Legal Steam Not A Chemical, Rules Bombay HC

[rajneesh madhok]

Steam not a chemical, rules Bombay HC

Steam not a chemical, rules Bombay HC - India - The Times of India

Ask any schoolkid and she will tell you that steam is H²O. Bombay High Court was however recently approached to decide on a 21-year-old issue: whether steam was a chemical or not.

At stake was tax to the tune of crores; if it was designated as a chemical it would attract a mere 4% sales tax. But a division bench of Justice V C Daga and Justice K K Tated last week ruled that steam was not a chemical for tax purposes, which meant 10% sales tax would have to be paid.

The judges said for sales tax purposes the usage of the product in common parlance had to be considered. "In common sense, the steam is treated as byproduct of water and for preparation of the steam the process is just to boil water," said the judges.

"Therefore, the common man always treats steam as part and parcel of water. It is a fact that in taxing statute the words which are not of technical expressions or words of art but are words of every day use, must be understood and given a meaning, not in their scientific sense, but in a sense as understood in common parlance."

The court was hearing a case filed by M/s Gopalanand Rasayan, a company manufacturing sulphuric acid and other chemicals. During the manufacturing process, steam is generated which is sold as a byproduct. Tax authorities directed the company to pay 10% as sales tax for the assessment years 1988 to 1991. The dispute finally referred to HC.



Rajneesh Madhok

 

[ballym]

Look at it in a different context. Firms involved in the business produce chemicals and byproducts under a business manufacturing process. While sulphuric acid or a salt solution or salt or an untreated muddy residual is considered a chemical , water is not.
Is steam common? No. Is sale of steam common? No . Mostly any steam generated in some chemical process is used by the producer themselves, for power generation.
A chemical producer is using a chemical process to make a product. If he gets steam as byproduct, he should be levied tax on the basis of intent. Sales tax based on plant process, not productwise, if classification is based on group. Moreover, steam can never be a common product. We can make steam from water but it requires a large investment.
Levy of higher sales tax stifles free enterprise and value addition. Electricity is genarated from steam. I guess they charge 4% on electricity sale, if they do charge any sales tax at all.

 

[rajneesh madhok]

Dear Ballym ji,
Yeah the decision is with regard to the firm that is involved in business that produces chemicals and byproducts. I agree to you that the water is not considered as chemical though as per salt name it itself signifies that Sulphuric acid is chemical, Salt Solution will be considered as Sodum Choloride and so on the untreated muddy residual will also be considered as chemical.
But now we come to question. If steam is common, and so the sale of steam is also not common. Your version is 100% correct that the use of stem generated from chemical process is being used by the producer for power generation. Now we come to another point. LPG (Liquified Petroleum Gas) has so many uses. With this LPG we can cook food, run vehicle, can be used in Gas Geyser, can be used in homes and commercially by hotels and restaurants, used in marriage palces for cooking the food of general public and the use is made on commercial basis. Indian Government pay subsidies to the Oil Marketing companies and the same product has multiple uses. The same product when used in the homes and in hotels and restaurants though the use is the same to cook food but there is a lot of difference between its uses. Likewise the judgement to consider the use of the product is in a right direction. Now come to the point whether the LPG Gas cylinder should be provided with subsidy or should be taxed as it has multiple uses.
Sales tax should be applied on the basis of product uses. In India the LPG cylinders are being provided to household at subsidized rates but its use is more than 10 times commercially. The domestic cylinders are being converted in Commercial cylinders firstly. Secondly the domestic cylinders are being used commercially and this is being done in connivance with the officials of the department. Likewise this trend make losses in billions to the nation but there is no check on this malpractice.
It is really useless to discuss the uses of the product in India. I defined you that the Sales tax is being levied on the same product on different rates but there is misuse of billions. Whether we can consider the LPG as a common product. To convert steam from water it needs a large investment and the sales tax at what rate should be levied the Court is free to judge. But why not we consider the large scale loss to Govt. Exchequer. The electricity is generated by the steam. I honour the role of the unit that generate electricity from the steam, in one way that unit is not making any loss to Govt. Exchequer and not providing direct loss to the public as a whole. But the diversion of LPG for other purposes in connivance with the official machinery is sheer loss to the nation and the public.

Rajneesh Madhok

 

[ballym]

Steam is not common. it is specialized "Chemical" or we can say ' business production input". It can not be equated with water.
This intricate taxation creates national waste and also causes people to misuse as it happens in LPG. gradually this difference must be rought to zero. Other means may be developed to give benefit to poor. If one can afford costly school fee, they can easily pay few extra rupees for LPG.

 

[rajneesh madhok]

Ballym ji,
I agree to you that the Steam is not common. No doubt it is business production input. O.K, we consider that it can be equated with water.

Now we come to the point of LPG. In India why there is so much subsidy in LPG. Because the major portion of the black marketing goes in to the pockets of ministers and bureaucrats. That’s why there is large scale misuse of LPG. The bureaucrats will not make such a policy from which there permanent income should waive out. Steps to check the misuse at the large scale are not being taken.

Now we consider the factor of H.S.D. (High Speed Diesel). In India the Diesel is the product which gets subsidy from the Govt. Why the Govt. gives subsidy in Diesel. The main reason Govt says that the Diesel is being used for the producing agriculture produce. But the main use of Diesel is in vehicles and Power Generating Sets. The main cause of the subsidy is diversion of funds to Ministers and Bureaucrats. That’s why there is large scale corruption in appointment of Dealerships in LPG and Petrol / Diesel outlets.

Here the subsidies are being hotch-potched in the names of poor. That’s why in one Lecture our past Prime Minister had declared that if the Centre sends Rs one for the benefit of the poor, the amount reached not more than 4 paise to the beneficiary. Now tell me where the 96% amount goes away.

The question is not to give benefit to the poor. The people are paying reasonably for every product. You see during winter season the people are purchasing the LPG cylinders in black market, the Hotels, Dhabas, Restrurant and marriage palaces use domestic cylinders meant for Domestic use and by this misuse the Distributors earn handsomely. That amount is being distributed by distributor to bureaucrats and ministers. There is no check on large scale misuse. The public has been deprived of their rights and the with benefits of this robbery the ministers and bureaucrats are filling their pockets.

The people are still paying extra money for LPG but the amount is being diverted to another side not and the Govt is making losses of millions in Govt. Exchequers. This is a Political-Bureaucrats-Traders nexus. No body can do anything to improve the system.

Rajneesh Madhok