M/s. TMT GRANITES (PVT) LTD. Versus THE COMMISSIONER STATE GST DEPARTMENT, KERALA, TRIVANDRUM, THE DEPUTY COMMISSIONER OF STATE TAX STATE GST DEPARTMENT, PALAKKAD, THE ASSISTANT COMMISSIONER (ASSESSMENT), PALAKKAD AND THE STATE OF KERALA REPRESENTED BY ITS SECRETARY (TAXES DEPARTMENT), THIRUVANANTHAPURAM
VAT and Sales Tax
2018 (11) TMI 1360 – KERALA HIGH COURT – 2019 (26) G. S. T. L. 327 (Ker.)
KERALA HIGH COURT – HC
Dated:- 22-11-2018
WP (C). No. 31159 of 2018
CST, VAT & Sales Tax
MR DAMA SESHADRI NAIDU, J.
For The Petitioner : ADV. SRI. PHILIP J. VETTICKATTU
For The Respondent : ADV. GOVERNMENT PLEADER
JUDGMENT
Introduction:
Mining and quarrying, as we know, are related, yet distinct activities. One concerns the major minerals, and the other minor minerals. One involves the prospecting or extracting, the other mere excavation. Their semantic nuances apart, can we treat “quarrying” as an act of “mining”? We will answer.
Facts:
2. TMT Granites (Pvt.) Ltd
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also the Kerala Minor Mineral Concession Rules, 2015.
5. Sri Vettickattu has taken pains to explain that the fuel consumed for the machinery and the motor vehicles must alike be treated as the goods enjoying the tax benefit under Section 8 of the CST Act. To support his contentions he has relied on Indian Copper Corporation Ltd., v. Commissioner of Commercial Taxes AIR 1965 SC 891, J.K. Cotton Spinning and Weaving Mills Co., Ltd., v. Sales Tax Officer AIR 1965 SC 1310, Bihar Mines Ltd., v. Union of India AIR 1967 SC 887, All Kerala River Protection Council v. State of Kerala 2015 (2) KLT 78, D.K. Trivedi and Sons v. State of Gujarat AIR 1986 SC 1323.
6. Dr.Thushara James, the learned Government Pleader, on the other hand, has strenuously contended that the mining and quarrying are entirely different activities. According to her, the Government grants mining permit, whereas the Department of Geology grants quarrying permit. She has also submitted that mining concerns itself with major
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judgments concerned themselves either with the permits granted, mostly, for mining. So those judgments, she asserts, could be distinguished. In the end, she urges the Court to dismiss the writ petition.
9. Heard Sri Philip J. Vettickattu, the learned counsel for the petitioner, and Dr. Thushara James, the learned Government Pleader. Discussion:
10. The petitioner-Company, a registered dealer under the KVAT Act and the Central Sales Tax Act, 1956, has been engaged in quarrying and crushing of granite metals. It uses several items of machinery and motor vehicles for its quarrying operations. It claims that the machinery and the motor vehicles are “integrally connected” with its business. For its machinery and vehicles, the Company uses HSD Oil as fuel. As the Company needs huge quantities of oil, Hindustan Petroleum Corporation has allowed it to have its own filling station.
11. So the Company Wanted to take advantage of Section 8 of the CST Act. For that purpose, the Company wanted
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he goods referred to in sub-sec. (1), ”
(a)[* * * * * *]
(b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture of processing of goods for sale or in the telecommunications network, or in mining or in the generation or distribution of electricity or any other form of power;
. . .
(italics supplied)
13. From the above provision, we can gather that a dealer gets a tax concession. To get that concession, it must fulfill certain conditions: (a) the dealer must be dealing in inter-State trade or commerce, (b) it must be selling to registered dealers goods as described in sub-section (3), and (c) it must be paying tax under the CST Act. These conditions fulfilled, the dealer can pay tax at “three per cent of its turnover or at the rate applicable to the sale or purcha
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underground excavation formed in the roof, or fault, for obtaining material for pack walls.
16. The same lexicon defines “mining” as the science, technique, and business of mineral discovery and exploitation. Strictly, “the word connotes underground work directed to severance and treatment of ore or associated rock. Practically, it includes opencast work, quarrying, alluvial dredging, and combined operations, including surface and underground attack and ore treatment.”
17. The Shorter Oxford English Dictionary defines “quarry” as an open-air excavation from which stone for building, etc., is or has been obtained by cutting, blasting, etc. Any place from which stone may be extracted. The same dictionary defines “mine” as an excavation or a system of excavations in the earth for the extraction of metal, metallic ore, coal, salt, etc. Lexically, true, both “quarrying” and “mining” are distinct activities with different objectives. But the question is, does this distinction survive legis
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57, deals with the “Declaration as to the expediency of Union control”: in the public interest the Union should control and regulate the mines and develop the minerals to the extent provided in the Act. Then, Section 3(aa) inclusively defines “minerals”: all minerals except mineral oils qualify under the definition.
21. Section 3 (c) defines “mining lease”. It is a lease granted “for the purpose of undertaking mining operations, and includes a sub-lease granted for such purpose.” And, under Section 3(d), “mining operations” means any operations undertaken for winning any mineral. Indeed, under Section 15 of that Act, the State Government has the power to regulate the minor minerals. It may regulate the grant of “quarry leases, mining leases, or other mineral concessions” in respect of minor minerals and for purposes connected therewith.
22. Rule 2 (xvi) of the Kerala Minor Minerals Concession Rules 2015 defines “quarrying lease” to mean a mining lease for minor minerals granted under
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legislative history and also the federal distribution of powers on the subject: mining. Referring to the States' powers, it observes that under Section 15(1) of the 1957 Act various State Governments have made rules in respect of minor minerals. Although these rules vary from State to State, there are certain broad features present in all of them. The majority of States provide for two types of mineral concessions: a lease on tenure basis and a permit to extract a specified quantity of a minor mineral. In all the States, the rules provide for the grant of a lease for a particular term, varying from one year to twenty years. These leases are variously described in different State rules as “mining lease”, “quarrying lease” and “quarry lease”, and are similar to the mining leases granted under the Mineral Concession Rules, 1960.
26. Then, D.K. Trivedi has paid particular attention to the Gujarat Minor Mineral Rules, in the statutory backdrop of Section 15(2). The term “minerals”, as we h
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) of Section 3, “mining lease”, among other things, means “a lease granted for the purpose of undertaking mining operations”. Under Clause (d) of Section 3, the expression “mining operations” means “any operations undertaken for the purpose of winning any mineral”. “Quarry”, we have already seen, is to excavate stone for building, etc. by cutting, blasting, or the like. Relying on the lexical meaning of quarrying, D.K. Trivedi has emphatically held that “quarrying minerals is, therefore, a mining operation inasmuch as it consists of an operation undertaken for the purpose of winning particular classes of minerals.”
28. Then, D.K. Trivedi refers to Clause (vi) of Rule 2 of the Gujarat Rules. That Rule defines “quarry lease” as “a kind of mining lease in respect of a minor mineral granted under these rules.” In this context, we will, here, examine Rule 2 (xvi) of the Kerala Minor Mineral Concession Rules, 2015. It is, in fact, in para materia with the Gujarat Rule: “Quarrying Lease” mea
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he petitioner Company is a dealer under Section 8 of the CST Act. That assertion admits of no contradiction. But the Company claims benefits under Section 8 of the CST Act. The question is whether the fuel it uses for its machinery and vehicles qualifies for that benefit, as we now accept that the Company is in mining activity.
31. The goods referred to in clause (b) of sub-section (3) of Section 8, which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel, or lubricants, in the manufacture or processing of in the telecommunications network or in mining, or in the generation or distribution of electricity or any other form of power.
32. In Indian Copper Corporation Limited, the petitioner applied to the tax authorities for registration as a dealer under the Central Sales Tax Act, setting out a list of goods for specification in the certificate of reg
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ning operations and in the manufacturing process – the two processes being interdependent – it would be impossible to exclude vehicles which are used for removing from the place where the mining operations are concluded to the factory where the manufacturing process starts. It appears that the process of mining ore and manufacture with the aid of ore copper goods is an integrated process and there would be no ground for exclusion from the vehicles those which are used for removing goods to the factory after the mining operations are concluded. Nor is there any ground for excluding locomotives and motor-vehicles used in carrying finished products from the factory. The expression “goods intended for use in the manufacturing or processing of goods for sale” may ordinarily include such vehicles as are intended to be used for removal of processed goods from the factory to the place of storage.
34. In J.K. Cotton Spinning and Weaving Mills, the Supreme Court has followed Indian Copper Corp
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without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods “in connection with” manufacture of or “in relation to” manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Court in which it was held that vehicles used by a Company (which mined ore and turned out copper in carrying on activities as a miner and as manufacturer) fell within Rule 13, even if the vehicles were used merely for removing ore from the mine to the factory, and finished goods from the factory to the place of storage. Spare parts and accessories required for the effective operation of those vehicles were also held to fall within Rule 13.”
35. Veering back to the facts, I may observe that t
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