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TMI Blog1977 (7) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial for Research Laboratory (-) (1) Plant Machinery, its spares tools. (2) All kinds of packing materials. (3) Dyes Chemicals. (4) All kinds of yarn. (5) Laboratory articles. (6) Air-conditioning Plant Machinery and its spares. (7) Lighting materials including fans, tube-lights, bulbs, etc. (b) Safely Articles (1) Fire Extinguishers other equipment. (2) Water and fire hose pipes. (c) Electrical Goods (1) For lighting the factory, such as fluroscent tubes, bulbs, fans and their spares. 4. At the outset Shri R.V. Patel, Advocate for the appellant, stated that so far as group (b) Safety Articles were concerned, the appellant gives up this contention. The present second appeal, therefore, relates to the two categories, namely, goods described as materials for Research Laboratory, and Electrical goods. 5. The point for decision in the present second appeal is whether the goods in question constitute goods required for use in he manufacture of taxable goods for sale. At the outset, it must be stated that in a case of the present type it is necessary to set out the relevant facts in due detail. Shri Patel stated that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is the biggest unit and has the biggest research laboratory. The objects of the research work done in the appellant's laboratory are as follows: (1) Development and improvement of products and process: (a) Research pilot plant for polymer preparation, spinning trials and processing technique development. (b) Introduction of fine denier products. (c) Development of new fibre variants, fibres with different cross section, fibres for industrial outlets. (d) Production of high performance fibre. (e) Research work connected with modifications of plant machinery for increasing production efficiencies and optimising yield and fibre strength. (2) Import substitution: (a) Raw materials, additives, catalysts and spin finish. (b) Dyes and chemicals used in polyester fibre processing. (c) Large number of engineering items : mechanical, instrument and electrical for the manufacture of polyester fibre. (d) Research relating to fibre: (i) Determining suitability of superior quality Indian cotton for blending with polyester fibre in place of imported Egyptian/Sudanese cotton. (ii) Evolving acceptable blends using good Indian wools, viscose and acr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be manufactured in a factory which is geared to production of goods of uniform pattern, it would be impossible to attempt manufacture of goods on a commercial scale. Production itself has to be of a set pattern, and deviation from the design prepared would be impermissible. That without the use of the drawing instrument and photographic materials, designing of patterns would, if not impossible, be very difficult, is conceded. It was further observed, setting aside the reasoning and the view of the High Court, that 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 should be commercially inexpedient, the goods required in that process fall within the expression 'in the manufacture of goods'. 10. The subsequent observations are also very significant. If a process or an activity is so integrally related to the ultimate manufacture of goods, so that without that process or activity, manufacture may, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, the objects of the research work are as follows. Polymerisation, spinning trials and the development of processing techniques : introduction of finer denier products, which I am told at the Bar, means finer counts of the staple fibre : development of new fibre variants : production of high performance fibre; modification of plant machinery for increasing production and optimising yield and fibre strength. 12. The sum total of the wood done by the research laboratory in this respect, therefore, is to experiment at developing fibres of different qualities as per requirements of the industries and developing techniques for preparing such fibres including modifications of plant machinery. The next objective of the research is import substitution. By this research, raw-materials, dyes and chemicals and certain engineering items which have to be imported are sought to be developed indigenously. The ultimate object, it must be remembered, is to experiment for the production of materials requisite for the processing and manufacturing of the fibres which the appellant concern is producing. 13. The research also relates to the fibers to be produced by the concern. One aspect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution of the other 9 designs which were rejected, can be said to be goods not intended for use in manufacture, simply because those particular articles and the designs evolved by their use do not ultimately find their way in the designs actually manufactured by the concern. 16. The same conclusion is reinforced by the other observations of the Supreme Court, reproduced above. The expression 'in the manufacture of goods' normally encompasses the entire process of converting raw materials into finished goods. The Supreme Court held that such entire. process included the use of drawing and photographic materials for designing of patterns. However, as emphasised in the concluding observations of the Supreme Court, commercially expediency is not to be decided by any theoretical possibility of manufacture without the disputed process or activity. Thus, in the present case as Shri Giram tried to argue, even without any research the appellant concern can go on producing polyester fibre. This approach, however, is wrong. As the observations above cited show, a theoretical possibility of manufacture is not the test. The test is commercial expediency. Such expediency has to be decided not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory can be of two types. One is that of analysis or processing of the raw materials and testing the finished products. The other is that of evolution of new varieties which have not as yet been manufactured. He meant to imply that only the first category of research was one of which goods could be used so as to fall within the expression 'in the manufacture of goods for sale'. The implication is that if the research is merely for evolving new varieties, then it would stand outside the category. This line of reasoning has already been exhaustively considered and rejected above. As held above, the evolution of new fibres and the techniques requisite for the same and the improvement of machinery for the same are commercially expedient, and the use of articles for such research work is also used in the manufacture of goods for sale. 20. Shri Giram has relied on Travancore Tea Estates Co. Ltd. vs. State of Kerala (1977 CTR (SC) 43 : 39 STC 1). He has extensively read from the ruling. It is requisite to clearly bear in mind the facts in the case and the principles laid down concerning these facts. The concern had the business of tea planting and growing. It owned tea estates and had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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