Judgment

R.M. SAHAI, J.

(1) THE short question of law that arises for consideration in this appeal is whether any raw material, including those which were otherwise finished products, used by the appellant in manufacture or processing of commercial vehicles, spare parts and other engineering products were industrial raw material (inputs) within the meaning of the expression used in the notification issued by the State government on 12/4/1982 in exercise of its power under Section 13(1(b) of the Bihar Finance Act, 1981.

(2) THE appellant, a registered dealer, under the central Sales Tax Act, 1956 and the Bihar Finance Act, 1981 for purpose of manufacturing and processing its products, namely, motor vehicles, trucks and bus chassis, excavators and other engineering products, purchased commodities including such commodities as tyres, tubes, batteries and various other items which are used for producing the goods and making them saleable commodities. The appellant claimed that such goods being raw material having been required directly for use in the manufacturing of goods for sale in the State or in course of inter-State trade, the appellant was entitled to concessional rate of tax at 1% on such goods. It made an application on 27/4/1982 before the Deputy Commissioner for issuing certificate to enable the appellant to purchase the goods at concessional rate on which the order was passed to the following effect:

"ONLY industrial raw material purchases will be subject to tax at 1%. Consumables, machinery, equipments etc., will still be subject to 3%." Since, according to appellant, the order was vague, it filed another application on 16/8/1982 in which the details of the industrial raw material that the appellant intended to purchase were mentioned. To this the reply given by the Deputy Commissioner was that complaints were received that the appellant was paying tax of 1% only, on all kinds of purchases irrespective of whether materials were raw material or not. In pursuance of this letter, the appellant submitted its reply and on 26/11/1982, the Deputy Commissioner rejected the claim of the appellant and observed as under: "In my opinion the term industrial raw materials (input) means those inputs to the extent they are raw materials. To be very clear items of inputs which are in a finished state and are just to be fitted in the chassis without any further modifications etc., which are not undergoing any further process of manufacture are not industrial raw materials and are merely fittings. The purchases of such fittings to bring a chassis in saleable condition are not covered by the aforesaid Notification No. SO-604 dated 12-4-82."

The appellant challenged this order by way of a writ petition in the High court which was dismissed by the division bench and it was held that the claim of the appellant that the notification should be so read as to extend to all the goods required for use in manufacture or processing as contemplated by Section 13(1(b) and not only to raw material as mentioned in the notification, was not correct as the section itself permitted the appellant, a manufacturer, to avail of the benefit subject to the conditions and restrictions to be prescribed. Since there was no unconditional right to pay concessional rate of tax and it depended on satisfying the conditions mentioned in the notification, the appellant could not claim that the notification suffered from any infirmity or that the appellant was not liable to be subjected to tax on what was raw material even though used as finished products for the manufacture of the vehicles. The High court held that the words industrial raw material (inputs) could not be given such a wide meaning as to result in widening the scope of concessional rate even to finished products nor did it find any merit in the submission of the appellant that the Deputy Commissioner had passed the order, mechanically, without applying his mind.

(3) SEC