1996 (12) TMI 381 - AT - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the process of converting hot rolled steel strips (HR strips) to cold rolled steel strips (CR strips) constitutes a manufacturing process.
2. Whether HR strips and CR strips are considered different commercial commodities.
3. Eligibility of the applicant for tax remission under section 10G of the Bengal Finance (Sales Tax) Act, 1941 and section 41 of the West Bengal Sales Tax Act, 1994.
4. Validity of the notice proposing cancellation of the Eligibility Certificate (E.C.) granted to the applicant.

Detailed Analysis:

1. Manufacturing Process:
The core issue was whether converting HR strips to CR strips involves a manufacturing process. The applicant contended that the process includes slitting, pickling, rinsing, anti-corrosive treatment, cold rolling, annealing, and slitting to the required width. The Tribunal referred to the definition of "manufacture" in section 2(dd) of the Bengal Finance (Sales Tax) Act, 1941, which includes producing, making, extracting, or blending any goods. Additionally, the Tribunal cited Black's Law Dictionary and the South Bihar Sugar Mills Ltd. v. Union of India case, establishing that a new and distinct commodity must emerge from the process. The Tribunal concluded that the processes described by the applicant indeed constitute manufacturing since CR strips emerge as a new and distinct commodity from HR strips.

2. Different Commercial Commodities:
The applicant argued that HR strips and CR strips are different commercial commodities with distinct uses and characteristics. The Tribunal examined the uses, ISI specifications, and market distinctions between HR strips and CR strips, noting that HR strips are used in construction and fabrication, while CR strips are used in manufacturing white goods and consumer products. The Tribunal found that the two products are indeed different commercial commodities, despite falling under the same sub-item in section 14(iv) of the Central Sales Tax Act, 1956.

3. Eligibility for Tax Remission:
The applicant sought remission of tax under section 10G of the Bengal Finance (Sales Tax) Act, 1941, which applies to manufacturers in newly set up or expanded industrial units. The Tribunal noted that the applicant was registered and issued an E.C. for the manufacture of CR strips. Given that the conversion process constitutes manufacturing and CR strips are a different commercial commodity, the Tribunal held that the applicant is entitled to tax remission under section 10G of the 1941 Act and section 41 of the West Bengal Sales Tax Act, 1994.

4. Validity of Cancellation Notice:
The respondents issued a notice proposing to cancel the E.C. granted to the applicant, arguing that the process did not constitute manufacturing and that HR strips and CR strips are the same commodity. The Tribunal found that the respondents failed to provide evidence supporting their claim that HR strips and CR strips are treated as the same commodity in common parlance. The Tribunal quashed the notice and any order based on it, affirming the applicant's entitlement to the E.C. and tax remission.

Conclusion:
The Tribunal allowed the application, quashing the impugned notice and any consequential orders. The Tribunal affirmed that the applicant is a manufacturer of CR strips and entitled to the benefits under the West Bengal Incentive Scheme, 1993, and the remission under section 10G of the Bengal Finance (Sales Tax) Act, 1941. The request for a stay of the judgment was rejected.