SRO OBTAINED FROM DISTRICT PANCHAYATH, KOTTAYAM DATED 20.12.2001. ANNEXURE-D8 TRUE COPY OF THE SRO OBTAINED FROM NH BRIDGE DIVISION, KODUNGALLUR DATED 26.03.2002. ANNEXURE-D9 TRUE COPY OF THE SRO OBTAINED FROM NH BRIDGE DIVISION, KOCHI DATED 31.01.2002. ANNEXURE-D10 TRUE COPY OF THE SRO OBTAINED FROM MVIP DIVISION, KOOTHATTUKULAM DATED 26.03.2002.** - **ANNEXURE-D11 TRUE COPY OF THE ANNEXURE ISSUED BY PWD ROAD DIVISION, KANNUR FOR RS.12,24,496/- DATED NIL.** - **ANNEXURE-D12 TRUE COPY OF THE ANNEXURE ISSUED BY PWD ROAD DIVISION, KANNUR FOR RS.1,10,29,673 DATED NIL.** - **ANNEXURE-D13 TRUE COPY OF THE FORM 18 ISSUED BY SOUTHERN REFINERIES LIMITED DATED NIL.** - **ANNEXURE-D14 TRUE COPY OF THE FORM 18 ISSUED BY SAFA CHEMICALS, DATED 12.04.2001.** **S.T.REV.NO.86 OF 2012** **- 2 -** **ANNEXURE-D15 TRUE COPY OF THE FORM 18 ISSUED BY CEE JEE LUBRICANTS DATED 13.11.2001.** - **ANNEXURE-D16 TRUE COPY CERTIFICATE OF REGISTRATION OF CRAIN BEARING REGISTRATION NO.KL-07-D-357 DATED 16.09.1992.** - **ANNEXURE-D17 TRUE COPY CERTIFICATE OF REGISTRATION OF CRAIN BEARING REGISTRATION NO.KL-07-Z-6518 DATED 8.3.2000.** - **ANNEXURE-D18 TRUE COPY CERTIFICATE OF REGISTRATION OF CRAIN BEARING REGISTRATION NO.KL-07-AC-5788 DATED 22.10.1999.** **ANNEXURE-D19** - **TRUE COPY CERTIFICATE OF REGISTRATION OF CRAIN BEARING REGISTRATION NO.KBE-4288-D-357 DATED 27.10.1984.** **RESPONDENT'S ANNEXURES:-** **---------------------------------------------NIL.** **vku/-** **[ true copy ]** ## K. Vinod Chandran & Ashok Menon, JJ. ------------------------------------------------------- S.T.Rev.Nos.86 & 100 of 2012 ------------------------------------------------------Dated, this the 13[th] day of July, 2018 ## **ORDER** ## Vinod Chandran, J: Two revisions against two orders of the Tribunal for two assessment years. The questions of law raised are almost similar and hence these revisions are taken up together. In S.T.Rev.No.86 of 2012, with respect to the assessment year 2001-02, the assessee has approached this Court with three questions of law; one an omnibus claim on the various exemptions and concessions raised before the Tribunal and the other on refusal of the Tribunal to verify Form-18 declarations and SRO Forms produced for concessional rate of tax. We see that a number of grounds have been raised before the Tribunal, which have not been raised as questions of law in the revision. Essentially the questions arising are on facts, but despite that for examination of the issues, we re-frame the questions for consideration as follows: “(1) Whether the Tribunal was right in affirming the tax imposed on the income on account of hire charges received by the Company for furniture supplied to the residences of the employees? ST.Rev.Nos.86/2012 & - 2 - 100/2012 (2) Whether levy of tax on transfer of furniture to employees is liable to be taxed being a second sale? (3) Whether the Tribunal was correct in having sustained levy of tax on equipment charges being charges on hire received from contractors for permission to use heavy equipments, like cranes, for the purpose of execution of the contract? (4) Ought not the Tribunal verified Form-18 declarations and SRO forms produced before it and allowed the exemption claimed to the extent of the turnover reflected in such forms? (5) Whether the Assessing Officer (AO) was right in having imposed tax at the rate of 30% for bitumen and Special Boiling Point Spirit (SBPS) for which tax is only 24%? Has not the Tribunal erred in not having considered the specific submission made before it? (6) Whether the Tribunal was correct in having sustained levy of interest as made in the assessment order? 2. On the questions raised as (1) and (2), the claim of the assessee is that the assessee purchase furniture for the use of its employees, which is used by them in the residential quarters allotted to them. There is a specific contract levying hire charges for such furniture, which charges are to be paid for a period of seven years, on expiry of which or on retirement or transfer prior to that period; the employee is given an option to exercise his right to purchase the same. The AO has levied tax on the hire charges collected, alleging it to be charges on the transfer of right to use. The further sale component at the time of exercise of option by the employees has ST.Rev.Nos.86/2012 & - 3 - 100/2012 also been taxed. The first appellate authority and the Tribunal refused to interfere with the same. The contention of the assessee is that, in fact, it is a loan to the employees for the purpose of purchase of furniture. If it were a loan it should have been disbursed so, but the specific contract reveals that the assessee retained the ownership of the furniture and also received hire charges for the same. The three purchase vouchers in the name of the assessee, produced by the assessee itself, goes against its contention that it was a mere loan. The assessee had been supplying furniture to its employees and also had been taking hire charges for the same which definitely comes within the ambit of a transfer of right to use and we do not find any reason to interfere with the order of the AO as approved by the Tribunal. The tax levied on such transfer of right to use cannot be faulted. 3. The next question is on the sale to the employees being a second sale. The assessee had produced before the Tribunal three invoices which indicated purchases from a manufacturer of furniture. The Tribunal only to that extent granted relief, insofar as the second sale was absolved from liability to tax. The assessee did not produce any evidence to indicate that the other furniture supplied to its ST.Rev.Nos.86/2012 & - 4 - 100/2012 employees and later purchased by them, had suffered tax at the earlier point. Hence, there could be no interference on that count also. 4. The next question is on the equipment charges received by the assessee from its contractors. The contention of the assessee is that many of these small contractors would not have heavy machinery and equipment for carrying out the contract. In such cases, the equipment of the assessee is hired out to them with the assessee's employees manning the same. The learned counsel also contended that, in fact, the invoices specifically indicate drivers' names, insofar as the hire of cranes are concerned. The documents are also said to have been produced before the Tribunal, which are produced along with an interlocutory application before us. We see that only certificate of registrations have been produced as Annexures-D16 to D-19, which do not indicate that the assessee had used its own employees in operation of the said vehicles registered with the Motor Vehicles Department. Further, it is seen from the submission of the assessee before the appellate authority as extracted in the memorandum that there is a specific contract between the assessee and the contractors and the conditions of ST.Rev.Nos.86/2012 & - 5 - 100/2012 contract facilitates such hiring for speedy completion of the job. In that case, the terms of the contract would have indicated as to under whose control the cranes were, even when it was hired. The assessee failed to produce such a contract before any of the fact finding authorities. We are not inclined to interfere with the finding of the Tribunal affirming the levy made by the assessing officer. 5. The next question is on Form-18 and SRO forms produced by the assessee before the Tribunal. The IA filed in July, 2018 before us has produced certain documents which are claimed to have been produced before the Tribunal also. We see that the SRO Forms produced as Annexures-D1 to D3 are dated 19.1.2002, 9.1.2002 and 19.3.2004 respectively, and Annexure-D4 nil date, and Annexures-D5 to D9 are dated 28.2.2004, 20.12.2001, 20.12.2001, 26.3.2002 and 3.1.2002, respectively. Annexures-D10, D11 and D12 only listed transactions without any supporting SRO forms. All these have been issued long before the assessment was completed as per Annexure-A order dated 24.12.2009. There is no explanation as to why these Forms were not produced before the AO. We also do not see any production of these documents before the Tribunal as is seen from the extract of the appeal memorandum, either as extracted by ST.Rev.Nos.86/2012 & - 6 - 100/2012 the Tribunal or by the assessee in the memorandum of revision. The claim with respect to Form-18 also does not hold any credence, insofar as the perusal of the same as produced at Annexures-D13, D14 and D15. Annexures-D13 does not have a date and AnnexureD14 is not filled up in the blank portions and Annexure-D15 again is one issued on 13.11.2001. We are hence not inclined to direct any fresh consideration of these forms. We also notice that the AO had specifically rejected the aforesaid forms on the ground that there is no authentication by the purchaser. We cannot interfere with the same being a pure question of fact. We hence reject the prayer for reconsideration by the Tribunal. The first four questions herein above framed are all questions on facts, which already have been held against the assessee and we hence see no reason to interfere with the order of the Tribunal. 6. On to the question of the correct rate of tax on bitumen and SDPS, we see that the Tribunal has extracted the said grounds but has not answered it. The learned Senior Government Pleader would contend that only the questions urged at the time of hearing would have been answered by the Tribunal. We however, are not inclined to accept the contention of the State on that count. The ST.Rev.Nos.86/2012 & - 7 - 100/2012 Tribunal having extracted that specific ground ought to have stated that it was not argued or answered it. The correct rate of bitumen and SDPS will be verified by the AO and the modifications, if any, required would be made. As to the computation of interest in the assessment order, there can be no doubt that it is from the date of return and if the assessee has any complaint regarding the computation, they have to necessarily approach the AO. We, hence, find that there is no substantial question of law raised in S.T.Rev.No.86 of 2012; but, however, leaving the assessee to agitate before the AO, on the correct rate to be applied on bitumen and SDPS as also the computation of interest. 7. S.T.Rev.No.100 of 2012 is with respect to the assessment year 2002-03 under the KGST Act. Again there is an omnibus question framed as to whether the Tribunal was justified in denying the various exemptions and concessions. The issues already dealt with in S.T.Rev.No.86 of 2012 substantially answers those questions on similar issues in the present revision also. Hence, all the questions raised in the earlier year which are relevant for the present year are answered against the assessee and in favour of the Revenue. ST.Rev.Nos.86/2012 & - 8 - 100/2012 ## 8. Two other issues remain to be considered, the ## questions arising are the following: - (i) Whether the inclusion of water cess in the turnover for the purpose of levying purchase tax under Section 5A on the water supplied by the Irrigation Department to the revision petitioner is justified ? - (ii) Whether the stock transfer supported by F-Forms were rightly rejected for reason only of the assessee failing to establish the movement of goods outside the State. 9. On the aspect of water cess, the Tribunal relies on _**State of Kerala v. Cochin Shipyard Ltd.**_ **[(2009) 17 KTR 621 (Ker.)]** , which, according to the learned Counsel for the petitioner, is not at all applicable to the present case. Therein, the issue was whether the water charges paid by the assessee for its consumption in the industrial unit could be levied with purchase tax. The Division Bench of this Court found that such water charges are exigible to purchase tax under Section 5A. In the present case, the purchase tax under Section 5A has been satisfied by the assessee. What is to be looked at is whether the water cess paid by the assessee under the Water (Prevention and Control of Pollution) Cess Act, 1977 [for brevity “Water Cess Act of 1977”] can be included in the turnover for the purpose of levying purchase tax. We agree with the learned ST.Rev.Nos.86/2012 & - 9 - 100/2012 Counsel for the petitioner that _**Cochin Shipyard Ltd.**_ does not apply to this case on facts and law laid down. 10. The learned Senior Government Pleader relies on the decision in _**Madras Rubber Factory Ltd. v. State of Kerala**_ **[1989 (1) KLT 827 (FB)]** , wherein the question involved was whether the rubber cess collected from manufacturers would form part of purchase turnover exigible to sales tax. The Full Bench of this Court found that “ _the rubber cess collected from the manufacturers, form part of purchase turnover exigible to sales-tax under the relevant entry of Schedule I of K.G.S.T.Act, 1963_ ”. This was on the ground that the cess was on the manufacture of rubber, which makes it a levy of Excise and, hence, would be included in the turnover. The learned Counsel for the petitioner specifically points out that the inclusion in turnover as held in _**Madras Rubber Factory Ltd.**_ was only on the premise that the cess levied is an excise duty includable in the sales turnover. 11. In the teeth of such argument addressed, we have to look at the nature of the cess in the present case. Water cess is under the Water Cess Act of 1977. Section 3 creates the charge and speaks of the collection. The cess is payable by every person carrying on any ST.Rev.Nos.86/2012 & 100/2012 ## - 10 - specified industry and every local authority. 'Local authority' has been defined under Section 2(a), which definition includes any body entrusted with the duty of supplying water under any law by or under which it is constituted. The cess payable under the circumstances of a local authority supplying water to a person carrying on a specified industry is by the industry who consumes and uses such water supplied. The Explanation to Section 3 also brings in consumption of water within the ambit of the description “supply of water”. Hence, the cess is on the supply of water, which has to be levied at the time of supply and the charge is on the person who uses such water. In the present case, it is the Irrigation Department which supplies water for a price and, hence, the turnover also includes water cess. The water cess is a component that can be legitimately included in the aggregation of the consideration for the transfer of the goods; here the water supplied as has been held in _**EID Parry (I) Ltd. Vs Asst. CIT (2000) 117 STC 457(SC)**_ . We, hence, answer the said question in favour of the Revenue and against the assessee. 12. The next issue is with respect to the movement of the goods having not been established. As has been held in _**ESAB India Ltd. v. State of Kerala [(2006) 147 STC 417 (Ker)]**_ , when F-Forms - 11 - ST.Rev.Nos.86/2012 & 100/2012 are supplied and the consignor is asked to prove the transport of goods, it is the duty of the assessee to establish such transport, since F-Form is only one mode of evidence to establish the inter-State transfer of goods on consignment. The petitioner also has sought consideration of assessment of its own unit at Coimbatore, which we find has no relevance insofar as establishing the transport of goods which has to be on the basis of the check-post declarations and such other materials evidencing the movement of goods from the State of Kerala to the outside State. We, hence, answer the said question also against the assessee and in favour of the Revenue. The S.T.Revisions are dismissed; but, however, leaving the assessee to agitate before the AO, on the correct rate to be applied on bitumen and SDPS as also computation of interest. Parties are left to suffer their respective costs. Sd/- K.Vinod Chandran Judge Sd/Ashok Menon Judge vku/- [ true copy ]