Case: The State Of West Bengal Vs. The Indian Iron &amp; Steel Co. Ltd

2. The respondent company is the owner of Ramnagar colliery. It is also the owner of iron and steel factories and workshops at Hirapur and Kulti. Ramnagar colliery is a "coal mine". The coal raised from the Ramnagar colliery is by and large used in the manufacturing processes carried on in the iron and steel factories and workshops at Hirapur and Kulti. Some coal was also sold by the respondent company to outsiders. In the years 1946-47, 1947-48 and 1948-49, the respondent company lodged a return before the Collector of Burdwan under Section 72 of the Bengal Cess Act of 1880 (to be hereinafter referred to as the Act). Therein the company valued the coal supplied by the colliery to the factories mentioned earlier at Rs. 6/11/5 per ton, a sum less than the actual cost of raising the coal and computed the profits of the colliery on that basis. The company adopted the same basis for the purpose of paying education cess under Section 31 of the Bengal Primary Education Act, 1930. The provisions of the said Act in the matter of levy of education cess are similar to that of the Act. The Cess Deputy Collector who was the assessing authority under the Act as well as the Collector of Burdwan, the assessing authority under the Bengal Primary Education Act, rejected the returns submitted by the respondent company and computed the profits of the colliery, valuing the coal supplied by it to factories mentioned at Rs. 12/8/- per ton which was the control rate at the relevant time. On that basis the Cess Deputy Collector called upon the respondent company to pay Rs. 39,852/5/- as road cess and public works cess for the years 1946-47, 1947-48 and 1948-49. The Collector of Burdwan computed the education cess payable by the company for the years 1946-47 and 1947-48 at Rs. 21,661/90 P. and called upon the company to pay the same. The respondent company paid the said amounts under protest. Thereafter it instituted the present suit for refund of Rs. 44,428/4/3, which according to it was the excess amount collected from it. It also prayed for a declaration that it earned no profits from the Ramnagar colliery during the years 1946-47, 1947-48 and 1948-49, from the coal consumed in its own workshops and factories and as such no road or public works cess or education cess in respect of the same could have been assessed and levied on it and that the impugned levies were ultra vires.3. The trial court decreed the suit as prayed for. The appellant took up the matter in appeal to the High Court of Calcutta. The High Court dismissed the appeal by its judgment dated April 17, 1962.

Reasoning:
This contention has to be rejected in view of the decision of this Court in Tata Iron and Steel Co. Ltd. v. State of Bihar, (1963) Supp 1 SCR 199 = (AIR 1963 SC 577  ). The ratio of that decision directly bears on the point under consideration. It may be noted that the appellant therein as well as the respondent in this appeal are both Tata concerns. In that case the appellant company was the owner of certain mines in Bihar from where it extracted iron ore which it utilised in its factory at Jamshedpur for making iron and steel. Under Sections 5 and 6 of the Act as amended in Bihar all immovable property situate in any part of the State of Bihar was liable to the payment of local cess which in the case of mines was to be assessed on the annual profit earned by them. For the assessment years 1954-56, the company was assessed by the Cess Deputy Collector on the basis that it had made profits of Rs. 4/7/- per ton of iron ore extracted. Tata Iron and Steel Co. Ltd. claimed that it was not liable to the payment of cess as it did not sell any ore as such and could not therefore be treated as having made any profit from the mines within the meaning of Section 6 of the Act. The question in that case was whether the appellant company could in law be said to have derived "profits" from the mines when the ore extracted was not sold by it as such but was utilised by it for the purpose of manufacturing finished products which it sold. This Court ruled in that appeal that on a true construction of Sections 6 and 72 of the Act as amended in Bihar - which amendments are not material for the decision of this case, - where activities other than mere winning the ore are carried on by an assessee with a view to convert the ore into a finished product and there is a transaction of sale of the ultimate product, the profit derived from the working of the mine is imbedded in the final realisation, and the profit which accrues to the assessee from the mining operation can be disintegrated from the total profit and ascertained and cess levieddifference in fact has no bearing on the ratio of the decision. The rule laid down in Tata Iron and Steel case is that, where the profit derived from the working of a mine is imbedded in the profits earned by the sale of the ultimate product, it is open for the assessing authority to disintegrate that profit and to find out the profits earned by the mine. The fact that in the one case the winning was that of the iron and in the order it is coal makes no difference in principle. In that case this Court ruled that the winning of the ore and converting it into a finished product could not be construed as two transactions conducted by them but it should be viewed as a single integrated undertaking for the production of steel and steel products. Similar is the position in the present case. Hence we hold that it was open to the assessing authority to take into consideration the value of the coal supplied to the factories and workshops referred to earlier in computing the profits of theare of the opinion that it is impermissible for us to go into that question in these proceedings. The liability to pay tax is one thing and mode of computation of the net profit is another. The mode of computation is a matter for the assessing authorities except where the computation is done in violation of any provision of law. If there was any mistake in the computation, that mistake should have been got rectified by following the procedure prescribed in the Act. If the respondent company was aggrieved by the mode of computation adopted by the assessing authority, it should have agitated that question firstly before that authority and thereafter before the appellate authority. Having not done so, the company cannot be permitted to raise that question in the present suit; otherwise the finality contemplated by Section 102 of the Act would become illusory.