* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ [W.P.(C) 3138 OF 1991]
% RESERVED ON: FEBRUARY 18, 2011
JUDGMENT PRONOUNCED ON: MARCH 30, 2011
DURGA INDUSTRIES ....PETITIONER
Through: Nemo.
VERSUS
SALES TAX OFFICER ....RESPONDENT
Through: Mr. H.C. Bhatia, Advocate.
CORAM :-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE MANMOHAN
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J.
1. This writ petition is preferred by the petitioner invoking the
provisions of Article 226 and/or 227 of the Constitution of India.
The petitioner seeks quashing of orders dated 1st June, 1989
whereby reassessment of the petitioner for the assessment
year 1983-84 was finalized. The petitioner has also impugned
the order dated 23rd January, 1990 whereby the appeal of the
petitioner in respect of assessment for the year 1985-86 was
rejected by the Assistant Commissioner, Zone-V. The aforesaid
orders (hereinafter referred to the „impugned orders‟) were
passed by the authorities under the following circumstances.
2. The petitioner is a registered partnership registered under the
Delhi Sales Act, 1975 as well as the Central Sales Act, 1956. Its
business consist of manufacturing of cycle parts in general and
“Fork legs” in particular which is carrying on the business
WP (C) No.3138 of 1991 Page 1 of 5
under the name and style of M/s Durga Industries. As per the
petitioner, it is allowed to purchase the following goods free of
tax as per the following entry in column 2 (a) of the C.R.‟s”-
“Welding rod and Iron wire w.e.f. 12.11.1997
“Acids, cutting oil, Gas w.e.f. 15.2.1979
Cylinder, Copper coated Welding w.e.f. 6.4.1983
Wires & Calcium carbide:
Light Diesel Oil”
3. The petitioner had purchased „Electrodes‟ which according to
the petitioner was covered by the aforesaid entry and,
therefore, no sales tax was payable.
4. In the assessment year 1983-84, the petitioner filed its return
which was processed and assessment orders dated 11th
January, 1988 were passed by the Sales Tax Officer opining
that the petitioner was entitled to exemption on account of
purchase of electrodes, cutting oil, acid and LDO and allowed
the exemption on the basis of registration certification issued to
the petitioner. Thereafter, this assessment was reopened and
reassessment order dated 1st June, 1989 was passed under
Section 24 (1) of the Delhi Sales Tax Act. However, while
framing the reassessment in respect of assessment year 1983-
84, the Assessing Officer passed orders dated 1st June, 1989
stating that the petitioner was liable to tax on the amount of
purchase price of „electrodes‟ holding this purchase as
unauthorized and calling upon the petitioner to pay this
additional sales tax.
5. Likewise, in respect of assessment year 1985-86 assessment
orders dated 22nd January, 1990 were passed whereby the
WP (C) No.3138 of 1991 Page 2 of 5
petitioner was taxed at the rate of 7% on the purchase welding
rods worth `64558/- and an additional amount of `4519/- was
credited. Against this order, the petitioner went in appeal and
the appellate authority confirmed the orders thereby dismissing
the appeal vide orders dated 12th August, 1991. After the
dismissal of this appeal, the petitioner approached this court by
way of present petition challenging the reassessment order
dated 1st June, 1989 in respect of assessment year 1983-84 and
order dated 12th August, 1991 in respect of assessment year
1985-86. Perusal of the orders of the Sales Tax authorities
below reveled shows that they have relied upon a Division
Bench judgment of this court in the case of Commissioner of
Sales Tax, New Delhi Vs. Standard Metal Industries, 45
STC 229. On the basis of this judgment, conclusion was drawn
that the electrodes and iron chains which are used by the
dealer in the process of manufacturer of iron chains and bolts
cannot be recorded as “raw material”. On the strength of the
said judgment, a Circular No. 1/1990-91 had been issued by the
Additional Commissioner, Sales Tax vide which all the assessing
authorities had been directed to check the records of the dealer
registered and deleted the item Oxygen, electrodes, acetylene
gas, calcium carbide etc. which do not go into the finish product
but are consumed in the process of manufacture. The Circular
also provided that failure to comply with the instructions
contained therein would render the AO to be personally liable
for any revenue loss on this account.
6. Based on the aforesaid ratio in that case, the submission of
learned counsel for the petitioner was that in the present case
WP (C) No.3138 of 1991 Page 3 of 5
the „electrodes‟ do not really disappear and in fact become a
part and parcel of the finish product and, therefore, would
continue to remain “raw material” and thus shall be covered by
the exemption entry and, therefore, no sale tax was payable.
After taking note of the aforesaid contention, the Division
Bench took the view that in view of the latest judgment of
Supreme Court in the case of Ballarpur Industries (supra)
decision of Division Bench of this Court in Standard Metal
industries (supra) needed reconsideration and matter was
referred to the larger Bench. This is how the reference arises
for decision as to whether the Division Bench judgment of this
Court in Standard Metal Industries (supra) still holds the
field, and if not, what would be the impact thereof in the
present writ petition.
7. When the matter came up for hearing on 18.02.2011, nobody
appeared on behalf of the petitioner. Mr. Bhatia, who was present
in the Court was requested to assist, as he is taken on the panel of
the Advocates for Sales Tax Department. Though he informed
that notification for his appointment is yet to be issued, on our
request he agreed to assist. According to him, it appears that this
petitioner firm stood dissolved much earlier and not in the
business any longer. That could be the reason that nobody
appeared on behalf of the petitioner at the time of hearing as well.
It is also a matter of record that the Delhi Sales Tax Act has since
been repelled and in its place, Delhi Value Added Tax (DVAT) Act
has been enacted.
8. For all these reasons, we are of the view that it is not necessary to
answer the reference. It has been rendered infructuous in view of
WP (C) No.3138 of 1991 Page 4 of 5
the aforesaid facts and circumstances of this case. The writ
petition is accordingly dismissed as infructuous and also in default
because of no representation on behalf of the petitioner.
(CHIEF JUSTICE)
(A.K. SIKRI)
JUDGE
(MANMOHAN)
JUDGE
MARCH 30, 2011
skb/pmc
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