TMI Blog2008 (10) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Thiruvananthapuram in No. C3. 12224/04/CT dated October 26, 2005. The appellant is a company. It is engaged in the manufacture and sale of titanium dioxide through sulphate process . The main raw materials are ilmenite (mixed oxide of titanium) ferrous iron and ferric iron for the production of titanium dioxide pigment. Titanium dioxide TiO2 is used in the manufacture of paints, plastics, paper, printing and rubber products, etc. The manufacturing process of titanium dioxide pigments is as under: Titanium dioxide pigments are generally produced commercially according to the prior art processes by the so-called sulfate process in which a titaniferrous material, such as a titaniferrous iron ore, ore concentrate or a titanium slag is heated at elevated temperatures, with concentrated sulphuric acid to form a porous cake, sometimes referred to in the art as digestion cake . The digestion cake is allowed to cure so as to effect maximum recoveries of titanium values upon dissolving. After curing, the cake is dissolved in water or weak acid, with agitation to form a solution of titanium sulfate and iron sulfates. The ferric sulfate values in the solution are converted to fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia, requesting to clarify whether they can issue form 18 declarations for the purchase of kerosene oil used in the manufacture of titanium dioxide. In the application filed it was stated that the applicant is engaged in the business of manufacture and sale of titanium dioxide. Apart from producing the product literature on the production of titanium dioxide, they had briefly stated the process of manufacture/production of the product. According to them, the ground ilmenite is digested with hot concentrated sulphuric acid. The hot cake obtained is extracted in water, clarified and supernatant liquid concentrated and the same is precipitated to get titanium dioxide cakes, which is washed free of iron salts. This cake is incinerated in calciner (kiln) using super kerosene oil. Therefore, the sale of industrial raw material, namely, kerosene, by a registered dealer to the appellant for use in the production of the finished product, namely, titanium dioxide, inside the State for sale is taxable at the concessional rate of tax at three per cent on production of declaration to that effect from the appellant who uses the same for the declared purpose as provided under section 5(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the apex court in Gujarat Narmada Valley Fertilizers Co. v. Collector of Central Excise, Vadodara [2001] 2 SCC 511, Bajaj Tempo Limited v. Commissioner of Income-tax [1992] 196 ITR 188 (SC) and Periyar and Pareekanni Rubbers Ltd. v. State of Kerala [2008] 13 VST 538 (SC). The learned counsel for the Revenue ably justifies the impugned order passed by the Commissioner of Commercial Taxes. The learned counsel would contend that since kerosene oil is used only as fuel for the purpose of calcination, it cannot be said that kerosene oil is used in the manufacture of finished product. The learned counsel has produced lot of product literature in support of his contention and further relies on the observation made by the apex court in the case of Coastal Chemicals Ltd. v. Commercial Tax Officer, A.P. [2000] 117 STC 12. In our opinion, having heard the learned counsel for the parties, the one and the only issue that requires to be considered is, whether the appellant is entitled to issue form 18 declaration forms for the purpose of purchase of kerosene oil which is used as a fuel for the process of calcination in the kiln used in the production of finished product, namely, tita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax than three per cent; the sale must be to an industrial unit; the said unit must use the purchased commodity/commodities in the production of finished product; the sale of the finished product must be inside the State. If these conditions are cumulatively complied, the tax payable by the dealer shall be at three per cent on the taxable turnover relating to such industrial raw materials, component parts, containers or packing materials. The proviso appended to the subsection imposes yet another condition, namely, that the sub-section shall not apply unless the selling dealer furnishes form 18 declaration obtained from the purchasing dealer to the assessing authority. The purpose and object of this sub-section appears to be to encourage industries to procure the raw materials, component parts, containers or packing materials at a concessional rate of tax, so that the cost of production of the finished product would be less and the industrial unit would be in a better position to compete in the market by reducing the sale price of the finished product. In the instant case, we are concerned with only industrial raw material . The said expression is not defined in the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er into the composition of the finished product. The expression use is not defined in the Act. In its ordinary meaning, the word use is the act of employing a thing, putting into action or service; employing for or applying to a given purpose. The main raw materials for the production of titanium dioxide pigment are ilmenite (a mixed oxide of titanium) ferrous iron and ferric iron. The product literature produced by the appellant before the Commissioner of Commercial Taxes illustrates the stages in the production of titanium dioxide. The first stage is, ilmenite is reacted with sulphuric acid in reinforced concrete tanks called digesters; exothermic reaction is initiated by the heat of dilution of the acid with water and porous cake is formed. The mass in the solid form is dissolved in dilute sulphuric acid to get titanium in solution as titanium oxy-sulphate along with other metallic ingredients in ilmenite as their sulphate. After this digestion process, the next is known as reduction . At this stage, the liquor is reduced using scrap iron, when the ferric iron gets completely reduced to ferrous state. The third stage is known as clarification . In this stage, the bla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid contention and after referring to the decision of the apex court in Ballapur Industries Ltd.'s case [1990] 77 STC 282; [1990] 186 ITR 244, has stated as under: (page 14 of 117 STC) 6. The word 'consumable' in the said provision takes colour from and must be read in the light of the words that are its neighbours, namely, 'raw material', 'component part', 'sub-assembly part' and 'intermediate part': So read, it is clear that the word 'consumables' therein refers only to material which is utilised as an input in the manufacturing process but is not identifiable in the final product by reason of the fact that it has got consumed therein. It is for this reason that 'consumables' have been expressly referred to in the said provision, though they would fall within the broader scope of the words 'raw materials'. 7.. In the case of Thomas Stephen Co. Ltd. [1988] 69 STC 320 (SC) relied upon in the impugned judgment, it was held that cashew shells used as fuel did not get consumed in the manufacture of other goods and that 'consumption must be in the manufacture as raw material'. 8.. To use th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
