Important point
Where an assessee treat iron and steel scrap of considerable bulk by cutting down by mechanical process into pieces that may be conveniently utilized in rolling mills and foundries, such treatment, making saleable goods, would fall within wide definition of “manufacture” under Section 2(j) of the Madhya Pradesh General Sales Tax Act.

Headnote:(i) Madhya Pradesh General Sales Tax Act-Section 2(j)-Manufacture-Appellant purchased steel scrap in the form of defective angles, flats, channels, tubes and coils-Appellant cut down scrap so that it may be utilised by rolling mills and forging parts manufacturers, gear and pinion manufacturers and dye block manufacturers-Whether such cutting down with help of shearing machines and glass cutting scrap of width of 2 to 5 and thickness upto 2.5" into strips of size 2" to 4" is process of manufacture-Held: Appellant treat iron and steel scrap of considerable bulk by cutting it down by mechanical process into pieces that may be conveniently utilised in rolling mills and foundries-Such treatment, making saleable goods, would fall within the wide definition of ‘manufacture’ under Section 2(j).
       (ii) Words and Phrases-‘Manufacture’ as occurring in Section 2(j) of Madhya Pradesh Sales Tax Act.
       Held : Decisions construing the meaning of the word ‘manufacture’ as used in other statutes do not apply unless the definition of that word in the particular statute under consideration is similar to that construed in the decisions. The plain construction of the special definition of the word in a particular Act must prevail. In the special definition given in Section 2(j) of the said Act ‘manufacture’ has been defined as including a process or manner of producing, collecting, extracting, preparing or making any goods. There can be no doubt whatsoever that “collecting” goods does not result in the production of a new article. There is, therefore, inherent evidence in the definition itself that the narrow meaning of the word “manufacture” was not intended to be applied in the said Act. Again, the definition speaks of “the process of lopping the branches (of trees), cutting the trunks”. The lopping of branches and the cutting of trunks of trees also, self evidently, does not produce a new article. The clear words of the definition, therefore, must be given due weight and cannot be overlooked merely because in other contexts the word “manufacture” has been judicially held to refer to the process of manufacture of new articles. (Para 8)
       The appellants treat iron and steel scrap of considerable bulk by cutting it down by mechanical processes into pieces that may be conveniently utilised in rolling mills and foundries. Such treatment, making saleable goods, would, in our opinion, fall within the wide definition of “manufacture” under Section 2(j) of the said Act. (Para 9)

Judgment

Bharucha, J.-The principal judgment and order under appeal and the orders following it, also under appeal, were passed by a Division Bench of the High Court of Madhya Pradesh on writ petitions filed by the appellants.

2. Very briefly stated, the facts are these: The appellants purchase iron and steel scrap from the Bhilai Steel Plant and other parties. The scrap, in the form of defective angles, flats, channels, tubes and coils is of very considerable size. The appellants cut down the scrap so that it may be utilised by rolling mills and forging parts manufacturers, gear and pinion manufacturers and dye block manufacturers. The question is whether such cutting down, with the help of shearing machines and glass cutting, of the scrap of widths of 2 to 5 and thickness upto 2.5" into strips of the size of 2" to 4" is a process of “manufacture” within the special definition of that word in Section 2(j) of the Madhya Pradesh General Sales Tax Act. The definition reads thus :

“2(j) “manufacture” includes any process or manner of producing collecting, extracting, preparing or making any goods and in respect of trees which have been severed from the land or which have been felled, also the process of lopping the branches, cutting the trunks or converting them into logs, poles or ballies or any other articles of wood, but does not include such manufacture or manufacturing process as may be notified.”

3. The State Government issued a notification on 16th October, 1986 under Section 12 of the said Act granting exemption to dealers, who were registered under the said Act and had established eligible industrial units in any district in the State and held a provisional or permanent eligibility certificate issued by an officer authorised for the purpose, from payment of tax to the extent stated therein. Dealers registered with the Industries Department of the Government of Madhya Pradesh who had set up small scale industrial units and who had made a capital investment in fixed assets above Rs. 10 lakhs were exempted from the whole of the tax if they had set up industries within the areas categorised therein for the periods set out thereagainst. The exemption was available subject to the condition, inter alia, that it “shall be available only in respect of the sales of the goods which the dealer is licensed to manufacture and which are manufactured by him as also waste and by products obtained in the course of manufacture.”

4. Under the terms of the said notification the appellants obtained eligibility certificates from the District Level Committees established for the purpose, after due enquiry and verification. The State Level Committees, after the lapse of some time, issued to the appellants notices requiring them to show cause why their eligibility certificates insofar as they related to iron and steel scrap processing should not be cancelled on the ground that no manufacture of new items resulted. The State Level Committees, ultimately did cancel the eligibility certificates on the said ground. In the case of M/s. Laxmi Ispat Industries & Ors. v. State of M.P.1 and of some others the eligibility certificates were refused. The appellants challenged the orders of cancellation/refusal by way of writ petitions.

5. The High Court, in the judgment under appeal, dismissing the writ petitions, placed great stress on decisions under the Excise Act and other statutes relating to the meaning of the word “manufacture” as used therein and concluded that the activity that was carried on by the appellants was not “manufacture” for “simply because iron scraps are purchased and cut in a manner required by various customer, that will not change the basic character of iron scrap and it is only the processing by twisting, fabricating or giving it a particular shape required by customers. Such type of processing will not change the identity of the material and that will not amount to a manufacturing or processing of the same. As the definit

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