1994 (10) TMI 131 - SC - VAT and Sales Tax

SALE OR PURCHASE - INPUTS - NOTIFICATION REDUCING RATE OF SALES TAX TO ONE PER CENT ON SALE OR PURCHASE OF INDUSTRIAL RAW MATERIALS (INPUTS)

Summary

Issues:
Interpretation of the term 'industrial raw-material (inputs)' in a notification issued by the State Government under Section 13(1)(b) of the Bihar Finance Act, 1981.

Analysis:
The case involved a dispute over the classification of certain goods as 'industrial raw-material (inputs)' for the purpose of availing a concessional tax rate of 1%. The appellant, a registered dealer, purchased items like tyres, tubes, and batteries for manufacturing vehicles and other engineering products. The appellant contended that these items were raw materials directly used in the manufacturing process and should qualify for the concessional tax rate. However, the Deputy Commissioner rejected the claim, stating that items like tyres, tubes, and batteries, which were finished products in themselves, did not qualify as industrial raw materials. The High Court upheld the Deputy Commissioner's decision, emphasizing that the concessional rate of tax was subject to specific conditions mentioned in the notification.

The relevant provision under consideration was Section 13(1)(b) of the Bihar Finance Act, 1981, which allowed for a special rate of tax on goods used directly in the manufacture or processing of goods for sale. The Court referred to previous judgments to interpret the term 'in the manufacture of goods' expansively, covering all processes involved in converting raw materials into finished products. The notification issued by the State Government specified a concessional rate of tax for industrial raw materials (inputs) at 1%.

The Court analyzed the term 'raw-material' in the absence of a statutory definition, relying on common understanding and dictionary definitions. It concluded that items like tyres, tubes, and batteries, although finished products individually, qualified as raw materials when used in the manufacturing process of vehicles. The Court emphasized that the notification should be construed in harmony with the statutory provision, extending the benefit of concessional tax rate to all raw materials used in the manufacture of goods.

Further, the Court considered the term 'inputs' in conjunction with 'raw material,' interpreting it to include any material put into the manufacturing process. Drawing from precedent, the Court held that items like tyres, tubes, and batteries, essential for making vehicles operational, were inputs qualifying for the concessional tax rate. The Court's decision favored the appellant, allowing the concessional tax rate of 1% for items like tyres, tubes, and batteries used in manufacturing vehicles.

In conclusion, the Court allowed the appeal, overturning the High Court's decision and granting the appellant the benefit of the concessional tax rate for the specified items. Each party was directed to bear their own costs in the case.