1992 (9) TMI 314 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether furnace oil used in the manufacturing process qualifies as "processing material" u/s 42A of the Gujarat Sales Tax Rules, 1970.
2. Whether the Tribunal's conclusion that the flame generated by furnace oil did not contact the raw material was without evidence.

Issue 1: Furnace Oil as Processing Material

In Sales Tax Reference No. 10 of 1987, the applicant, M/s. Saurashtra Calcine Bauxite and Allied Industries, engaged in manufacturing calcined bauxite, claimed a set-off for purchase tax paid on furnace oil under rule 42A of the Gujarat Sales Tax Rules, 1970, asserting it as a processing material. The Sales Tax Officer and subsequent appellate authorities rejected the claim, categorizing furnace oil as fuel. The Tribunal upheld this view, dismissing the appeal. The High Court, however, found that the furnace oil, essential for the calcination process, should be regarded as processing material, referencing the Supreme Court's decision in J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] and distinguishing it from the Supreme Court decision in Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988].

Similarly, in Sales Tax Reference No. 8 of 1988, a co-operative society manufacturing sodium silicate claimed a set-off for furnace oil used in the process. The Sales Tax Officer and appellate authorities denied the claim, treating furnace oil as fuel. The Tribunal sustained this decision. The High Court, upon examining the manufacturing process, concluded that furnace oil was integral to generating the necessary heat for production, thus qualifying as processing material.

Issue 2: Tribunal's Conclusion on Evidence

In Sales Tax Reference No. 8 of 1988, the Tribunal's conclusion that the flame generated by furnace oil did not contact the raw material was challenged. The High Court found that the Tribunal's decision lacked justification, as the manufacturing process clearly indicated the essential role of furnace oil in heating the raw materials.

Conclusion:

The High Court answered the questions in both references in favor of the assessees, determining that furnace oil used in the respective manufacturing processes qualifies as processing material u/s 42A of the Gujarat Sales Tax Rules, 1970, and that the Tribunal's conclusion in Reference No. 8 of 1988 was unsupported by evidence.