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TMI Blog1994 (7) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under the Industrial Policy Resolution of 1986 as well as 1989 would depend? 2.. The Government of Orissa in the Industries Department being satisfied that there has been remarkable progress of industrial growth on account of attractive package of incentives conferred under the Industrial Policy Resolution of 1980 came forward with the Policy Resolution of 1986 in May, 1986. Amongst the objectives for laying down the Policy, planning for long-term and optimal utilisation of raw materials, industrial by-products and waste materials available in the State and expeditious delivery of incentives and facilities and effective monitoring progress of industrialisation, are some with which we are concerned in the case in hand. The Policy declared that all new industrial units for which investment has been made on or after the effective date will be eligible for the package of incentives under the Policy. So far as concession relating to exemption of sales tax is concerned, the Policy provided that all new small industries will be exempted from sales tax on purchase of spare parts of machinery, raw materials and packing materials for a period of five years from the date of commercial pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notwithstanding grant of registration certificate by the District Industries Centre and exemption certificates in forms II and III, in view of the nature of activity as no manufacturing is involved, the dealer is not eligible to get the exemption from levy of sales tax in accordance with the Policy Resolution of the Government. With these conclusions, the assessing officer having levied a penalty of Rs. 10,000 under section 12(8) of the Orissa Sales Tax Act and having re-determined the taxable turnover by adding Rs. 8,82,222 and ultimately having found that the dealer is liable to pay the total tax Rs. 1,07,643.41, the petitioner has assailed the said order. 3.. The main arguments advanced by Mr. A.K. Ray for the petitioner is that production of cotton from waste cotton does involve a process of manufacturing and, therefore, the petitioner is entitled to the exemption from payment of sales tax under the Policy Resolution. He further contends that the maker of the policy having granted necessary certificate of exemption, the sales tax authorities were not entitled to sit in judgment over the same and, therefore, the impugned order under section 12(8) is without jurisdiction. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e answered in this connection is whether it involves a process of manufacturing or is a case of mere processing? 6.. So far as the first question is concerned, under the Policy Resolution of 1986, the exemption from sales tax on raw material is available for all small industries on purchase of raw materials for a period of five years from the date of commercial production. So far as the finished products are concerned, products of new small-scale industries are exempted from sales tax for a period of five years from the date of commercial production. The relevant provisions are extracted herein below in extenso: "C. Incentives: ...................... (d) Concessions relating to sales tax- (i) Exemption of sales tax on raw materials-All new village, cottage and small industries will be exempted from sales tax on purchase of spare parts of machinery, raw materials and packing materials for a period of 5 years from the date of their commercial production. All new medium and large industries will be eligible for similar facility for 3 years in Zone B and C and for 5 years in Zone A. (ii) Exemption of sales tax on finished products- (a) Products of all existing and new k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as "waste cotton" which is the raw material and, therefore, it can never be said that any process of manufacturing is involved therein. This contention is difficult for us to accept either by examining and applying the common parlance theory or otherwise. If a buyer goes to the market and asks for cotton then he will be given either the sterilised cotton or surgical cotton or cotton pure and simple, but nobody would give him "waste cotton". In fact, waste cotton is not ordinarily sold in the market. Therefore, the two types of cotton cannot be held to be the same, as contended by the learned Standing Counsel for the Revenue. Then again, in the case of South Bihar Sugar Mills Ltd. v. Union of India [1968] 3 SCR 21; AIR 1968 SC 922; 1978 CLT (J) 336, the Supreme Court considered the expression "manufacture" and held that the word "manufacture" implies a change but every change in the raw material is not "manufacture" and there must be such a transformation that a new and different article must emerge having a distinctive name, character or use. If the aforesaid ratio is applied to the case in hand, we have no hesitation to come to the conclusion that cotton which is produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the sales tax authorities in overriding the eligibility certificate granted by the Government. The learned Judges observed that the Commissioner of Sales Tax has not been given any power to sit in judgment over the grant of eligibility certificate granted by the Government. As has been stated earlier, the Policy Resolution nowhere expresses the term "manufacture" and, therefore, all small-scale industrial units are exempted from levy of sales tax on purchase of raw materials as well as sale of finished products for a period of five years from the date of commercial production and the only requirement is that the competent authority of the Government under the Industries Department must issue the necessary certificate which has been issued in this case and, therefore, in terms of the Policy Resolution and in the absence of any denial that the petitioner is a small-scale industrial unit and commercial production started from December 14, 1989, the petitioner is entitled to the concession of tax relief given under the Policy Resolution. Even otherwise, we hold that the activity of the petitioner of producing cotton from waste cotton being a manufacturing activity, the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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