# M/s The Seksaria Biswan Sugar Fact. Ltd. Revisionist v. Commissioner of Trade Tax U.P. Opp. Party

- **Citation:** (2022) 7 ILRA 1166
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-07-04
- **Case number:** Sale/Trade Tax Revision No. 124 of 2007
- **Bench:** Alok Mathur
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-the-seksaria-biswan-sugar-fact-ltd-revisionist-v-commissioner-of-trade-tax-48740
- **Pages:** 6

## Headnote

Tax Law - U.P. Trade Tax Act, 1948 -
Section 4(B) - The word 'consumable' in the
said provision refers only to material which is
utilized as an input in the manufacturing process
namely 'raw material', 'component part', 'subassembly part' and ' intermediate part' etc. but
is not identifiable in the final product by reason
of the fact that it has got consumed therein.
Consumption must be in the manufacture as
raw material. In the present case it is noticed
that paints are utilized only for maintenance of
plants and machinery and are used as input in
the manufacturing process of sugar and hence
clearly there are not used in the manufacture of
sugar and also not involved in making o any
product and hence it cannot be said that they
are consumable. Therefore, the revisionist was
not entitled to purchase the same utilizing Form
-3B

Revisions dismissed. (E-12)

List of Cases relied upon:-

## Text

1166 INDIAN LAW REPORTS ALLAHABAD SERIES
undisclosed income even found during the
search and seizure operation. The fetter
imposed upon the Assessing Officer under
Sections 147 and 148 of the Act have been
removed by the non obstante clause under
Section 153A of the Act.

Consequently, we are of the opinion that
in
cases
where
the
assessment
or
reassessment proceedings have already been
completed and assessment orders have been
passed, which were subsisting when the
search was made, the Assessing Officer
would be competent to reopen the assessment
proceeding already made and determine the
total income of the assessee. The Assessing
Officer, while exercising the power under
Section 153A of the Act, would make
assessment and compute the total income of
the assessee including the undisclosed
income, notwithstanding the assessee had
filed the return before the date of search
which
stood
processed
under
Section
143(1)(a) of the Act.

In the light of the aforesaid, the reasons
given by the Tribunal that no material was
found during the search cannot be sustained,
since we have held that the Assessing Officer
has the power to reassess the returns of the
assessee not only for the undisclosed income,
which was found during the search operation
but also with regard to the material that was
available at the time of the original
assessment."
12. In view of above decision which
squarely clinches both the substantial
questions of law pressed in these appeals, we
find no reason to take a different view and
hence answer the above questions in favour
of Revenue and against Assessee."

27. The aforesaid two Division Bench
judgments in the case of Raj Kumar Arora
(supra) and Kesarwani Zarda Bhandar
(supra) being judgments of coordinate bench,
are binding on this bench. That apart, on
consideration of the provisions of Section
153A of the Act, 1961 and the findings of fact
recorded by the Assessing Officer and the
CIT (A), we find that the impugned orders of
the Tribunal cannot be sustained and are,
therefore, liable to be set aside.

28. For all the reasons aforestated, we
answer the substantial question of law
No.(i) in negative and the substantial
question of law No.(ii) in affirmative, i.e. in
favour of the Revenue and against the
assessee.

29. For all the reasons aforestated, all the
appeals filed by the Revenue are allowed
following the law laid down by this Court in the
case of Raj Kumar Arora (supra) and
Kesarwani Zarda Bhandar (supra). The
impugned orders of the Income Tax Appellate
Tribunal are hereby set aside and all the appeals
before the ITAT are restored to its original
numbers. The ITAT is directed to decide the
appeals afresh on merit in accordance with law,
after affording reasonable opportunity of
hearing to the parties, without being influenced
by any of the observations made in the body of
this order on merit.
----------
(2022)07ILR A1166
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 04.07.2022

BEFORE

THE HON'BLE ALOK MATHUR, J.

Sale/Trade Tax Revision No. 124 of 2007
Connected with Sale/Trade Tax Revision Nos.
125 of 2007, 126 of 2007

M/s The Seksaria Biswan Sugar Fact. Ltd.
 ...Revisionist
Versus
Commissioner of Trade Tax U.P.
 ...Opp. Party
7 All. M/s The Seksaria Biswan Sugar Fact. Ltd. Vs. Commissioner of Trade Tax U.P.
1167
Counsel for the Revisionist:
P. Agarwal

Counsel for the Opp. Party:
C.S.C.

Tax Law - U.P. Trade Tax Act, 1948 -
Section 4(B) - The word 'consumable' in the
said provision refers only to material which is
utilized as an input in the manufacturing process
namely 'raw material', 'component part', 'subassembly part' and ' intermediate part' etc. but
is not identifiable in the final product by reason
of the fact that it has got consumed therein.
Consumption must be in the manufacture as
raw material. In the present case it is noticed
that paints are utilized only for maintenance of
plants and machinery and are used as input in
the manufacturing process of sugar and hence
clearly there are not used in the manufacture of
sugar and also not involved in making o any
product and hence it cannot be said that they
are consumable. Therefore, the revisionist was
not entitled to purchase the same utilizing Form
-3B

Revisions dismissed. (E-12)

List of Cases relied upon:-

1. Coastal Chemicals Ltd. Etc. Vs Commercial
Tax Officer, A.P., (2000) 117 STC 12

2. Kisan Sahkari Chini Mills Vs Commissioner of
Sales Tax, 2002 (125) STC 216 (Alld.)

3. Ballarpur Industries Ltd. Vs St. of Karn.,
(1978) 42 STC 401 (Kar)
(Delivered by Hon'ble Alok Mathur, J.)

1. Heard Sri Pradeep Agarwal,
learned counsel for the revisionist as well
as Sri Rohit Nandan Shukla, learned
counsel appearing for the opposite party.

2. The present revision has been
preferred assailing the order of the
Commercial Tax Tribunal (hereinafter
referred to as "the Tribunal") dated
07.07.2007, whereby by means of common
judgment, the second appeals preferred by
the revisionist pertaining to assessment
years 1999-2000, 2000-2001 and 20012002, have been dismissed on common
question of law arising for determination
before the Tribunal.

3. Against the impugned judgment of the
Tribunal dated 07.07.2007 three revisions have
been preferred and considering that common
question of law are involved, they are being
disposed of by this common judgment.

4. Brief facts of the case are that the
revisionist firm is registered dealer under the
U.P. Trade Tax Act, 1948 (hereinafter referred
to as "the Act, 1948") and is engaged in
manufacture and sale of sugar. The revisionist
had applied for grant of "recognition certificate"
under Section 4-B of the Act, 1948 read with
U.P. Trade Tax Rules, 1948 and was granted
recognition certificate no. ST433, dated
28.07.1994. Further applications were made for
adding certain goods and by means of order
dated 16.12.1998, recognition certificate was
amended and revisionist was entitled to
purchase the goods on concessional rate of tax,
which were to be utilized by him for
manufacture of notified goods.

5. It is during course of assessment
proceedings it came to the notice that revisionist
had purchased 'paint' on concessional rate of tax
at the rate 2.5% (normal rate of tax 15%)
against Form-3B and hence he was put under
notice asking him to reply as to why he has
purchased Paint utilizing Form-3B, despite the
fact that Paint is not a raw material used for
manufacture of sugar and hence why should
difference of tax of 12.5% be not realised from
him.

6. The revisionist responded to the
said notice and in his defence stated that he
had purchased Paint as it was covered
1168 INDIAN LAW REPORTS ALLAHABAD SERIES
under the heading "Consumable Stores" for
which he had duly applied and in the
recognition certificate issued on 28.07.1994
the said article was indicated at item no. 1.
It was further stated that items no. 4 of
amended
certificate
dated
16.12.1999
"material for consumable stores".

7. The Assessing Authority rejected
the explanation given by the revisionist and
imposed penalty under Section 3(b) of the
Act, 1948, holding that Paint is not a
material
which
is
utilized
in
the
manufacture of sugar, but it is only used for
maintenance of machinery and hence it is
not covered under the definition of
"consumable stores" and the revisionist was
not eligible to purchase Paint against Form3B on concessional rate of tax as it is not
covered
under
the
definition
of
"consumable stores".

8. Aggrieved by the aforesaid order
dated 23.01.2020, the revisionist preferred
first appeal before the Joint Commissioner
(Appeals), Sitapur which was dismissed by
means of order dated 16.07.2003, and
subsequently, second appeal was preferred
before the Tribunal and all the three
appeals were dismissed by means of
common
judgment
and
order
dated
07.07.2007, which is impugned in the
present revisions.

9. The only question which arise for
determination by this Court is "as to
whether the revisionist was entitled to
purchase 'paint' at concessional rate of tax
under Section 3(b) of the Act, treating it to
be "consumable store", which is utilized in
the manufacture of sugar.

10. Learned counsel for the revisionist
has submitted that Paints are used to protect
the plant and machinery as sugar juice is
acidic in nature and sulphur-di-oxide is also
used for clarification of sugar cane juice in
the second stage of removal of colour
which is also acidic in nature and corrodes
the machinery and for prevention of which
paints are necessary. He submits that in
order to protect the plant and machinery,
Paints are utilized and hence it cannot be
said that they are not essential for
manufacturing sugar and consequently
revisionist is entitled to purchase Paints at
concessional rate of tax utilizing Form-3B
and submits that finding of the Assessing
Authority, first Appellate Authority as well
as the Tribunal are perverse, illegal and
arbitrary and deserve to be interfered with
by this Court in exercise of its revisional
powers.

11. Learned counsel for the revisionist
further submitted that similar controversy
has also been determined by the Tribunal in
the case of Commissioner of Commercial
Tax Vs. Awadhesh Sugar Mills Ltd.,
Hargaon, by means of judgment passed in
Appeal No. 307-2001, dated 01.01.2004,
wherein the Tribunal held that Paints are
included in the definition of "consumable
store" and has set aside the penalty order
while allowing the said appeal.

12. Sri Rohit Nandan Shukla, learned
counsel appearing for the Revenue has
supported the impugned judgment and
order as well as the orders passed by the
Assessing Authority as well as first
Appellate Authority and has submitted that
for manufacture of sugar 'paints' is not a
raw
material
which
is
utilized
for
manufacture of sugar and hence revisionist
has purchased the 'paints' utilizing Form3B in clear violation of provisions of
Section 4(b) of the Act and hence there is
no infirmity in the orders passed by the
authority below. He further submits that
7 All. M/s The Seksaria Biswan Sugar Fact. Ltd. Vs. Commissioner of Trade Tax U.P.
1169
definition of "consumable store" was
interpreted by the Hon'ble Supreme Court
in the case of Coastal Chemicals Ltd. Etc.
Vs. Commercial Tax Officer, A.P.,
(2000) 117 STC 12, wherein the Court has
held as follows :-

"The word 'consumables' in the said
provision takes colour from and must be
read in the light of the words that are its
neighbours,
namely,
'raw
material',
'component part', 'sub-assembly part' and
'intermediate part' so read, it is clear that
the word 'consumables' therein refers only
to material which is utilized as an input in
the manufacturing process but is not
identifiable in the final product by reason
of the fact that it has got consumed therein.
It is for this reason that 'consumables' have
been expressly referred to in the said
provision, though they would fall within the
broader scope of the words 'raw material'.

In the case of Thomas Stephen & Co.,
relied upon in the impugned judgment, it
was held that cashew shells used as fuel did
not get consumed in the manufacture of
other goods and that "consumption must be
in the manufacture as raw material".

To use the words of Thomas Stephen
& Co. the natural gas used by the appellant
does "not tend to the making of the endproduct". it is not a 'consumable'."

13. The provisions of Section 4-B(2)
of the Act, 1948 provide that "where a
dealer requires any goods, referred to in
sub-section (1) for use in the manufacture
by him in the State, of any notified goods,
or in the packing of such notified goods
manufactured or processed by him, and
such notified goods manufactured or
processed by him, and such notified goods
are intended to be sold by him in the State
or in the course of inter-State trade or
commerce or in the course of export out of
India, he may apply to the assessing
authority in such form and manner and
within such period as may be prescribed,
for the grant of a recognition certificate in
respect thereof, and if the applicant
satisfied
such
requirements
including
requirement of depositing lat fee, and
conditions as may be prescribed, the
assessing authority shall grant to him in
respect of such goods a recognition
certificate in such form and subject to such
conditions, as may be prescribed."

14. The word 'goods' as mentioned
above, have been defined in Explanation
(a) to Section 4-B(2) of the Act, 1948
according to which :-

"Explanation.- For the purposes of
this sub-section-

(a) 'goods required for use in the
manufacture' shall mean raw materials,
processing materials, machinery, plant,
equipment, consumable stores, spare parts,
acessories, components, sub-assemblies,
fuels or lubricants;"

15. It is further provided in Section 4B(5) of the Act, 1948 that :-

"(5) Where a dealer in whose favour a
recognition certificate has been granted
under sub-section (2) has purchased the
goods after payment of tax at concessional
rate under this section or, as the case may
be, without payment of tax and has used
such goods for a purpose other than that
for which the recognition certificate was
granted or has otherwise disposed of the
said goods, such dealer shall be liable to
pay as penalty such amount as the
assessing authority may fix, which shall not
be less than the difference between the
amount of tax on the sale or purchase of
such goods payable under this section and
1170 INDIAN LAW REPORTS ALLAHABAD SERIES
the amount of tax payable under any other
provisions of this Act but not exceeding
three times the amount of such difference."

16. The Apex Court in the case of
Coastal Chemicals Ltd. Etc. (supra) has
clearly stated that word 'consumables'
refers only to material which are utilized as
an input in the manufacturing process
namely 'raw material', 'component part',
'sub-assembly part' and 'intermediate part'
etc.

17. Applying the aforesaid definition
to the facts of the present case, it is noticed
that 'Paints' are not utilized either as raw
material or processing material such as raw
material, plant, machinery, equipments,
spare parts, but as per the revisionist 'paints'
are utilized only for maintenance of plant
and machinery.

18. It is also clear that 'Paints' are not
used as input in the manufacturing process
of sugar and hence clearly they are not
consumed in the process of manufacture of
sugar and are also not involved in making
of end product and hence it cannot be said
that they are 'consumables'.

19.

Similar
controversy
was
determined by this Court in the case of
Kisan
Sahkari
Chini
Mills
Vs.
Commissioner of Sales Tax, 2002 (125)
STC 216 (Alld.), where cement, steel and
paints were sought to be included as goods
which
are
directly
involved
in
the
manufacture of sugar. This Court relying
upon the judgment of Ballarpur Industries
Ltd. Vs. State of Karnataka, (1978) 42 STC
401 (Kar), wherein the Apex Court held as
follows :-

"--- One of the valid tests, in our
opinion, could be that the ingredient
should be so essential for the chemical
processes culminating in the emergence
of the desired end-product, that having
regard
to
its
importance
in
and
indispensability for the process, it could
be said that its very consumption on
burning up is its quality and value as raw
material. In such a case, the relevant test
is not its absence in the end-product, but
the dependence of the end-product for its
essential presence at the delivery end of
the process. The ingredient goes into the
making of the end-product in the sense
that without its absence the presence of
the end-product, as such, is rendered
impossible. This equality coalesce with
the requirement that its utilisation is in
the manufacturing process as distinct
from the manufacturing apparatus."

20. This Court in the case of The
Kisan Sahkari Chini Mills Ltd. (supra),
has observed as under :

"20. It is not the case of the
applicant that the three items mentioned
above
are
either
raw
material
or
consumables. On the other hand it is the
specific case taken by the applicant that
they fall under the description of the
word "stores". The word "store" has not
been defined under the Act or the Rules
framed thereunder. In Webster's Third
New International Dictionary of the
English Language, Unabridged, 1971
Edition, the word "stores" has been
defined as under:

"articles (as of food) accumulated or
some specific object and issued or drawn
upon as needed : the raw or unworked
material supplies of a manufacturing
concern."

21. Thus, the dictionary meaning of
the word "stores" is material supplies of a
7 All. M/S Suresh & Co. Vs. Commissioner of Trade Tax
1171
manufacturing
concern
or
articles
accumulated for some specific object and
issued or drawn upon as needed.

22. -------

23. Applying the aforementioned
principles, I find that the cement which is
required by the applicant for use in the
construction of factory building and or
foundation, as held by the honourable
Supreme Court in the case of J.K. Cotton
Spinning & Weaving Mills Co. Ltd. [1965]
16 STC 563 ; AIR 1965 SC 1310, which
has been followed by the honourable
Karnataka High Court in the case of
Ballarpur Straw Board Mills Ltd. [1978] 42
STC 401 and this Court in the case of
Sivalik Collulose Ltd. 1992 UPTC 1 cannot
be said that it is used either directly or even
remotely in the manufacture of finished
goods. Similar is the case of steel and
paints, which too is required only in the
repairs
of
boiler
and
protection
of
machineries. They cannot be said to be
used even indirectly in the manufacture or
processing of goods for sale. Thus, all the
three items would not fall under the
description of the word "stores", which are
used in the manufacture of finished goods."

21. The High Court rejected the
contention of the revisionist and held that
cement, steel and paints were included in the
definition of "consumable stores".

22. The judgment of the Tribunal in the
case of Awadh Sugar Mills Hargaon
(supra) is firstly distinguishable on the facts
inasmuch as interpretation of 'Industrial
Paints" is distinguished from 'Paints' which is
sought to be included as "Consumable
Stores" by the revisionist and secondly, in the
said judgment there is no discussion as to
whether "Industrial Paints" are utilized in the
manufacture of sugar and the revision has
been allowed only on the ground that
recognition certificate was granted to the
revisionist therein.

23. The aforesaid judgment of Tribunal,
in out considered view does not lay down the
law correctly and we do not approve of the
said decision.

24. This Court is of the considered view
that "Paints" are not utilized either as raw
material utilized for manufacture of sugar nor
is
so
closely
connected
with
the
manufacturing process so as to be included as
"consumable stores" and therefore the
revisionist was not entitled to purchase the
same utilizing Form - 3B, and we do not find
any infirmity in the judgment of the Tribunal
and hence the revisions are dismissed.

24. The question of law is answered in
favour of Revenue and against the revisionist.
----------
(2022)07ILR A1171
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 05.04.2022

BEFORE

THE HON'BLE ALOK MATHUR, J.

SALE/TRADE Tax Revision No. 163 of 2007

M/S Suresh & Co. ...Revisionist
Versus
Commissioner of Trade Tax ...Opp. Party

Counsel for the Revisionist:
P. Agarwal

Counsel for the Opp. Party:
C.S.C.

A. Tax Law - U.P. Trade Tax Act 1948 -
Section 11 - Merely because the said
transaction is reflected in the books of account