TMI Blog1996 (5) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of manufacturing and production work to be done and the raw materials required therefor were mentioned. After due enquiries and verification as to the nature of business and raw materials required, registration certificates under the State Act and Central Act have been issued by the Sales Tax Officer, Circle-II, Durg. The certificates described the nature of manufacturing carried on, viz., iron steel processing, fabrication, ferrous and non-ferrous casting and ribbed bar twisting. Various raw materials and incidental goods have been specified as per the list enclosed with the certificates. The petitioner also applied for grant of recognition certificate under section 16-C to enable him to purchase raw materials and incidental goods without payment of tax and after due enquiry and verification, recognition certificate dated May 18, 1990 was issued which was valid with effect from April 24, 1990. In this certificate also, the nature of industrial activity carried on, i.e., the goods manufactured and also the raw materials and incidental goods required therefor have been specified as per the list enclosed with the registration certificate. 3.. The petitioner also applied to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the notification. The petitioner therefore filed a writ petition challenging show cause notices issued by the Sales Tax Officer before this Court and it came to be registered as M.P. No. 2895 of 1990. Thereafter the Director of Industries, Tax Benefit Section, Directorate of Industries, Madhya Pradesh, by a notice dated December 22, 1990, directed the petitioner to appear before the State Level Committee at Bhopal on 7th and 8th January, 1991 and to show cause why the eligibility certificate of the petitioner be not cancelled from the date of issue. The petitioner appeared before the State Level Committee from time to time and filed written and oral submissions. The petitioner was informed by letter dated March 7, 1991 by the Director of Industries, Bhopal, that the eligibility certificate was reconsidered in 44th meeting of the State Level Committee held on February 11, 1991 and the committee cancelled the eligibility certificate with effect from April 19, 1990, i.e., the date of commencement. The State Level Committee held that for entitlement of exemption, it is an essential condition that new and different goods should have emerged and that mere processing does not entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, character and use. M.S. materials, such as M.S. iron scrap, cast iron, alloys, mild steel and chilled steel rolls of large sizes, which are auctioned by Bhilai Steel Plant are machined on lathe and other machines to obtain rolls of desired smaller shapes and sizes according to the requirement of different machines installed in different re-rolling mills. Such sizes are of 2", 3" and 4", etc. Defective ribbed bars in straight length and in coils are auctioned by Bhilai Steel Plant. These are also twisted and converted into C.T.D. bars commonly known as tor steel with cold twisting process. The tor steel and twisted bars are different commodities than ribbed bars and other materials. The tor steel is used in civil construction. 8.. It is also stated by the petitioner that in the manufacture of processed cast iron, scrap is used as raw materials. Bhilai Steel Plant sells cast iron scrap of 30 M.T. to 60 M.T. in single pieces. Similarly bottoms, plates, iron skulls and other scrap materials in huge sizes are sold. These are worked upon with the help of dropped hammers run with the aid of powers. With the help of various machines, these are converted into saleable steel of required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gust, 1986; and (iii) hold an eligibility certificate issued by an officer authorised for the purpose; from payment of tax under section 6 of the said Act to the extent specified in column (2) for the period specified in column (3) subject to the restrictions and conditions specified in column (4) of the Schedule and the general conditions specified in paragraph 2 below: SCHEDULE Class of dealers Extent of exempttion Period Restrictions and conditions subject to which exemption has been granted. (1) (2) (3) (4) 1. Dealers registered as small-scale industrial units with the Industries Department of the Government of Madhya Pradesh and who have made a capital investment in fixed assets of above rupees ten lakhs. Whole of tax. For an industrial unit established in a district specified in(i) Part I of annexure I Three years. (ii) Part II of annexure ICategory A-Five years. Category B-Five years. 2(I). Dealers registered with the Director-General of Technical Development, Government of India, as an industrial unit or registered as industrial unit by an authority duly e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of manufacture." 11. In short the contention of the State is that altering into shape or size or physical appearance of a particular goods does not amount to "manufacture" as the basic goods remains the same. It is contended that merely cutting, sizing, twisting or straightening of basic goods of the goods being disposed of to foundries or rolling mills, the activity of the petitioner does not in any manner bring about any change termed as change in physical composition by the petitioner. The basic composition of the material in question, i.e., scraps whether in the form of defective slabs, billets, bars, blooms, etc., remains the same. It is contended that the scraps purchased and is though disposed of in different shape and size the physical appearance remains the same and therefore it cannot be said to be manufacturing process and it is not covered by the notification so as to entitle the petitioner for exemption from sales tax as per aforesaid notification. 12. We have heard learned counsel for the parties and perused the record. Shri Shrivastava, learned counsel for the petitioner has invited our attention to definition of the word "manufacture" as defined in section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C); AIR 1981 SC 1014 (Chowgule Co. Pvt. Ltd. v. Union of India), [1993] 91 STC 408 (SC); (1994) 1 SCC Suppl 413 (Rajasthan Roller Flour Mills Association v. State of Rajasthan), [1995] 99 STC 83 (SC); (1995) 5 SCC 527 (Commissioner of Sales Tax v. Jagannath Cotton Company), [1988] 70 STC 314 (SC) [Collector of Central Excise v. Kutty Flush Doors and Furniture Co. (P) Ltd.], [1983] 142 ITR 306 (Bom) (Commissioner of Incometax, Bombay v. Rashtriya Metal Industries Ltd.), [1988] 69 STC 226 (SC) (Collector of Central Excise v. Kiran Spinning Mills), [1980] 46 STC 394 (Mad.) (Arkay's National Engineering and Foundry Co. v. State of Tamil Nadu) and [1984] 55 STC 62 (Mad.) (K.A.C. Trading Corporation v. State of Tamil Nadu). Learned counsel also submitted that the exemption notification should be strictly construed and in support thereof, learned counsel invited our attention to [1996] 102 STC 476 (SC) supra; (1995) 4 SCC 473 (Rajasthan Spinning and Weaving Mills Ltd. v. Collector of Central Excise). 13.. Learned counsel Shri Shrivastava, appearing for the petitioner also submitted that once a certificate of exemption has been granted and the petitioner acted thereon, it cannot be rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it was found that a new article with different identity emerges and it becomes a new marketable commodity. Hence, it was held that this process involved was one of manufacture. But that is not the case here before us. In the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC); AIR 1976 SC 800 also under the Tamil Nadu General Sales Tax Act, section 14, clause (iv) of the Central Sales Tax Act came up for consideration-whether the object is to tax sales of goods of each variety and not the sale of substance out of which they are made. In this context, their Lordships of honourable Supreme Court held: "The more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item in section 14 is that, each item so specified forms a separate species for each series of sales although they may all belong to genus: 'iron and steel'. Hence, if iron and steel 'plates' are melted and converted into 'wire' and then sold in the market, such wire would only be taxable once so long as it retains its identity as a commercial goods belonging to the category 'wire' made of either iron or steel. The mere fact that the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtracting, preparing or making any goods; but the idea of this definition is that something new should emerge out of it. The manufacture has various shades and meanings in context of sales tax legislation and if the goods to which some labour is applied remains essentially the same, then that commercial article cannot be said to be the final product is the result of manufacture. Innumerable examples can be quoted to show that notwithstanding by processing, new identity has emerged still it cannot be said to be manufacture as it has not changed its essential character. Series of decisions have been quoted before us to throw light on each subject which is peculiar of its own kind. Instead of referring to all those cases, we have referred only those cases which are nearer to the issue before us, i.e., relating to iron and steel. All these cases referred to above show that their Lordships were conscious that when some new thing is made out by fabrication or by twisting, but if essential element remains the same, then that item would not be treated to be an item prepared by processing or manufacturing. 16.. In American case of East Texas Motor Freight Lines v. Frozen Food Express 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the sale by them of such batteries was not resale. Even before the dry batteries were manufactured, the plates were immersed in electrolyte and completely charged, a process which was described as 'formation charge'. They were also kept immersed in electrolyte. Only, before the goods were actually delivered to the dealers the electrolyte was thrown out because it consisted of an acid component and there may be risks involved if it were to split in the process of transportation. All that the dealer did was to reintroduce this electrolyte into the battery after it was purchased and, where efflux of time made it necessary, also to re-charge it so that it may serve the purpose for which it was required. Basically speaking, therefore, the goods produced by the manufacturers as well as the goods sold by the dealers were one and the same, viz., batteries falling under entry 58." 19.. Upshot of above discussion is that the State is right in its submission that purchase of iron scrap and its conversion into various shapes according to the requirement of the customers would not amount to a process of manufacture so as to entitle the petitioner for the benefit of exemption under the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation of facts, the authority realised that grant of exemption in the present case was not warranted and hence, the same has been revoked and the principle of estoppel cannot operate in such a case. However, one thing is clear that the eligibility certificate for exemption from tax was given by the Committee on April 19, 1990 and the same has been withdrawn/revoked by order dated March 7, 1991 with effect from April 19, 1990. This cannot be permitted because it will amount to causing greater hardship to the assessee because the assessee has acted upon the eligibility certificate issued by the competent authority and on the basis of the appreciation of facts, the authority has now changed its opinion and wants to withdraw the certificate. If the authority wants to withdraw the eligibility certificate, then the effectivity of withdrawal shall be with effect from the date of order and it cannot be made retrospective. To this extent submission of learned counsel is correct that the order of withdrawal of eligibility certificate cannot be given retrospective effect and the petitioner is entitled for the relief to this extent. 22.. In the result, this writ petition and other writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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