2023 (5) TMI 648 - HC - VAT and Sales Tax

Rebate on Input Tax paid on diesel - activity of crushing the boulders into gitti amounts to manufacturing (or not) and for this process, diesel is used as raw material - interpretation of Section 14(1AC) of MP VAT Act - HELD THAT - The learned Appellate Tribunal has considered the first contention of the appellant about the activities of stone crushing is amount to manufacture or not. According to the Tribunal, the appellant is only changing the size of stones from boulder to gitti , hence, there is no change in its character by reducing the size. The manufacturing includes any activities that bring out a change in final product. The Apex court in the case of COMMISSIONER OF SALES TAX, UP. VERSUS LAL KUNWA STONE CRUSHER (P) LTD. 2000 (3) TMI 58 - SUPREME COURT held that Even if gitti, kankar, stone ballast, etc. may all be looked upon as separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that Entry 40 of the notification is intended to describe the same as not stone at all. In fact the term stone is wide enough to include the various forms such as gitti, kankar, stone ballast. The above view has been affirmed in the case of STATE OF MAHARASHTRA VERSUS MAHALAXMI STORES 2002 (11) TMI 112 - SUPREME COURT where it was held that From a perusal of the definition, extracted above, it is clear that the processes of producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting of any goods fall within the meaning of the term manufacture . But it may be pointed out that every type of variation of the goods or finishing of goods would not amount to manufacture unless it results in emergence of a new commercial commodity. In the instant case, the very nature of the activity does not result in manufacture because no new commercial commodity comes into existence. Claim of ITR for the purchase of diesel - HELD THAT - The appellant used to purchase diesel to run the crusher machine and not as a raw material to manufacture the gitti . ITR can be allowed only to the registered dealers on the purchase of goods specified in Schedule II within the State. The appellant is not a dealer engaged in the sale or purchase of diesel, therefore, the Tribunal has not committed any error in interpreting Sections 14 and 14(1AC) of the Act of 2002. Diesel is covered in Part III A of Schedule II and Part II of Schedule II does not cover petrol and diesel. As such, there are no errors in the finding recorded by the Assessing Authority, First Appellate Authority as well as Tribunal. Appeal dismissed.

Summary

Issues involved: Interpretation of Section 14(1AC) of the Madhya Pradesh Value Added Tax Act, 2002 and consideration of whether crushing boulders into small pieces amounts to manufacturing activity.

Issue 1: Interpretation of Section 14(1AC) of the Act

The appellant contended that the Madhya Pradesh Commercial Appellate Board erred in disposing of the appeal without considering the assessment records and the first appellate authority's records. The appellant also argued that the Board misinterpreted Section 14(1)(a) and Section 14(1AC) of the Act. Furthermore, the appellant claimed that the Board wrongly considered the assessments under Section 20 of the Act, which was not the case of separate assessment for each year but an issue of earlier input not being properly considered by the assessing authority.

Issue 2: Whether crushing boulders into small pieces amounts to manufacturing

The appellant, a firm engaged in stone crushing, argued that the activity of crushing boulders into small grit constitutes manufacturing, entitling them to an Input Tax Rebate on diesel used as raw material. However, the assessing authority held that this process does not qualify as a manufacturing activity. The appellant's appeal was partly allowed by the Deputy Commissioner, Commercial Tax, and subsequently dismissed by the Madhya Pradesh Commercial Appellate Board.

Judgment:

The High Court, after hearing both parties and examining the record, upheld the decisions of the lower authorities. The Court reiterated that the process of crushing boulders into grit does not amount to manufacturing as it does not result in the emergence of a new commercial commodity. Citing precedents from the Hon'ble Bombay High Court and the Supreme Court, the Court emphasized that mere change in size does not constitute manufacturing. The Court also clarified that Input Tax Rebate on diesel can only be allowed to registered dealers on specific goods within the State, which did not include diesel in this case. Therefore, the Court found no substantial question of law in the appeal and dismissed it.

This summary provides a detailed breakdown of the issues involved in the legal judgment, including the interpretation of relevant sections of the Act and the determination of whether the stone crushing activity qualifies as manufacturing. The judgment ultimately affirms the decisions of the lower authorities based on established legal principles and precedents.