TMI Blog1992 (9) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the purchase of raw materials, processing materials and machinery or packing materials used in the manufacture of goods for sale by a manufacturer holding the exemption certificate. Accordingly by the Government notification dated November 11, 1970, issued under subsection (2) of section 49 of the Act the Government has exempted a dealer who establishes a new industry and has been certified as such by the Commissioner of Sales Tax, from payment of the whole of the purchase tax under section 15 of the Act in respect of the purchases of raw materials, processing materials, machinery or packing materials from the person who is not a registered dealer. Similar exemption is provided for in respect of purchases made from registered dealers also against the prescribed certificate in form Z. The said exemption is referred to as "certificate of the Commissioner" in entry 53 of the Government notification issued under section 49 of the Act. The assessee in the present reference holds such exemption certificate as a new industry. The main activity of the assessee is to manufacture calcined bauxite. For the aforesaid purpose the assessee had purchased furnace oil and in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oil was a processing material and sulphur and carbon of the furnace oil were found in the calcinated bauxite in addition to the contents and thus there was a physical property change. In support of the abovesaid contention reliance was placed on the Supreme Court decision in the case of Chowgule Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 and on the decision of this High Court in the case of Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294. Against the abovesaid contentions raised on behalf of the assessee, it was urged on behalf of the Revenue that, the furnace oil was not a processing material but was a fuel simpliciter. It was urged that the furnace oil was required to be ignited and was used for the purpose of heating and thus, the furnace oil was being used as a fuel. Reliance was placed upon the decision of the Tribunal rendered in the case of Prakash Industries v. State of Gujarat. The evidence produced by the assessee was also considered and ultimately it was found that the furnace oil was being used as a fuel only in the process of manufacturing the calcined bauxite, and that the furnace oil can never be treated as the processing material. Thus the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see used furnace oil. The Assistant Commissioner, Sales Tax, visited the factory of the assessee in December, 1979 and had carried out the personal inspection. He had noticed certain aspects of the manufacturing process as the finding of facts. It was noticed that the furnace oil was carried by means of a pipe to burner, which was fitted in the bhatthi with a blower and the air was blown by means of the blower so as to keep the bhatthi constantly burning. It was found that the flame which was generated in the abovesaid manner used to cover the entire breadth and length of the Matthi and due to this process, the mixture of silica and soda ash kept in the bhatthi was converted into a honeylike semi-liquid, having particular formula, which product is known as sodium silicate. Reliance was also placed upon the affidavit and a sketch showing the working of the bhatthi or the kiln. After hearing the assessee and the Revenue, the view has been taken by the Assistant Commissioner, Sales Tax, that the furnace oil was used as a fuel only. While coming to this decision, reliance was placed upon the Tribunal's decision in Prakash Industries v. State of Gujarat (Second Appeal No. 237/80?). Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete and that, the heat could not be generated without the use of the furnace oil, and therefore the abovesaid article, namely, the furnace oil must be taken as the processing material. They have further contended that, if once this position is accepted, the abovesaid commodity, namely, the furnace oil would fall within the purview of rule 42A of the Rules and the necessary notification issued by the Government, and therefore, the assessee would be entitled to the benefit under the scheme available to the new industries. Anyhow, the contentions raised by Ms. Doshit the learned advocate who appears on behalf of the Revenue is that the decision rendered by the Sales Tax Tribunal and the sales tax authorities below are completely justified on the basis of relevant material before them, and that, there is absolutely no doubt that the furnace oil was being used as a fuel only. It is also contended by Ms. Doshit that, merely because the furnace oil was required to be utilised for the purpose of generation of heat the same cannot be taken as the processing material within the meaning of rule 42A of the Rules and the relevant notification issued by the State Government under sub-section (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided they are able to establish that the furnace oil was the processing material. At one juncture the learned advocates appearing on behalf of the assessees wanted to show us the difference in language and in spirit between rule 42 and rule 42A of the Rules. Anyhow, according to us the questions shall have to be decided on the basis of rule 42A which exist at present. In view of this situation we do not consider it necessary to take up the question of comparative examination of the language and the spirit of rule 42 and rule 42A of the Rules. It is not in dispute that certain notification regarding exemptions can be issued by the State Government under section 49(2) of the Gujarat Sales Tax Act, 1969. In view of this position reference shall have to be made to the relevant notification which is dated November 11, 1970, which says that there would be a refund in respect of the whole of the purchase tax under section 15 of the Act, provided certain conditions are fulfilled. We are not concerned with the other conditions of the notification, but it should be pointed out once again that for claiming the benefit of the notification the purchases must be of raw material, processi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e air was blown by means of the blower so as to keep the bhatthi constantly burning. It is also noticed as a finding of fact that the abovesaid was the procedure or process as a result of which a honey like semi-liquid known as sodium-silicate was being manufactured, having a particular chemical formula with which we are not concerned. It appears that reliance was also placed upon a sketch or a rough drawing of the kiln or bhatthi, which appears as annexure 5. This sketch would go to show that the furnace oil was being stored in a storage tank and it used to go to a burner through a pipe and later on the furnace oil used to enter in the fusion furnace and thereafter the flames were going to that chamber which contains the boiling pans. This process also is not in dispute before us. Therefore in this reference also the question as to whether the furnace oil was being used as a fuel only or as the processing material requires to be determined on the abovesaid process of manufacture. Reliance has been placed by the assessee in these two references upon the Supreme Court decision in J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563. The question bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the purview of the term processing material in rule 42A of the Rules, it should not be overlooked that certain other commodities or materials which appear to be slightly far related shall have to be regarded as the commodity or the article used in the manufacture of a particular finished commodity. The learned advocates have distinguished between the words "in manufacture and for manufacture". Therefore it appears that the present two references would more or less be required to be decided on the decision rendered by the Supreme Court in the aforementioned decision. It must not be overlooked in that decision certain other goods which were required for the creation of the designs, etc., were also taken as the goods in the manufacture or process of the goods for sale. On the other hand our attention has been drawn to the Supreme Court decision in Deputy Commissioner of Sales Tax v. Thomas Stephen Co. Ltd. [1988] 69 STC 320. In this decision the question was as to whether the cashew shells can be said to have been consumed in the manufacture of other goods within the meaning of section 5A of the Kerala General Sales Tax Act, 1963. The assessee-company were the dealers in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale in the State; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in section 5." Ms. Doshit has tried to urge that in the above case also the Supreme Court had taken into consideration the fact that the use of cashew shells was taken, as a fuel only. But when the decision is studied in all its entirety, it becomes clear that the question which was in fact, considered by the Supreme Court was as to whether the cashew shells were being consumed as the raw material in the process. This position becomes clear because the Supreme Court has also preferred to consider the decision in the case of Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63, wherein the question was as to whether the sliced pine apple being sold in sealed cans can be said to have been consumed in the process. The Supreme Court has also pointed out that "the cashew shells did not get transformed into the end-product. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the operations of handling the ore could be said to be the goods purchased for use "in the manufacture or processing of goods for sale or in mining" so as to attract the lower rate of sales tax under the relevant provisions of the Central Sales Tax Act, 1956. The Supreme Court has pointed out that the mechanical ore handling process can be divided into 7 different operations but all the goods purchased by the assessee for use in the abovesaid operations could be said to be the goods purchased for the abovesaid use. The learned advocates for the assessees have also placed reliance upon a Bench decision of this Court in State of Gujarat v. Wood Polymer Ltd. [1982] 50 STC 229. The aforementioned decision deals with the question of justification and warrant for departing from the legislative dictionary meaning of the term "sale" as defined under section 2(28) of the Gujarat Sales Tax Act, 1969. It appears to us that the abovesaid decision in case of State of Gujarat v. Wood Polymer Ltd. [1982] 50 STC 229 (Guj) is not much relevant for our purpose, and therefore a detailed reference to the same is not called for, though heavy reliance has been placed on the same by the learned adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 1982. The question indeed related to the expression "raw material" which is not a defined term. While examining this question it has been pointed out that: "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." This decision also in a way goes to assist the submissions canvassed before us by the learned advocates for the assessees. Thus on overall consideration of the factual and legal aspects emerging from these two references, we are inclined to say that the Sales Tax Tribunal and the authorities below were not justified in taking a view that the furnace oil was being used as a fuel only and, therefore, it was not falling within the meaning of the processing material within the meaning of rule 42A of the Rules. On a careful examination of the entire process being adopted for the manufacture of the endproduct, we are satisfied that the heat treatment was the key process in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
