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TMI Blog1988 (2) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... w materials; caustic soda and soda ash purchased, the assessee had used only 25 per cent as raw materials *Not printed here. and the remaining 75 per cent had not been so used, so, the penalties were imposed under section 5C(2) of the Rajasthan Sales Tax Act, 1954 (for short "the Act"). The assessee was unsuccessful in appeals before the Deputy Commissioner (Appeals). The assessee also filed writ petitions but the same were dismissed on the ground of availability of alternative remedy of appeal. The assessee thereafter filed appeals before the Sales Tax Tribunal. The Tribunal by its order dated 5th February, 1987 allowed all the appeals and set aside the orders of the assessing authority as well as of the Deputy Commissioner (Appeals). The learned Tribunal found that caustic soda and soda ash are "raw materials" for dyeing and printing industry and no part of any of them can be said to be used in it, as not a "raw material". The Tribunal considered the various processes to be undergone for preparing the cloth for dyeing and printing and it placed reliance on the observations made in J.K. Cotton Spinning Weaving Mills v. Sales Tax Officer [1965] 16 STC 563 (SC) and also on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the department to contend that the articles mentioned in the registration certificate are not "raw materials" and penalties were also set aside on the ground that section 5C(2) of the Act would not be attracted when the articles are not "raw materials" as per the case of the department. The most important question, which arises for consideration in these revisions, is as to whether the articles, which are admittedly raw materials to certain extent being necessary for dyeing and printing cease to be raw materials, when they are used in various other processes undertaken till the cloth is made ready for dyeing and printing. In Lodha Fabrics' case [1988] 68 STC 145 (Raj) 25 per cent of caustic soda and soda ash purchased by the assessee has been considered as "raw materials" and the remaining 75 per cent was not so considered and consequently, the penalty was imposed by the assessing authority. For the proper appreciation and adjudication of the controversy in question, it is necessary to read some relevant provisions of the Act. The expressions "manufacture" and "raw material" have been defined in section 2(k) and section 2(mm) respectively asunder: "2. (k) 'manufacture' incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g contained in section 5, and subject to such conditions and restrictions as may be prescribed, sale to or purchase by a registered dealer of goods (other than raw material) specified in the certificate of registration of the registered dealer purchasing the goods and required by him for use in the manufacture or processing of goods for sale, or in mining or in the generation or distribution of electricity shall, unless the goods are taxable at a lower rate, be subject to sub-section (2), leviable to tax at 4 per cent., (2) The dealer selling the goods shall furnish to the prescribed authority in the prescribed manner, a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in the prescribed form obtained from the prescribed authority, and (3) In respect of sale under sub-section (1) if the goods purchased are utilised by the purchaser for any purpose other than those specified in that sub-section, or while purchasing any class of goods represents that goods of such class are covered by his certificate of registration as specified in sub-section (1), the purchasing dealer shall be liable to pay as penalty, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be an article, which is used as an ingredient in the manufactured goods, i.e., in the end-product, the article must be used as an ingredient. If the article is not used as an ingredient in the end-product, then, such an article would not be a raw material. One of the essential ingredients of the expression "raw material" is that the article must be an ingredient in the end-product. If the article is a constituent or an element of manufactured goods, then such an article would be raw material. The definition does not place any limit that only to the extent it becomes ingredient, it would be raw material and the rest would not be raw material. If in the process of manufacturing goods, only a part of the article becomes ingredient and the rest goes waste, still the whole of it would be raw material within the meaning of the expression "raw material" as the article has been used as an ingredient of the finished goods. If the article is used in the various processes, which are essential in the manufacturing of the goods but the same does not become ingredient in the finished product, then, such an article would not be a raw material. But, if the article is used in various processes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the legislature. It is only from the language of the statute that the intention of the legislature must be gathered, for the legislature means no more and no less than what it says. It is not permissible to the court to speculate as to what the legislature must have intended and then to twist or bend the language of the statute to make it accord with the presumed intention of the legislature. In construing a taxing statute 'one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law'. If the legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the taxpayer. Even if there is any doubt as to interpretation, it must be resolved in favour of the subject." Here, we may consider as to what is the meaning of the word "ingredient". In Webster's Third New International Dictionary, the meaning of the word "ingredient" is; something that enters into a compound or is a component part of any combination of mixture; consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 7th April, 1979. It appears that the legislature without amending the definition of "raw material", thought it proper that if the goods are required for the use in the manufacture or processing of goods for sale, then, further concessional rate should be provided in respect of sale to or purchase by a registered dealer of such goods. Raw material has been expressly excluded from such goods in this provision. This shows that if the goods are required in the manufacture or processing of goods and if such goods are also used as an ingredient in the manufactured goods, then, such goods would attract a more concessional rate under section 5C of the Act. But if the articles are only required to be used in the manufacture or processing of goods for sale and such articles do not become an ingredient in the end-product, then in respect of such articles the registered dealer can only avail the special rate of tax under section 5CCCC. Thus, the benefit of concessional rate under section 5C can be availed of by the registered dealer in respect of an article, which is used as an ingredient in the end-product, although that article is also used at different stages in the manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Officer [1965] 16 STC 563. The learned Chief justice extracted the following observations from that decision: "........ the intention must be to use the goods as raw materials, as processing materials, as machinery, as plant, as equipment, as tools, as stores, as spare parts, as accessories, as fuel, or as lubricants. A bare survey of the diverse uses to which the goods may be intended to be put in the manufacture or processing of goods, clearly shows that the restricted interpretation placed by the High Court is not warranted. The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression 'in the manufacture of goods'. In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctionary meaning or common parlance interpretation was given to the words "raw materials". This authority does not in any way help to determine the question involved in the present revision petitions. In J.K. Cotton Spinning Weaving Mills' case [1965] 16 STC 563 (SC), it was observed that in the case of a cotton textile manufacturing concern, raw cotton undergoes various processes before cloth is finally turned out. Cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendered and pressed. All these processes would be regarded as integrated processes and included "in the manufacture" of cloth. The words "in the manufacture" were given the widest connotation and meaning. In relation to dyeing and printing industry, therefore, the process of desizing, scouring, mercerising and bleaching are all integrated processes and admittedly, the use of caustic soda and soda ash and other bleaching and whitening agents are indispensable for the final process of dyeing and printing. Without their use, the finished product cannot come into existence. But on this consideration, an article cannot be considered to be a "raw material" within the meaning of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue that the articles used by the assessee in these cases do become an ingredient in the endproduct. By the assessee before me, a question was also raised that the articles do become ingredient even in the intermediary processes and for that an exercise was made by both the sides and experts opinions have been submitted. On behalf of the department, cloth samples from various dyeing and printing industries were obtained and PH tests were carried out on the sample clothes and samples were found negative of alkaline content. It is not necessary for me in these petitions to go into that question in the view which I have taken on the interpretation of the expression "raw material". On behalf of the assessees, my attention was also drawn to the decision in Commercial Taxes Officer v. Hindustan Radiators [1986] 62 STC 374 (Raj); (1986) 18 STL 52 (Raj). The Tribunal has extracted the relevant portions from this decision. It may be mentioned that the Division Bench of this Court placed reliance on the decision of the Bombay High Court in Bowen Press v. State of Maharashtra [1977] 39 STC 367 and it was observed that it is not open to the Revenue to contend that a particular ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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