# M/S Indian Farmers Fertilizer Cooperative Limited Aonla v. Commissioner of

- **Citation:** (2022) 7 ILRA 965
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-07-04
- **Case number:** Sales/Trade Tax Revision No. 7 of 2011
- **Bench:** Alok Mathur
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-indian-farmers-fertilizer-cooperative-limited-aonla-v-commissioner-of-48688
- **Pages:** 6

## Headnote

A. Tax Law - Central Sales Tax Act,1956 -
Sections 7 & 10 - The provisions of the Act
indicate that every dealer has to make an
application for registration under Section 7 of
the Act containing the details and particulars of
the goods which are to be used by the dealer in
the manufacturing process and the authority on
being satisfied grants approval in form of
Certificate of Registration, pursuant to which the
dealer purchases the said goods on Form-C
issued by the authorities in this regard and any
goods purchased beyond the goods approved in
Form of certification of registration would be
subjected to penalty proceedings u/S 10 of the
Act.

B. Tax Law - Central Sales Tax Act, 1956 -
Section 10 - Cannot be imposed unless
there is an element of mens rea and the
goods
have
been
purchased
under
bonafide belief or under mistake of fact.

Revision dismissed. (E-12)

List of Cases relied upon:-

Commissioner of Sales Tax, UP V M/s Sanjeev
Fabrics 2010 NTN (Volume 44)-69

## Text

7 All. M/S Indian Farmers Fertilizer Cooperative Limited Aonla Vs. Commissioner of
 Commercial Tax Lucknow, U.P.
965
dis-entitle the dealer from being granted
benefit under the said notification.

17. Applying the aforesaid to the facts of the
present case, it is noticed that even though the land
did not belong to the Promotor/Director of the
revisionist firm, but the same was sought to be
transferred to the revisionist and that transfer can
be said to have been completed on 17.01.2001,
when UPSIDC directed for transfer of plot no. F63 in favour of the revisionist firm. It cannot be
said that prior to 17.01.2001, the land was
transferred in favour of the revisionist. The validity
of the agreement to sell dated 25.11.1999, has
been doubted by the Tribunal as the original copy
was never produced before the Tribunal nor were
the documents produced before the Divisional
Level Committee, which was considering the case
of the revisionist firm. Even before this Court no
material has been placed so as to doubt the
correctness of findings recorded by the Tribunal
and hence there is no material before this Court to
interfere with the concurrent findings of
authorities below that the condition required for
transfer of land was not completed prior to last
date i.e. 31.01.2000.

18. In this view of the matter, for the reasons
recorded above, no interference is required with
the findings recorded by the Tribunal that the land
was not transferred prior to cut off date prescribed
in the exemption notification dated 22.12.2001.

19. The second contention raised by learned
counsel for the revisionist that old machinery was
not used in the process of manufacture and it is
only 'accessories', and on this basis has assailed the
findings recorded by the Tribunal.

20. It is noticed that findings of the Tribunal
were based upon the spot inspection report, where
the manufacturing process was carefully observed
and it has been recorded that 'cranes' were used for
lifting of boxes and was also used in the process of
manufacture. Hence it cannot be said that findings
of the Tribunal are perverse or without any
material.

21. Per contra in this regard it has only been
submitted on behalf of revisionist that transformer,
voltage stabilizer, motor and blower and EOT
Crane are not used in the process of manufacture.
The said spot inspection report has not been
disputed by the revisionist at any stage of the
proceedings and categorical finding has been
recorded in the spot inspection with regard to use
of old machinery which was found to be used in
the manufacture process, hence revisionist would
not be entitled for the benefit of the Exemption
Notification.

21. It is also noticed that one of the
condition required for grant of exemption was that
the unit should be registered with the Industries
Department and both the plots were jointly
registered with the Industries Department on
21.03.2001, which is clearly beyond 31.03.2000,
which is cut-off date, and consequently for all the
aforesaid reasons, it is noted that revisionist did not
fulfill the conditions before the cut-off date fixed
and hence is not entitled for exemption.

22. No question of law arise for
adjudication in this revision. Accordingly
present revision is dismissed.
----------
(2022)07ILR A965
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 04.07.2022

BEFORE

THE HON'BLE ALOK MATHUR, J.

Sales/Trade Tax Revision No. 7 of 2011

M/S Indian Farmers Fertilizer Cooperative
Limited Aonla ...Revisionist
Versus
Commissioner
of
Commercial
Tax
Lucknow, U.P. ...Opposite Party
966 INDIAN LAW REPORTS ALLAHABAD SERIES
Counsel for the Revisionist:
Rahul Srivastava, Arvind Saran Das, Piyush
Agarwal, Pooja Tawar, Yogesh Chandra
Srivastava

Counsel for the Opposite Parties:
C.S.C.

A. Tax Law - Central Sales Tax Act,1956 -
Sections 7 & 10 - The provisions of the Act
indicate that every dealer has to make an
application for registration under Section 7 of
the Act containing the details and particulars of
the goods which are to be used by the dealer in
the manufacturing process and the authority on
being satisfied grants approval in form of
Certificate of Registration, pursuant to which the
dealer purchases the said goods on Form-C
issued by the authorities in this regard and any
goods purchased beyond the goods approved in
Form of certification of registration would be
subjected to penalty proceedings u/S 10 of the
Act.

B. Tax Law - Central Sales Tax Act, 1956 -
Section 10 - Cannot be imposed unless
there is an element of mens rea and the
goods
have
been
purchased
under
bonafide belief or under mistake of fact.

Revision dismissed. (E-12)

List of Cases relied upon:-

Commissioner of Sales Tax, UP V M/s Sanjeev
Fabrics 2010 NTN (Volume 44)-69
(Delivered by Hon'ble Alok Mathur, J.)

1. Heard Ms. Pooja Talwar, learned
counsel for the revisionist as well as Sri
Rohit Nandan Shukla, learned counsel
appearing for the revenue.

2. The revisionist have assailed the
order of the Trade Tax Tribunal dated
13.10.2010 whereby the second appeals
preferred by them has been partly allowed,
and certain goods have been held to be
validly purchased utilizing Form C and
were
held
to
be
entitled
for
the
concessional rate of tax, while with regard
to the purchase of Locomotives and
Railway siding and spares, transmitters and
computer stationery were held to have been
unauthorisedly purchased against Form C,
for which penalty of Rs. 56,19,991.00 has
been imposed.

3. The revisionist is a Cooperative
Society under the administrative control of
Ministry of Fertilizer
and Chemical,
Department of Fertilizers, Government of
India and a registered dealer both under the
UP Trade Tax Act as well as the Central
Sales Tax Act (hereinafter referred to as
"the Act") and is engaged in the business of
manufacture and sale of chemical fertilizers
[urea] .

4. The controversy in the present case
relates to the assessment year 1989-90
arising out of penalty proceedings initiated
under Section 10A of the Act, where, by
means of order dated 22/02/1993, penalty
was imposed on purchase of Iron Steel,
cement and other various items to the tune
of Rs.1,60,00,000/-. The first appeal was
preferred
before
Joint
Commissioner
(Appeals), Bareilly which was dismissed
on 29/01/1994. The order of the passed by
the Joint Commissioner (Appeals), Bareilly
was assailed before the Commercial Tax
Tribunal (hereinafter referred to as "the
Tribunal"), in Second Appeal No. 148 of
1994, which was partly allowed by means
of order dated 27.10.2006, and sustained
the penalty imposed on purchase of cement
and iron & steel. Aggrieved by the order of
the Tribunal, Revision preferred before this
Court being Trade Tax Revision No. 04 of
2007, which was allowed on 04/07/2007,
and the order of the Tribunal was set aside
and the matter was remanded to the
7 All. M/S Indian Farmers Fertilizer Cooperative Limited Aonla Vs. Commissioner of
 Commercial Tax Lucknow, U.P.
967
Tribunal to decide the case on merits afresh
expeditiously.

5. It is in the remand proceedings that
the
present
impugned
order
dated
13.10.2010 has been passed which has been
assailed before this court in the instant
revision. It has been submitted by Ms.
Pooja Talwar appearing on behalf of the
revisionist
that
he
had
moved
an
application under Section 7(2) of the Act
for registration in Form A on 31/01/1985
for grant of registration certificate with
regard to the material used in manufacture
of fertilizer, for permitting them to
purchase the same at concessional rate of
tax. It has been submitted that the
applications for purchase of certain items
including Steel Pipes and Pipe Fittings as
material which is used in manufacture was
allowed. Another application was submitted
on 16/09/1985 for adding more items on
the list and the authorities after being
satisfied noticed that Iron and Steel in all
forms and shapes has been included in Item
4, cement and another compounding
material is already included in Item 5 and
pipes of all kinds and pipe fittings
including valves and bracket is already
registered with the previous registration
certificate and proceeded to include all the
other items as requested by the revisionist.

6. It has further been submitted that
against Form C the revisionist continued to
purchase and utilize Iron and Steel,
Cement, Pipe Fittings etc. after declaration
and submission of his return in this regard
before the Assessing authority and no
objection was taken by them for the
assessment year 1985-86, 1986-87, 198788 and 1988-89. For the assessment year
1989-90 after giving a show cause notice,
penalty was imposed upon the revisionist
holding that the Cement and Iron and Steel
purchased on Form C was not used for the
purpose of manufacture of goods rather
than they were used unauthorisedly for
construction
of
factory
building,
electrification and building township and
road and hence violated the provisions of
Section 10 (d) of the Act. The revisionist
was also penalized for the utilization of
Form C for the purchase of locomotives, as
locomotives was not included in the
registration certificate and utilizing Form C
for purchasing the same on concessional
rate of tax constituted an offence under
Section 10 (b) of the Act.

7. It has been argued on behalf of the
revisionist
that
Railway
siding
and
locomotives are integral part of the
machinery used for the manufacturing
process as the raw material is carried to the
manufacturing plant and also from the
manufacturing site to wagons for loading
the finished product, and hence no illegality
has been committed by purchasing the said
goods against Form C.

8. Following questions arise for
consideration before this Court :-

(I) Whether in view of the
judgment of Hon'ble Supreme Court in the
case of Sanjiv Fabrics (supra) and in the
case of Commissioner of Commercial
Taxes Vs. Bombay Garage (supra), the
imposition of penalty in absence of mens
rea which is essential ingredient for levy of
penalty under Section 10-A of the Act, the
order passed by the Tribunal is justified?

(II)
Whether
admittedly
the
railway siding, locomotive and transformer
and its spare parts and diesel used therein
are so integrally connected without which
ultimate production is not possible, still
imposition of penalty on the above items is
justified?
968 INDIAN LAW REPORTS ALLAHABAD SERIES

9. It has been submitted by learned
counsel for the revisionist that application
under Section 7(2) of the Act in Form-A
were given from time to time for including
goods stated therein for being purchased at
the concessional rate of tax which were
essential for the manufacture process and
by means of orders dated 03.04.1986,
08.07.1988 and 26.11.1998, were issued
permitting the revisionist to include the
items as stated in the said applications.

10. It is relevant to state that it is only
when an application was made under Section
7(2) of the Act by the revisionist on
26.11.1998 for including Railway Siding ,
Locomotives and Transmitters, that the
application of the revisionist was allowed and
they were entitled to purchase the said goods
at the concessional rate of tax with effect
from 31.03.1995.

11. The provisions of the Act indicate
that every dealer has to make an application
for registration under Section 7 of the Act
containing the details and particulars of the
goods which are to be used by the dealer in
the manufacturing process and the authority
on being satisfied grants approval in form of
Certificate of Registration, pursuant to which
the dealer purchases the said goods on FormC issued by the authorities in this regard.

12.
The
allegation
against
the
revisionist is that he purchased railway
siding and locomotives and certain other
goods utilizing Form-C to enable him to
purchase the said goods at concessional
rate of tax, whereas Railway Siding
,Locomotives and Transmitters are not
listed as goods for which the revisionist had
neither applied nor was he permitted to
purchase the same utilizing Form-C, for
which he was subjected to penalty
proceedings under Section 10 of the Act.

13. The argument of the revisionist
that Railway Siding ,Locomotives and
Transmitters are essential for manufacture
of finished goods, may be correct as for
subsequent years i.e. with effect from
31.03.1995 the revisionist has been duly
registered for purchase of the said goods
but
for
the
assessment
year
under
consideration, admittedly the revisionist
was not registered for purchase of the said
goods against From-C.

14. Whether the revisionist had
correctly utilized Form-C for purchase of
said goods can be answered once we peruse
the provisions contained in Section 10 of
the Act. As per Sub Clause (b) of section 10
of the Act, penalty can be imposed upon
registered dealer who falsely purchase any
class of goods that goods are covered by
certificate of registration. Thus, Section
10(b) of the Act clearly indicates that in
case
any
dealer
has
not
obtained
registration certificate for purchase of any
product or any class of goods or the same
are not covered by the certificate of
registration then penalty can be levied upon
the dealer in case he purchases the said
goods utilizing Form-C. In the present case,
admittedly, the revisionist did not have
Certificate of Registration for purchase of
Railway
Siding,
Locomotives
and
Transmitters and hence he could not have
utilized Form-C for purchase of said goods
and his case is covered under Section 10(b)
of
the
Act
and
therefore
penalty
proceedings were initiated by the Assessing
Authority.

15. Assailing the said penalty, the
learned
counsel
for
the
revisionist
submitted
that
Railway
Siding,
Locomotives and Transmitters are essential
for manufacture process and in support of
his contention the revisionist has relied
7 All. M/S Indian Farmers Fertilizer Cooperative Limited Aonla Vs. Commissioner of
 Commercial Tax Lucknow, U.P.
969
upon the judgment of Hon'ble Supreme
Court in the case of Indian Copper
Corporation Ltd. Vs. Commissioner of
Commercial Taxes, Bihar and Others,
AIR 1965 SC 891, where the petitioner had
applied to the Superintendent of Sales Tax,
Jamshedpur for registration as dealer under
the Central Sales Tax setting out a list of
goods for specification in the certificate of
registration under Section 8 of he Act. The
Superintendent of Sales Tax issued the
certificate of registration to the Corporation
without specifying certain categories of
goods which the Corporation claimed
should be specified under Section 8(3)(b)
of the Act. The Corporation then petitioned
the High Court under Articles 226 and 227
of the Constitution of India for an order
that the Superintendent of Sales Tax be
directed to specify the goods mentioned in
paragraph 4 of the petition in the certificate
of registration granted to the petitioner, and
to forbear from levying or realizing tax
under the Act from the Corporation in
excess of one per cent under Section 8(1)
of the Act.

16. The Court in the aforesaid facts
was
of
the
considered
view
that
locomotives and vehicles used to carry
finished products from factory are included
in the expression "goods" intended for use
in the manufacturing or processing of
goods for "sale", and hence directed the
authorities to include certain goods used in
the manufacture of final products.

17. The facts of the aforesaid case are
clearly distinguishable from the facts of the
present case inasmuch as admittedly for the
assessment year under consideration there
was no application made by the revisionist
for including Railway Siding, Locomotives
and Transmitters for grant of Registration
Certificate and also it is not the case of the
Revisionist that authorities have rejected
the said application. In fact as stated
hereinabove,
the
application
was
subsequently made some time in March,
1995 and was allowed on 26.11.1998 with
effect from 31.03.1995. The revisionist was
fully aware of the all the facts and the
requirement
of
the
Railway
Siding
,Locomotives and Transmitters , but did not
make any application under Section 7 of
the Act, but on the other hand continued to
purchase the said goods utilizing Form-C,
which is not permissible under the scheme
of the Act, knowing fully well that the said
purchase on Form C was unauthorized.

18. It is also noticed that railway
siding, locomotives and transmitters are not
such goods as can be included in any other
class of goods for which certificate of
registration had already been obtained by
the revisionist and hence neither it has been
argued nor it is established that railway
siding, locomotives and transmitters are
such goods which can be included in any
other class or category of goods for which
registration certificate has already been
granted to the revisionist.

19. Lastly it has been submitted by
the revisionist that unless there is element
of 'mens rea' which is essential for
imposing penalty under Section 10 of the
Act is missing and therefore the penalty
order is illegal and arbitrary relying upon
the judgment of Supreme Court rendered in
the case of Commissioner of Sales Tax,
U.P. Vs. M/s Sanjeev Fabrics (alongwith
another connected case), reported in 2010
NTN (Vol. 44) - 69.

20. In the aforesaid case, the applicant
therein had applied for registration of
'cotton' and had claimed exemption on
'cotton' waste' and he was under bona fide
970 INDIAN LAW REPORTS ALLAHABAD SERIES
belief that 'cotton' includes 'cotton waste'
and he had purchased the goods in question
and furnished Form-C for the said goods
and in the aforesaid circumstances it was
canvassed that there was no mens rea
which is essential ingredient prior to
levying penalty under Section 10 of the
Act.

21. In the present case, the revisionist
had never applied for registration of Railway
Siding, Locomotives and Transmitters and in
absence of registration of such goods Form-C
was issued to him for purchase of the said
items and it could not be demonstrated by the
revisionist that he had done this under any
bona fide belief or under mistake of fact.
Apart from the above, clearly Railway
Siding, Locomotives and Transmitters cannot
be related to any other goods or class of
goods for which registration had already been
obtained by the revisionist, so as to show that
he was under some bona fide belief that the
said goods are included in the class of goods
for which Registration Certificate had already
been issued. In absence of any such bona fide
belief, or any other circumstance indicating
that revisionist could have validly purchased
the said goods against Form-C, it cannot be
said that the same had been obtained in a
bona fide manner and hence leads to
inevitable conclusion that Form-C had been
utilized malafidely and unauthorizedly only
with intention to evade tax.

22. From the aforesaid facts it cannot be
demonstrated that purchase of goods against
Form-C was done in bona fide manner nor
had the revisionist moved any application for
inclusion of said goods for registration under
Section 7 of the Act.

23. In the above circumstances it
cannot be said that there is any infirmity in
imposition of penalty by the revenue under
Section 10 of the Act. Hence this Court is
of the considered view that there is no
infirmity in the order of Tribunal and hence
no interference is required by this Court.

24. The revisionist is dismissed. The
questions of law are answered against the
assessee and in favour of the revenue.
----------
(2022)07ILR A970
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 23.05.2022

BEFORE

THE HON'BLE SURYA PRAKASH
KESARWANI, J.
THE HON'BLE JAYANT BANERJI, J.

Writ Tax No. 760 of 2022

M/s
Kay
Pan
Fragrances
(P)
Ltd.
Ghaziabad ...Petitioner
Versus
U.O.I. & Ors. ...Respondents

Counsel for the Petitioner:
Ms. Pooja Talwar, Sri Dhruv Agarwal (Senior
Adv.)

Counsel for the Respondents:
A.S.G.I., C.S.C., Sri Sanjay Kumar Om, Sri
M.C. Chaturvedi (Addl. A.G.)

A. Civil Law - Constitution of India,1950 -
The Constitution (101st Amendment ) Act -
Article 246-A r/w Article 366 (12A) -
CGST/ UPGST Act,2016 - Sections 7,8,& 9
-Income Tax Act 1961- Sections 132 &
153-A - Article 246-A r/w Article 366 (12A) and
other relevant provisions were enacted by the
Constitution (101st Amendment) Act, 2016 so
as to bring the taxes on purchase and sale of
goods, duties on excise and entertainment tax
etc. under one umbrella by empowering the
Parliament and the St. Legislatures to enact
laws with respect to taxes on supply of goods or
services or both including sale of goods.
Accordingly, the Parliament enacted the Central