1988 (2) TMI 433 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the articles purchased by the assessees qualify as "raw materials" under the Rajasthan Sales Tax Act, 1954.
2. The applicability of penalties under section 5C(2) of the Rajasthan Sales Tax Act, 1954.
3. Interpretation of the definitions of "manufacture" and "raw material" under sections 2(k) and 2(mm) of the Act.
4. The binding nature of entries in the registration certificate on the department.

Issue-wise Detailed Analysis:

1. Whether the articles purchased by the assessees qualify as "raw materials" under the Rajasthan Sales Tax Act, 1954:
The Tribunal found that caustic soda and soda ash are "raw materials" for the dyeing and printing industry. The Tribunal considered the various processes involved in preparing cloth for dyeing and printing and relied on observations from J.K. Cotton Spinning & Weaving Mills v. Sales Tax Officer and Chhipa Abdul Gani Abdul Gafoor v. Commercial Taxes Officer. The Tribunal also referenced notifications dated 14th April 1955 and 12th November 1958, and concluded that the definition of "raw material" in section 2(mm) of the Act includes these articles. The Tribunal held that the entry in the registration certificate is conclusive and binding on the department, making it impermissible for the department to argue otherwise unless the entry is cancelled or modified.

2. The applicability of penalties under section 5C(2) of the Rajasthan Sales Tax Act, 1954:
The Tribunal set aside the penalties imposed by the assessing authority and the Deputy Commissioner (Appeals), stating that section 5C(2) would not be attracted when the department itself contends that the articles are not "raw materials." The Tribunal held that the penalties were incorrectly imposed based on the department's inconsistent stance on the nature of the articles.

3. Interpretation of the definitions of "manufacture" and "raw material" under sections 2(k) and 2(mm) of the Act:
The court elaborated on the definitions of "manufacture" and "raw material." Section 2(k) defines "manufacture" to include any process of producing or preparing goods, excluding processes notified by the State Government. Section 2(mm) defines "raw material" as an article used as an ingredient in manufactured goods, including fuel and lubricant but excluding bullion and specie. The court emphasized that an article must be an ingredient in the end-product to qualify as a "raw material." The court rejected the department's argument that only the portion of the article used as an ingredient should be considered a raw material, stating that the definition does not support such a restrictive interpretation.

4. The binding nature of entries in the registration certificate on the department:
The court upheld the Tribunal's reliance on the Division Bench decision in Commercial Taxes Officer v. Hindustan Radiators, which held that the entry in the registration certificate is conclusive and binding on the department. The court noted that the department cannot argue that a particular article is not a "raw material" if it is listed as such in the registration certificate, unless the entry is cancelled or modified.

Conclusion:
The court dismissed all the revision petitions, affirming the Tribunal's decision that caustic soda and soda ash are "raw materials" for the dyeing and printing industry. The penalties imposed under section 5C(2) were set aside, and the court emphasized the binding nature of entries in the registration certificate on the department. The court also clarified the definitions of "manufacture" and "raw material," rejecting the department's restrictive interpretation. The revision petition against M/s. Lodha Fabrics was also dismissed on the ground of being time-barred.

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