TMI Blog2016 (4) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision would not be applicable to the facts of the present case. Similarly, the first appellate authority, viz. the Joint Commissioner of Commercial Tax has also held that the decision in the case of M/s Welspun Steel Ltd. cannot be made applicable to the present case as the same relates to the use of pet coke in the manufacture of sponge iron. Therefore, it appears that it was the case of the Department that the decision of the Tribunal in the case of M/s Welspun Steel Ltd. would not be applicable to the facts of the present case, under the circumstances, merely because the appeal preferred by the State against the said order of the Tribunal has been admitted on a question of law, does not mean that the present appeal is also required to be admitted on a similar question of law, despite the fact that the impugned order does not give rise to a substantial question of law. The Tribunal, after appreciating the material on record, has found as a matter of fact that coke/pet coke used in the VSK technology is not used as a fuel but as part of feed stock and its components form part of the product, that is, clinker and that without this raw material, the product clinker cannot be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19) of the Gujarat Value Added Tax Act, 2005 (hereinafter referred to as the GVAT Act ) defines the expression raw materials to mean the goods used as ingredient in the manufacture of other goods and includes processing materials, consumable stores and material used in the packing of the goods so manufactured but does not include fuels for the purpose of generation of electricity. 3.2 Section 11 of the GVAT Act makes provision for tax credit . Clause (a) of sub-section (11) provides that a registered dealer (hereinafter referred to as the purchasing dealer ) who has purchased the taxable goods shall be entitled to claim tax credit equal to the amount of (i) tax collected from the purchasing dealer by a registered dealer from whom he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period; or (ii) tax paid by him during the tax period under sub-section (1), (2), (5) or (6) of section 9, or (iii) tax paid by the purchasing dealer under the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001. Clause (b) thereof provides that the tax credit to be so claimed under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d selling of cement within the State of Gujarat as well as outside the State and is holding registration as a dealer both under the GVAT Act as well as the Central Sales Tax Act (hereinafter referred to as the CST Act ). While submitting the returns for the assessment period 2007-08 and 2008-09, the dealer claimed input tax credit on purchases of pet coke. It was the case of the dealer that considering the manufacturing process adopted by it wherein pet coke is used as a raw material, the amount of tax credit is not required to be reduced by four per cent as contemplated under section 11(3)(b)(iii) of the GVAT Act in respect of the pet coke used by it in the manufacture of cement. The Deputy Commissioner of Commercial Tax, Circle-8, Mehsana, however, had called for audit assessment for the year 2007-08 and after due verification of all the evidence and books of accounts produced by the dealer, he worked out the said input tax credit as eligible. He further observed that the dealer had purchased petroleum coke which can be used as a substitute of coal. Coal is a fuel and therefore, 4% of the purchase price is required to be reduced as per section 11(3) of the GVAT Act. The dealer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that though in the present case, while manufacturing cement, petroleum coke is mixed along with the raw material, considering the process which is undertaken by the respondent, it is clear that the pet coke is necessary for the purpose of the exothermic reaction which takes place inside the kiln when it is heated externally. It is on account of this exothermic reaction that the raw material is converted into clinker. The fact that there is an exothermic reaction is clearly indicative of the fact that the petroleum coke acts as a fuel which causes such exothermic reaction. It was submitted that the petroleum coke having been used as fuel, the dealer is not entitled to input credit in respect thereof. It was, accordingly, urged that the authorities below were wholly justified in holding that petroleum coke is fuel and not raw material as was contended on behalf of the respondent and denying the benefit of input credit in respect thereof. 6.1 The learned Assistant Government Pleaders referred to the written submissions tendered by them and submitted that the Tribunal has grossly erred in arriving at a finding that whether a material is fuel or raw material, is a question of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the manufacturing process of VSK plant as supplied by the dealer. It was submitted that in the present case, there is determination order of the Commercial Tax Commissioner (Legal), State of Gujarat, under section 80 of the GVAT Act in the case of M/s Digvijay Cement Co. Ltd., wherein it has been held that use of petroleum coke in the manufacture of cement is by way of fuel; however, the Tribunal has turned a blind eye to the same. It was submitted that therefore, the impugned order passed by the Tribunal is bad in law as it has been passed without appreciating the correct process of manufacturing of cement. It was, accordingly, urged that the appeals require consideration on the questions as proposed or as may be formulated by the court. 7. Vehemently opposing the appeals, Mr. Tushar Hemani, learned advocate for the respondent dealer invited the attention of the court to the definition of raw material as defined under clause (19) of section 2 of the GVAT Act, which defines raw material to mean goods used as ingredient in the manufacture of other goods and includes processing materials, consumable stores and material used in the packing of the goods so manufactured but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the impugned order which describes the process of manufacture as follows: 14. .... .... The process undertaken by the appellant own as Vertical Shaft Kiln (VSK) for manufacturing clinker. For making clinker (semi finished good), the raw material like lime stone, silica, pet coke / coal, red oxide and bauxite is used. These materials are mixed in definite proportion as per the formula. They are stored as different hoppers. In different percentage mixed is fed to raw mill. The raw mill is a ball mill type. Mill to grind the mixture of raw material. This raw material will become a homogeneous powder. The raw material mixture powder is stored in a silo. From the silo the raw material powder which has all the ingredients including pet coke/coal etc. is conveyed through bucket elevator into the vertical shaft kiln (VSK). The VSK which is already heated through external electricity heater is filled with this raw mix powder. Exothermic reaction takes place inside the kiln. After the completion of the chemical reaction, it is converted into a compound consisting of all the chemical elements of the raw material into clinker. After certain period, the chemical process is completed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being used only for ancillary purpose, that is, as a fuel. Therefore, irrespective of the fact whether any manufacture is involved in the production of cinder it should be held to be out of the tax net for the reason that it is not a raw material for the end product. 28. In producing cinder , there is no manufacturing process involved. Coal is simply burnt as fuel to produce steam. Coal is not tampered with, manipulated or transformed into the end product. For purposes of manufacture the raw material should ultimately get a new identity by virtue of the manufacturing process either on its own or in conjunction or combination with other raw materials. Since coal is not a raw material for the end product in all the cases before us, the question of getting a new identity as an end product due to manufacturing process does not arise. 29. In CCE v. Ballarpur Industries Ltd., (1989) 4 SCC 566, the raw material in the course of chemical reactions got burnt up and lost its apparent identity. To be more precise, the input of sodium sulphate in the manufacture of paper would not cease to be of raw material by reason alone of the fact that in the course of the chemical reaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in the case of M/s Welspun Steel Ltd. v. The State of Gujarat has been admitted on a substantial question of law and the Tribunal having placed reliance upon such decision, this appeal also deserves to be admitted on a similar question of law, it may be noted that the Deputy Commissioner in the assessment order has categorically recorded that the said decision would not be applicable to the facts of the present case. Similarly, the first appellate authority, viz. the Joint Commissioner of Commercial Tax has also held that the decision in the case of M/s Welspun Steel Ltd. cannot be made applicable to the present case as the same relates to the use of pet coke in the manufacture of sponge iron. Therefore, it appears that it was the case of the Department that the decision of the Tribunal in the case of M/s Welspun Steel Ltd. v. The State of Gujarat would not be applicable to the facts of the present case, under the circumstances, merely because the appeal preferred by the State against the said order of the Tribunal has been admitted on a question of law, does not mean that the present appeal is also required to be admitted on a similar question of law, despite the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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