1999 (4) TMI 552 - SC - VAT and Sales Tax

Treatment as raw material - Held that - So far as drilling bits are concerned, they are used to bore, holes in the walls of the mine; the holes are stuffed with explosives and the detonation thereof yields the coal. Their utility is quickly exhausted. It can, therefore, be said that they are consumed in the mining of the coal. To that extent alone can the assessee succeed. Accordingly, the appeal is allowed, except to the extent that it covers drilling bits

Summary

Issues:
Interpretation of the definition of "raw material" under the Madhya Pradesh General Sales Tax Act, 1958.

Analysis:
The judgment in question involved the interpretation of the definition of "raw material" as per section 2(l) of the Madhya Pradesh General Sales Tax Act, 1958. The respondent, who operated a coal mine, sought registration for various items as raw materials consumed in the course of manufacture. The items included timber, kerosene oil, drilling bits, hewing implements, dry cells, torches, cement, lime, and electrical bulbs. The Sales Tax Officer and the Commissioner of Sales Tax denied registration for most of these items, stating that they did not qualify as raw materials under the Act. The High Court disagreed with the Commissioner's narrow interpretation of raw material. The Supreme Court analyzed each item in detail to determine if they met the criteria of being consumed in the manufacturing process.

The definition of "raw material" under the Act includes articles used as ingredients in manufactured goods, articles consumed in the manufacturing process, and fuel and lubricants required for manufacturing. The Court examined each item sought for registration by the respondent to determine if they were consumed in the process of manufacturing coal. It was established that items like timber, kerosene oil, hewing implements, dry cells, torches, cement, lime, and electrical bulbs were not directly consumed in the manufacturing process. The Court cited various judgments to support its decision, emphasizing the requirement that raw materials should be consumed in the manufacturing process to qualify for registration.

The Court found that drilling bits, used to bore holes in the mine walls for coal extraction, were indeed consumed in the mining process. As the utility of drilling bits was quickly exhausted during the coal extraction process, they were considered to be consumed in the mining activity. Therefore, the Court allowed the appeal in favor of the respondent, except for the drilling bits, which were deemed to qualify as raw materials. No costs were awarded in the case, and the appeal was allowed accordingly.