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TMI Blog2016 (10) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... cess under the provisions of the VAT Act and the petroleum gases (LPG) and Oxygen gases are forming part of the said process, being raw material covered within the swip of Section 2(19) of the VAT Act, and since the same are the processing material and consumable stores in the activity, the tax credit of tax paid on purchases of these commodities is admissible under the Act - Decided in favor of the assessee. - TAX APPEAL NO. 714 of 2013 - - - Dated:- 20-10-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ FOR THE APPELLANT : MR HARDIK VORA, AGP FOR THE OPPONENT : MR N C SHUKLA, ADVOCATE, MR TUSHAR P HEMANI, ADVOCATE, MS VAIBHAVI K PARIKH, ADVOCATE CAV JUDGMENT (PER : HONOURABLE MR.JUSTICE A.J. SHASTRI) 1. Present tax appeal is directed against the judgment and order dated 27.09.2012 passed in First Appeal No.26 of 2010 by the learned Gujarat Value Added Tax Tribunal at Ahmedabad ( Tribunal for short). 2. The brief facts are as under: The opponent herein is engaged in business activity of ship breaking and in the course of such business the opponent is purchasing ships for the purpose of dismantling and then sell the material derived there from an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 passed by the determining authority namely (i.e.) learned Joint Commissioner of Commercial Tax (Legal) Gujarat State at Ahmedabad. 4. It is against this judgment and order passed by the learned Tribunal, the authority i.e. revenue, has preferred the present tax appeal by raising substantial question of law, which is registered as Tax Appeal No.714 of 2013. This court while considering the appeal has admitted the same for consideration of following substantial question of law which are reproduced hereinafter vide order dated 26.12.2013. (A) Whether on the facts and in the circumstances of the case, the Tribunal has rightly held that, ship breaking process is manufacturing process under the Gujarat Value Added Tax Act, 2003 and LPG and Oxygen are raw material covered within the scope of Sec. 2(19) of the Gujarat Value Added Tax Act, 2003? (B) Whether on the facts and in the circumstances of the case, the Tribunal has rightly held that, LPG and Oxygen are used as processing materials or consumable stores in the ship breaking process and therefore, Input Tax Credit of tax paid on the purchases of LPG and Oxygen is admissible u/s 11 of the Gujarat Value Added Tax Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in case of Mahavir Inductomelt Pvt. Ltd. (Appeal No.13 of 2000) the transaction is not attracting any tax benefit which can be made available to the opponent and therefore, contended that order passed by the learned Tribunal is not in consonance with settled position of law. It was also contended by the counsel that activity carried on by the opponent is not a manufacturing activity as it is not generating any new commodity out of it and relying upon some of the decisions as mentioned in the order of Tribunal, it has been contended by the counsel to set aside the order passed by the learned Tribunal. The counsel further submitted that out of the process of activity of ship breaking the opponent is simply recovering the items like electrical appliances, refrigerator, cable wires, etc. while scrapping the unserviceable and discarded ship and therefore, opponent is not actually manufacturing any item. The learned counsel for the appellant submitted that before the learned Tribunal, several decisions came to be relied upon, but none has been considered in its true perspective and therefore, the learned Tribunal ought not to have arrived at the conclusion without ascertaining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Tribunal the learned counsel relying upon not only various judgments, as pointed out at Pg.335 of the paper book compilation, which is part of the record of the Tribunal, however, in addition thereto even the counsel has referred to the Memorandum of Agreement dated 03.10.2009, which took place between Mrianna Shipping Ltd. Pvt. and M/s. Bansal Brothers, and by referring to various clauses contained in the agreement the counsel submitted that the process which was to be undertaken in response to that was dealing in vessels which is workable vessel and not waste vessel and therefore, opponent being registered dealer under the Gujarat Sales Tax Act, the sales tax authority had assessed the opponent as a manufacturer till the accounting year 2005-06 and therefore, for a pretty long period the activity of ship breaking by the opponent is considered by the department as a manufacturing process. The counsel further submitted that the determining authority has dealt with an issue of tax credit not in a just and proper manner which reflects a clear nonapplication of mind and therefore, when the Tribunal has corrected a mistake after relying on series of decisions and after examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soned order that order passed by the determining authority deserves to be quashed and specifically held that ship breaking process is a manufacturing process under the VAT Act and the articles referred to above which are used as a part of that process in consumption of being raw material, tax credited on the said commodity is admissible under Section 11 of the VAT Act. The learned counsel has further submitted that referring to the various other relevant statutes namely Income Tax Act as well Central Excise Act and by comparing the definition of word manufacturer the Tribunal has held specifically the process is a manufacturing process and therefore, entitled to have a tax credit and therefore, this elaborate judgment does not call for any interference. Learned counsel has submitted that the substantial question of law raised while framed are already reflected to have been elaborately dealt with by the learned Tribunal and therefore, in such a situation when a decision is delivered after giving full opportunity to both the sides and after considering every material which is produced on record including the decisions such exercise of jurisdiction undertaken by the VAT Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flecting from the record that the learned Tribunal has gone in depth to examine the issue minutely and therefore, there appears to be no error of jurisdiction in any manner which requires the court to intervene. It appears that from several angles the learned Tribunal has examined the issue and then finally came to the conclusion based upon series of decisions and therefore, we are of the opinion that the order in question is not required to be interfered with. 9. In view of aforesaid situation, the ratio laid down by the Hon'ble Bombay High Court in case of Ship Scrap Traders reported in 251 ITR 806 held that ship breaking activity gives rise to manufacture and production of altogether new commercial article or thing which is commercially indentifiable in the commercial world as other than ship and therefore, in that case, the assessee was entitled to claim deduction under Sections 80 HHA and 80-I of the Income Tax Act. Of course, the same was in the Income Tax Statute, but the breaking of ship activity is upon examination of every aspect has been held to be an activity of manufacturing and production and therefore, learned Tribunal has rightly taken assistance out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter, use and name and commercially known as such from that point of view is a question depending upon the facts and circumstances of the case. 16. The word 'manufacture' used as a verb is generally understood to mean 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance', however, minor in consequence the change may be. This distinction is well brought about in a passage, thus, quoted in Permanent Edition, Words and Phrases, Vol.26, from an American judgment. The passage runs thus: 'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new and different article must emerge having a distinctive name, character or use. 17. The expression manufacture has on ordinary acceptation a wider connotation. It means making articles, or material commercially different from the basic components, by physical labour or mechanical process. However, it also needs to be considered that when the word 'manufacture' is appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understood as a production of article or thing. In Webster's New International Dictionary, the word 'produce' is defined as 'something which is brought forth or yielded either naturally or as a result of effort and work'. In Shorter Oxford English Dictionary, the following meaning is given : 'to bring forward, bring forth or out : to bring into being or existence'. The meaning given in Black's Law Dictionary to the expression 'produce' is 'to bring forward : to show or exhibit : to bring into view or notice : to bring to the surface'. 19. Applying the principles spelt out by the Apex Court in the aforementioned decision and the ordinary meaning of the word 'produce' as disclosed by the dictionary and by its ordinary connotation, we are of the opinion that when the word 'manufacture' is appearing in the company of the word 'production', which has wider connotation than the word 'manufacture', then in that event, the word 'manufacture' will have to be interpreted in wider sense and will have to be understood at par with the meaning assigned tot he word 'production' and if such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial obtained from the dismantled ship was sold mostly as scrap to re-rolling mills for manufacture of iron and steel. The timber obtained from the ship was sold as timber. Consequently, the condemned and unserviceable ship purchased by the assessee from the Shipping Corporation of India was not regarded as a ship but was treated as an article sold for breaking and scrapping purposes. Therefore, the Division Bench on the facts found in that case was of the opinion that the condemned and unserviceable ship purchased by the assessee was not a ship but was a re-rollable scrap in the form of old ship for dismantling. The Division Bench, however, observed that, in fact, from the purchase of such ship the assessee acquired only the old materials and the articles contained therein, which were sold by it in the form in which they were acquired. No process whatsoever was applied to the said goods, not to speak of any process of manufacture. Thus, the said judgment of the Division Bench being a judgment based on the facts of that particular case cannot be relied upon as a precedent for deciding the issue involved in the present case. The Division Bench was not dealing with the ship as is invo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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