2000 (1) TMI 972 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the production of stone ballast (gitti) by breaking large stones amounts to manufacturing under the Rajasthan Sales Tax Act, 1994.
2. Whether the respondent unit is entitled to claim the benefit of exemption from payment of tax under the New Sales Tax Incentive Scheme, 1989.

Issue-Wise Detailed Analysis:

1. Whether the production of stone ballast (gitti) by breaking large stones amounts to manufacturing under the Rajasthan Sales Tax Act, 1994:

The court examined whether the process of breaking large stones into smaller pieces (gitti) constitutes manufacturing. The definition of "manufacture" under section 2(27) of the Rajasthan Sales Tax Act, 1994, includes every processing of goods that brings into existence a commercially different and distinct commodity. The court emphasized that the process of crushing large stones into gitti and chips results in a distinct commercial commodity with different functional utility. The court referred to various precedents and concluded that the process of converting large stones into gitti and chips amounts to manufacturing because it produces a commercially distinct commodity from the raw material.

2. Whether the respondent unit is entitled to claim the benefit of exemption from payment of tax under the New Sales Tax Incentive Scheme, 1989:

The respondent, M/s. Prakash Udhyog, applied for an eligibility certificate under the Incentive Scheme for its new industrial unit engaged in producing stone grits/chips. The District Level Screening Committee initially rejected the application, stating that the process did not amount to manufacturing but only processing. The Rajasthan Tax Board, however, found that the process of producing gitti and chips from large stones constitutes manufacturing, making the respondent eligible for the tax exemption. The court upheld the Tax Board's decision, stating that the production of gitti and chips involves a manufacturing process that results in a distinct commercial commodity, thus entitling the respondent to the tax exemption under the Incentive Scheme.

Conclusion:

The court dismissed the Revenue's revision petition and upheld the Tax Board's decision, affirming that the process of producing gitti and chips from large stones constitutes manufacturing under the Rajasthan Sales Tax Act, 1994, and that the respondent unit is entitled to claim the benefit of exemption from payment of tax under the New Sales Tax Incentive Scheme, 1989. The court emphasized the importance of the functional utility and commercial distinctiveness of the end product in determining whether a process constitutes manufacturing.