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TMI Blog2023 (12) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of the Act, 1956 says that a dealer would be entitled to get a rebate in the tax for goods of the class or classes specified in the certificate of registration according to rules made by the Central Government to be used by him in manufacture or processing of goods for sale or mining or in general or distribution of electricity. The Hon ble Supreme Court in J.K. Cotton [ 1964 (10) TMI 2 - SUPREME COURT] while dealing with Section 8(3)(b) of Act 1956 and Rule 13 of the Act, 1957 has clearly held that the intention must be to use the goods as raw materials, as processing materials, as machinery, as plant, as equipment, as tools, as spare parts, as stores, as accessories, as lubricants, as fuels etc. and the restricted interpretation is not warranted. The Hon ble Supreme Court further held in no uncertain terms that articles used in the process of manufacture would be liable for concessional tax, even though such articles may not be incorporated in the manufactured end-product. The High Court of Patna in the matter of M/s Larson Toubro [ 1994 (12) TMI 313 - PATNA HIGH COURT] and the High Court of Calcutta in the matter of Nagarjuna Constructions [ 2014 (3) TMI 1043 - CAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commercial Tax Officer vide order dated 19.04.2011 partly allowed the application and added Soil (Murum) in the registration certificate but for the rest of the articles, the application was rejected. The petitioner preferred a revision before the Deputy Commissioner, Commercial Tax, Durg and vide order dated 07.06.2012, the same was rejected on the ground that Truck, Tripper, Dumper, JCB, Crane, Dozer etc. are not directly used in the execution of the works contract and the work can be done without using all these articles or goods. The petitioner has preferred this petition against the order passed by the Deputy Commissioner, Commercial Tax, Durg. 3. Learned counsel for the petitioner would invite the attention of this court to the provisions of Section 8(3)(b) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act, 1956 ) and Rule 13 of the Central Sales Tax (R T) Act, 1957 (hereinafter referred to as the Act, 1957 ). The provisions of Section 8 (1) of the Act, 1956 read thus:- Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, 1956 mere intention to use the goods in the manufacture or processing of goods for sale will not be a sufficient ground for a specification; 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, as lubricants. The Hon ble Supreme Court further held that if a process is so integrally related to the ultimate manufacture of goods that without that process or activity, the manufacture may, even if theoretically possible be commercially inexpedient, goods intended in the activity specified in Rule 13 qualify for special treatment. Paras 10 and 11 of the aforementioned judgment are reproduced herein below:- 10. Section 8 (3) (b) authorises the Sales Tax Officer to specify, subject to any rules made by the Central Government, goods intended for use by the dealer in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power. By Rule 13 the Central Government has prescribed the goods referred to in s. 8 (3) (b): such goods must be intended for use in the manufacture or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial treatment under S. 8(1), be ingredients or commodities used in the processes, nor must they be directly and actually needed for turning out or the creation of goods. 11. 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 possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods in' connection with manufacture of or in relation to manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Court in which it was held that vehicles used by a Company (which mined ore and turned out copper in carrying on activities as a miner and as a manufacturer) fell within Rule 13, even if the vehicles were used merely for removing ore from the mine to the factory, and finished goods from the factory to the place of storage. Spare parts and accessories required for the effective operation of those ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the construction, in which property passes, lose their original character What is produced is something totally different. There is no reason why activities involved in a works contract should not constitute manufacture. 81. If after the amendment of the Constitution it has become possible for the State to levy sales tax on the value of goods incorporated in a works contract, which as illustrated above, lose their original character, in the sarne way in which sales tax is leviable on the price of goods and materials supplied in a building contract, there is no reason why those goods which are required in the process of execution of a works contract, should not be liable for concessional sales tax. The distinction sought to be drawn by Mr. Majumder in respect of the judgments in J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer MANU/SC/0269/1964: [1965] 16 STC 563 (SC), Member, Board of Revenue, West Bengal v. Phelps and Co. (P.) Ltd. MANU/SC/0611/1971: [1972] 29 STC 101 (SC), Chowgule Co. Pvt. Ltd. v. Unior of India MANU/SC/0395/1980: [1981] 47 STC 124 (SC) is no distinction in the eye of law. Facts are bound to differ from case to case. What is relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods for sale or in mining or in the generation or distribution of electricity or any other form of power. In exercise of this power, Rule 13 was framed by the Central Government, which as amended read at the material time, as follows : The goods referred to in clause (b) of sub- section (3) of section 8 which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power. 9. The High Court confirmed the exclusion of drawing and photographic materials on the ground that those materials are required merely in the preparation of designs which though necessary for turning out textile goods cannot be said to be goods intended for use in the manufacture of goods. In the view of the High Court, designing is a process distinct from the process of manufacture i.e. of making or fabricating raw materials by hand, art or machinery, and work into forms convenient for use. But without a design of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat process would, in our judgment, fall within the expression in the manufacture of goods . For instance, 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 yam, then cloth is woven, put on rolls, dyed, calendared and pressed. All these processes would be regarded as integrated processes and included in the manufacture of cloth. It would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth. To read the expression in the manufacture of cloth in that restricted sense, would raise many anomalies. Raw cotton and machinery for weaving cotton and even vehicles for transporting raw and finished goods would qualify under Rule 13, but not spinning machinery, without which the business cannot be carried on. In our judgment, Rule 13 does not justify the importation of restrictions which are not clearly expressed nor imperatively intended. Goods used as equipment, as tools, as stores, as spare parts, or as accessories in the manufacture or processing of goods, in mining, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms that articles used in the process of manufacture would be liable for concessional tax, even though such articles may not be incorporated in the manufactured end-product. The High Court of Patna in the matter of M/s Larson Toubro (supra) and the High Court of Calcutta in the matter of Nagarjuna Constructions (supra) while dealing with similar issues included machinery, plant, equipment, tools, spare parts, stores, accessories, fuels, lubricants etc. in the registration certificate according to the provisions of Section 8(3)(b) of Act, 1956 and Rule 13 of Act, 1957. 8. In light of the authoritative pronouncements discussed above and the facts of the present case, it appears that the authorities have committed an error of law in rejecting the application moved by the petitioner to include the articles mentioned in the application as stated above. Consequently, the order passed by Deputy Commissioner, Commercial Tax, Durg is hereby set aside and the application moved by the petitioner under Section 8(3)(b) of the Act, 1956 is hereby allowed. The amendment would be effective in the registration certificate of the petitioner from the date of application. 9. With the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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