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TMI Blog2016 (1) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... became entitled to get rough stone, cut stone, chakkai and jelly from the said leased land. Under Regulation 106(2) of the Metalliferrous Mines Regulations, 1961, permission for deep hole blasting was obtained by proceedings dated 6.9.2011. The Petitioner has also registered under the Factories Act, 1948. b. According to the Petitioner, for the purpose of quarrying operations, crushing plants, excavators and front end loaders and its spare parts and accessories are purchased within the State as well as from other States against Form C under the Central Sales Tax Act, 1956. However, the Input Tax Credit was availed only on the capital goods, parts and accessories purchased from the local registered dealers. The Petitioner availed Input Tax Credit on the capital goods, namely 'excavator' and 'front end loaders at 50% and availed full Input Tax Credit on the parts and accessories. The Petitioner was also assessed on self assessment basis and the returns were accepted and orders were finalised. While so, the Enforcement Officials conducted an inspection and scrutinized the assessment and submitted a report that the Petitioner is not entitled for Input Tax Credit on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 150 SC (Chrestien Mica Industries Ltd Vs. The State of Bihar), 1980 6 ELT 343 SC (Deputy Commissioner of Sales Tax (Law), Ernakulam Vs PIO Food Packers) ,1990 79 STC 149 (Kher Stone Crusher Vs. General Manager, District Industsries Centre, Jabalpur), 1992 87 STC 339 (State of Tamil Nadu Vs. O.P.Aliyar), 2000 118 STC 287 SC (Commissioner of Sales Tax, UP Vs. Lal Kunwa Stone Crusher (P) Limited), 2001 122 STC 594 (State of Tripura Vs. Manoranjan Chakraborty and others) and 2004 271 ITR 331 (Commissioner of Income Tax Vs. Sesa Goa Ltd) in support of his contentions. 4. The learned Additional Government Pleader for the Respondents submitted that as the Petitioner crushes the rocks and convert them into small stones of different sizes and sell them as blue metal, such an activity would not amount to manufacture, as no new different and distinct commodity emerges by the process of crushing and that crushing of boulders into smaller size of stones is mere reducing the size and would not amount to manufacture and therefore, Input Tax Credit on the purchases of JCB spares, excavator spares and earth moving equipments as capital goods shall not be availed, inasmuch as, as per Section 19( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts; (c) components, spare parts and accessories of the goods specified in (a) and (b) above; (d) moulds, dies, jigs and fixtures; (e) refractors and refractory materials; (f) storage tanks; and (g) tubes, pipes and fittings thereof used in the State for the purpose of manufacture, processing, packing or storing of goods in the course of business excluding civil structures and such goods as may be notified by the Government; 9. It is evident from Section 2 (11) that there is only a generalisation of machineries and its spares. It does not name the goods. The definition only specifies that the goods, which are used for the purpose of manufacture, can be categorized as capital goods. The tax paid for the purchase of capital goods used in manufacture is entitled to be claimed back as ITC as per section 19 (iv) and (v) as the case may be. Rule 10 of TNVAT Rules specifies the procedures to be followed. What is also evident is that the ITC on the capital goods is permissible only if the activity amounts to manufacture. Therefore, the test to be satisfied is that the activity of the assessee should amount to manufacture as contemplated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulder of stone. The essential condition is the same, viz., that there is an expenditure of some skill in fashioning an object of a different size and shape, ready for a commercial deal. In the present case, the man who manufactures metal is manufacturing a new article which has got a different price and that price includes the labour which goes into its manufacture. 6. We are satisfied, therefore, that the process indulged in to shape stones into metal is a manufacturing process and therefore the assessee was within definition (i) of Section 2 of the Act. We only pause to say that the position has now been cleared by the introduction of the definition of the word 'manufacture'. But, as we have already stated above, the definition does no more than bring out the essential meaning of the word 'manufacture' as used in the Act." 13. In 1961 12 STC 150 SC (Chrestien Mica Industries Ltd Vs. The State of Bihar), it has been held thus:- "Mica is found imbedded in the pegmatite vein in the form of what are known as 'books of mica'. These are crystals of mica and comprise the mineral in its crude form. They may vary in size from a few cubic inches to big blocks, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, washers and discs. Neither of the words 'production' or 'manufacture' is defined in the Bihar Sales Tax Act, but according to the Oxford English Dictionary, 'production' means amongst other things that which is produced, a thing that results from any action, process or effort, a product; a product of human activity or effort. It is obvious that what is described in the report above quoted would fall within the dictionary meaning of the word 'production'. It is unnecessary to decide what the word 'manufacture' means. As what was sold was mica produced in Bihar by the appellant, the answer to the question would be in the affirmatiave and therefore, in favour of the State." 14. In 1980 6 ELT 343 SC (Deputy Commissioner of Sales Tax (Law), Ernakulam Vs PIO Food Packers), it has been held as under:- "7. While on the point, we may refer to East Texas Motor Freight Lines v. Frozen Food Express, where the U.S. Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken. It was pointed out: "Killing, dressed and freezing a chicken is certainly a change in the commodity. But it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esired. Learned counsel for the Revenue contends that even if no manufacturing process is involved, the case still falls within s. 5-A(1) (a) of the Kerala General Sales Tax Act, because the statutory provision speaks not only of goods consumed in the manufacture of other goods for sale but also goods consumed otherwise. There is a fallacy in the submission. The clause, truly read, speaks of goods consumed in the manufacture of other goods for sale or goods consumed in the manufacture of other goods for purposes other than sale. 8. In the result, we hold that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture. The case does not fall within s. 5-A(1)(a) of the Kerala General Sales Tax Act. The High Court is right in the view taken by it." 15. In 1990 79 STC 149 FB (MP) (Kher Stone Crusher Vs. General Manager, District Industsries Centre, Jabalpur), it has been held thus:- "9. From the ratio of the decision in the case of Bheraghat Mineral Industries [1987] 20 VKN 290 (MP), it is clear that the matter whether a particular process is a manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained. The Tribunal has referred to a decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Pio Food Packers [1978] 41 STC 364 (Ker) and other authorities on the subject. Corpus Juris Secundum, volume 55, at page 685, explained the term "manufacture" thus: "In determining whether an activity is or is not a manufacture, or whether a process or operation is or is not manufacturing, one of the important factors is the extent of the change that has been effected in the original material, since, while every change in an article is the result of treatment, labour and manipulation, every change is not manufacture; something more is necessary, and the application of labour must be carried out to such an extent that the article suffers a species of transformation and a new and different article emerges. This characteristic has been the subject of considerable discussion and the courts have experienced some difficulty in determining what constitutes a new and different article." Ismail, C.J. and M. A. Sathar Sayeed, J. were faced with a similar contention in State of Tamil Nadu v. Subbaraj and Co. [1981] 47 STC 30 (Mad.) where the assessee bought raw bones and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave adverted to earlier. Each one of the items enumerates various goods, which could be brought to tax. The purpose of sales tax is to levy tax on sale of goods of each variety and not the sale of the substance out of which they may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately, taxable goods for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing, they may remain commercially the same goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. We are fortified in this view by the decision in State of Tamil Nadu v. Pyare Lal Malhotra, [1978] 2 SCC 552. What is to be seen in the present case is whether stone gitti, chips, etc. continue to be identifiable with the stone boulders, which have been bought by the dealer. 5. The view taken by the Tribunal as affirmed by the High Court is that the goods continue to be stone and they are not commercially different goods to be identified differently for the purposes of sales tax. The decision relied on by minority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, correctly submitted that the other provisions of the Act, particularly Section 33(1)(b)(B) r/w item No. 3 of the Fifth Schedule to the Act, would show that mining of ore is treated as "production". Section 35E also speaks of production in the context of mining activity. The language of these sections is similar to the language of Section 32A(2). There is no reason for us to assume that the word "production" was used in a different sense in Section 32A. We are, therefore, of the opinion that extraction and processing of iron ore amounts to "production" within the meaning of the word in Section 32A(2)(b)(iii) of the Act and, consequently, the assessee is entitled to the benefit of Section 32A(1) of the Act. The question whether the High Court was correct in holding that the activity did not amount to "manufacture" is left open. The civil appeal is, accordingly, dismissed but without any order as to costs." 19. Upon careful consideration of the ratios laid down in the above judgments, this court is of the view that the above judgments do not support the case of the Petitioner. The judgments reported in 1956 7 STC 626 and 1961 12 STC 150 SC are relating to manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to be identifiable with the stone boulders, which have been bought by the dealer." 21. In the present case, however, stone, as such, and gitti and articles of stones are all of similar nature though by size they may be different. Even if gitti, kankar, stone-ballast, etc. may all be looked upon as separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that Entry 40 of the notification is intended to describe the same as not stone at all. In fact the term 'stone' is wide enough to include the various forms such as gitti, kankar, stone ballast. In that view of the matter, we think that the view taken by the majority of the Tribunal and affirmed by the High Court stands to reason. We are, therefore, not inclined to interfere with the same. 22. In so far as the judgement reported in 2004 271 ITR 331 is concerned, wherein, it was held that the extraction and processing of iron ore amounts to production, the said judgment also does not come to the aid of the Petitioner because as held by the Apex Court, production necessarily does not imply the emergence of a commercially new product. The commodity dealt there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hold that the impugned provisions are valid. It is, of course, clear that if gross injustice is done and it can be shown that for good reason the court should interfere, then notwithstanding the alternative remedy which may be available by way of an appeal under Section 20 or revision under Sectio 21, a writ court can in an appropriate case exercise its jurisdiction to do substantive justice. Normally of course the provisions of the Act would have to be complied with, but the availability of the writ jurisdiction should dispel any doubt which a citizen has against a high handed or palpable illegal order which may be passed by the assessing authority. 5. For the aforesaid reasons, these appeals are allowed and the judgement of the High Court is set aside." 26. There is no quarrel over the well settled principle that availability of an alternative remedy is not a bar. Also when the order is illegal, this court can certainly exercise its jurisdiction under Article 226 to set right the injustice caused. More so, in matters relating to tax, the authority to tax is subject to Article 265 of the Constitution. However, the factual disputes cannot be decided by this court sitting under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no manufacturing process involved". Following this principles, the contention of the appellants that there is manufacturing activity at the hands of the purchasers of the machinery sold by the appellants, is not acceptable. Section 2(11) defines capital goods, as the plant and machinery used for manufacture, the result of which emerges a change in any substance for the manufacture of final products. Considering the statutory position of law in the case of the appellant, I find no reasons to interfere in the matter of levy of tax at the rate of 12.5% on the sales turnover of Rs. 5,98,38,755-00 and I hold to sustain the levy of tax made on the above turnover. Accordingly it is sustained and confirmed. 10. It is to be noted that it was not the case of the petitioner that there is violation of principles of natural justice or arbitrariness in the proceedings. The issue raised by the petitioner is a question of fact. It has to be finally decided by the Tribunal and the statute provides for the same. Whatever point that has been addressed by the petitioner before the Original Authority and First Appellate Authority, has been considered by the Authority and a decision has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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