TMI Blog2006 (9) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vide assessment framed on July 2, 1986, the claim of the assessee for deduction from turnover under rule 29(xii) of the Punjab General Sales Tax Rules, 1949 (for short, the Rules ) on account of purchase value of furnace oil used in manufacture was allowed. Subsequently, on April 4, 1991, the revisional authority issued notice to the assessee under section 21(1) of the Punjab General Sales Tax Act, 1948 (for short, the Act ) on the ground that deduction under rule 29(xii) of the Rules had been allowed wrongly. Accordingly, the same was disallowed vide order dated June 24, 1991. Revision of the assessee before the Tribunal against the order passed by the revisional authority was dismissed vide order dated February 28, 1992 with the following observations: I have considered the arguments of both the parties and seen the record of the case. The main question involved in this case is whether furnace oil consumed by the applicant is directly used in the process of manufacturing purpose or not. Out of this issue, so many points arise. These are being considered/discussed and adjudicated here. Firstly, whether furnace oil purchased or used is an aid in manufacture and not as es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods from the taxable turnover of the assessee, which had been used by the assessee in the manufacture of other goods. According to the learned counsel for the assessee, the furnace oil, so purchased by the assessee on payment of tax, was used by it in manufacture of iron and steel products and without use of furnace oil, the production itself was not feasible. Once the assessee had been granted right to purchase furnace oil for use in manufacture by mentioning the same in the registration certificate, there was no reason to deny the benefit thereof at a later stage. To buttress his arguments, learned counsel for the assessee relied upon the judgments of the honourable Supreme Court in J.K. Cotton Spinning Weaving Mills Co.Ltd.v.Sales Tax Officer, Kanpur [1965] 16 STC 563 (SC); AIR 1965 SC 1310, Indian Copper Corporation Ltd.v.Commissioner of Commercial Taxes, Bihar, Patna [1965] 16 STC 259 (SC); AIR 1965 SC 891, and Collector of Central Excise, New Delhi v.Ballarpur Industries Ltd.[1990] 77 STC 282 (SC) and of various High Courts in Commercial Taxes Officer v.Hindustan Radiator [1986] 62 STC 374 (Raj), Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser but as contemplating distribution eventually to consumers in general within the State.' It is not the immediate person who brings the goods into a local area who must consume them himself, the act of consumption may be postponed or may be performed by someone else but so long as the goods have been brought into the local area for consumption in that sense, no matter by whom, they satisfy the requirements of the Boroughs Act and octroi is payable. Added to the word 'consumption' is the word 'use' also. There may be certain commodities which though put to use are not 'used up' in the process. A motorcar brought into an area for use is not used up in the same sense as food-stuffs. The two expressions 'use' and 'consumption' together therefore, connote the bringing in of goods and animals not with a view to taking them out again but with a view to their retention either for use without using them up or for consumption in a manner which destroys, wastes or uses them up. In this context, the word 'consumption', as has been shown above, must receive a larger meaning than merely the act of consuming in the generally understood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spoken of as consumption of the particular commodity'. (emphasis(1) supplied) Further, in Kathiawar Industries Ltd.v.Jaffrabad Municipality AIR 1979 SC 1721, while considering the meaning of words consumption and use , the honourable Supreme Court held as under: 6. In this appeal it is necessary for us to consider the scope of the words 'consumption' and 'use'. The precise meaning to be given to the words 'consumption' and 'use' will depend upon the context in which they are used. These words are of wide import in the Constitution of India, entry 52 in List II in Seventh Schedule a right to impose tax 'on entry of goods into the local area for consumption, use or sale' is conferred. In Burmah-Shell Oil Storage and Distributing Co. of India Ltd.v.Belgaum Borough Municipality [1963] Supp. 2 SCR 216; AIR 1963 SC 906, this court after tracing the history of octroi and terminal tax observed that while terminal tax is a kind of octroi which is concerned only with the entry of goods in a local area irrespective of whether they would be used there or not, octrois were taxes on goods brought into the area for consumption, use or sale. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for use in the manufacture of goods for sale are expressly made admissible for specification. Drawing and photographic materials falling within the description of goods intended for use as 'equipment' in the process of designing which is directly related to the actual production of goods and without which commercial production would be inexpedient must be regarded as goods intended for use 'in the manufacture of goods'. (emphasis(1) supplied) The principles laid down in J.K. Cotton Spinning's case [1965] 16 STC 563 (SC); AIR 1965 SC 1310 were applied by the honourable Supreme Court in Member, Board of Revenue, West Bengal v. Phelps and Co.(P.) Ltd.[1972] 29 STC 101 (SC), wherein it was held that the gloves used by the workers of a manufacturer in hot jobs and in handling corrosive substances in the course of manufacture would amount to use in manufacture. (1)Here Italicised. In Collector of Central Excise v.Jay Engineering Works Ltd.[1989] 75 STC 313 (SC); [1989] 39 ELT 169 (SC), the assessee therein, who was manufacturer of electric fans, brought into its factory name-plates which were affixed to the fans before marketing them. The question was whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d utilise it for the purpose raw naphtha. The raw naphtha was obtained at the concessional rate of duty and was used for producing ammonia which, in turn, was used, partly, directly in the urea plant and, partly, indirectly, in the submission of the appellants, in the production of urea by being employed in off-site plants, namely, the water treatment plant, stream generation plant, inert gas generation plant and effluent treatment plant, all of which were part of the integral process of the manufacture of urea. . . . 9. That leaves us to consider whether the raw naphtha used to produce the ammonia which is used in the effluent treatment plant is eligible for the said exemption. It is too late in the day to take the view that the treatment of effluents from a plant is not an essential and integral part of the process of manufacture in the plant. The emphasis that has rightly been laid in recent years upon the environment and pollution control requires that all plants which emit effluents should be so equipped as to rid the effluents of dangerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end-product is part and parcel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from the actual manufacture of paper. Sri Sorabjee's answer to this contention is, in our view, appropriate. That apart, the following observation in Collector of Central Excise v.Eastend Paper Industries Ltd. [1990] 77 STC 203 (SC); AIR 1990 SC 1893; [1989] 43 ELT 201 (SC), cited by Sri Ganguly himself is a complete answer: '. . . Where any particular process, this court further emphasised, is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression in the manufacture of goods . . .' On a consideration of the matter, we are persuaded to the view that the Tribunal was right in its conclusion that sodium sulphate was used in the manufacture of paper as 'raw material' within the meaning of the Notification No.105/82-CE dated February 28, 1982. In Delhi Electric Supply Undertaking v.Central Board for the Prevention and Control of Water of Pollution [1995] Supp 3 SCC 385, the question was regarding levy of cess under the Water (Prevention and Control of Pollution) Cess Act, 1977 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specify that the inputs have to be utilised within the factory premises. The Explanation contained in rule 57A is merely meant to enlarge the meaning of the word 'input' and does not in any way restrict the use of the input within the factory premises. The appellant could not have claimed MODVAT credit in respect of limestone because of the provisions of rule 57C, inasmuch as there was an exemption from levy of excise duty in respect thereof. There was an exemption for a certain period and for the rest of the period the tariff itself provided that there would be nil rate of duty on the limestone which is extracted. CEGAT has ignored rule 57J, which will be applicable notwithstanding anything contained in the other Rules. Pursuant to rule 57J, notification was issued on June 20, 1986 which was amended from time to time. Explosives fall under column (2) of the notification being a tariff item in Chapter 36; the intermediate product, namely, limestone falls under column (3) being covered by Chapter 25; and the final product, namely, cement also falls under Chapter 25 and therefore under column (4). The reading of rule 57J along with the said notification shows that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods for sale. In Saurashtra Calcine Bauxite and Allied Industries' case [1993] 91 STC 435 (Guj), while relying upon J.K.Cotton Spinning's case [1965] 16 STC 563 (SC); AIR 1965 SC 1310 and Ballarpur Industries Ltd.'s case [1990] 77 STC 282 (SC) and distinguishing Thomas Stephen Co.Ltd.'s case [1988] 69 STC 320 (SC), a Division Bench of the Gujarat High Court held that furnace oil used to produce heat in the process of calcination of raw bauxite into calcined bauxite and for the purpose of heating the mixture of soda ash and silica in the manufacture of sodium silicate, is not merely a fuel. It is rather a key process in the manufacture which could not have been acquired without the use of the furnace oil. If the furnace oil was not used, the heating process could not have been accomplished and the end-product could not have been achieved. Accordingly, it was held that the furnace oil used in both the cases was processing material and not merely as fuel. In K.V.Balakrishnan's case [1991] 81 STC 424, a Division Bench of the Kerala High Court, while considering the words consumed in the manufacture of , held that in the manufacture of wet grinders vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment, the question of interpretation of an entry was there, which was interpreted by the honourable Supreme Court by applying the principles of statutory interpretation noscitur a sociis, which is not relevant for the purpose of decision of the present case. In view of our above discussions and the fact that furnace oil purchased by the assessee is one of the primary and essential commodities used by the assessee in the process of manufacture and without use thereof, the production itself is not possible. Further that deduction was available on account of purchase value of the goods, which have already been subjected to tax, having been used or consumed in the manufacture of goods is quite wide in its application, as interpreted by the honourable Supreme Court in Burmah-Shell Oil Storage and Distributing Co.of India Ltd.'s case [1963] Supp. 2 SCR 216; AIR 1963 SC 906 and Kathiawar Industries Ltd.'s case AIR 1979 SC 1721. Still further, there being no dispute that the goods so purchased by the assessee had been subjected to tax and were used in the manufacture of goods other than tax-free goods in the State of Punjab, we are of the view that the assessee is enti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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