IMPORTANT POINT
Diesel can be called raw material in the manufacture of polyester yarn as the diesel used by the assessee is a fuel and lubricant as defined under Section 2(34) of the Rajasthan Sales Tax Act.

Headnote:(i) Rajasthan Sales Tax Act, 1994—Sections 2(34) and 10(1)—Concessional levy of tax on raw material—Claim of benefit under Section 10(1) claiming that diesel purchased is a raw material for manufacture of Polyester Yarn—Under the notification issued under Section 10(1) of the Act, purchase of raw material for manufacture of final product is entitled to a concessional rate of tax @ 3% instead of the normal tax of 4%—Respondent is engaged in the business of manufacture of polyester yarn—For the said purpose, it purchased diesel and used it for manufacturing electricity by D.G. sets—In year 1997-98 respondent has purchased diesel by paying 3% sales tax whereas 4% sales tax is leviable on purchase of diesel—Assessing Officer held that since diesel was not directly used for manufacture of final product, respondent was not entitled to the benefit under the notification—Assessing Authority, therefore, levied a differential duty @ 1%—High Court held that diesel used by respondent manufacturer was used as raw material—Whether diesel can be called raw material in the manufacture of polyester yarn—(Yes).
       Held : It is not in dispute that the respondent is a manufacturer of synthetic blended yarn in the State of Rajasthan and for the said purpose, respondent purchases diesel as raw material in accordance with the provisions of Section 10(1) of the Rajasthan Sales Tax Act, 1994 by paying a concessional rate of tax as notified by the State Government.(Para 18)
       Diesel is a raw material for the respondents which is being purchased and utilized in the process of manufacturing by way of generation of power through which the plant and machinery are being operated. It is relevant to consider that before purchasing any goods as raw material, it is necessary for the purchaser to apply to the Assessing Officer concerned for issuance of registration certificate specifically mentioning such items as raw material. In the instant case, the respondent accordingly approached the appellant who granted the registration certificate after considering all the aspects of the matter and taking a conscious decision. It is not the case of the appellant that at the time of grant of such registration certificate all facts were not placed before the appellant and that there is concealment of any material facts. The registration certificate so issued has been in effect during the concerned period and has not been cancelled, revoked or modified. The registration certificate issued by the appellant to the respondent has been marked as Annexure-R1.(Para 19)
       There is no dispute in the instant case that the diesel and lubricant is used to generate electricity through DG sets which is admittedly used for the purpose of manufacturing yarn. Thus, it is seen that as diesel is specifically and intentionally included in the definition of raw material by the legislature, the question that whether it is directly or indirectly used in the process of manufacture is irrelevant as argued.(Para 21)
       In the instant case, it can be seen that the respondent has purchased diesel as raw material and utilized the same for the purpose specified in the registration certificate and thus no condition is violated for invoking the provisions of Section 10(2) of the Act. In view of the fact that the diesel is being used for the purpose of running the generator set for the production of the ultimate product which is also required for the purpose of manufacturing the end product the diesel can only be termed as raw material and not otherwise. The Rajasthan Tax Board was, therefore, justified in setting aside the orders passed by the Assessing Authority as confirmed by the Deputy Commissioner (Appeals). (Paras 26 & 27)
       To avail the concessional rate of tax under Section 10, the assessee has to satisfy 3 conditions:
       a)he must be a registered dealer of any raw material;
       b)raw material must be used for the manufacture of goods; and
       c)the said manufacture in the State should be for the purpose of sale by him within the State or in the course of inter-state trade or commerce or in the course of export outside the territory of India.(Para 28)
       The respondent before us satisfy all the above tests and, therefore, the assessee-respondent, in our opinion, shall be entitled to such concessional rate as may be notified by the State Government. The respondent-assessee used diesel as raw material for the manufacture of the end product, namely, yarn and fabric. The diesel used by the assessee is a fuel and lubricant as defined under Section 2(34) of the Sales Tax Act. (Paras 29 & 30)
       (ii) WORDS AND PHRASES—Word ‘includes’—It gives a wider meaning to the words or phrases in the statute.
       Held : The word includes gives a wider meaning to the words or phrases in the Statute. The word includes is usually used in the interpretation clause in order to enlarge the meaning of the words in the statute. When the word include is used in the words or phrases, it must be construed as comprehending not only such things as they signify according to their nature and impact but also those things which the interpretation clause declares they shall include.(Para 21)

JUDGMENT

Dr. AR. Lakshmanan, J.—Leave granted.

2. The above appeal filed by the Commercial Taxation Officer Circle-B, Udaipur raises a very interesting question of law of general public importance, as to the parameters for the test for the determination of raw materials and in addition to whether the use of articles or commodities not generally used in the manufacturing process can still be categorized as raw materials for the purpose of concession in the levy of taxes, for consideration by this Court.

In other words;

“Whether diesel can be called raw material in the manufacture of polyester yarn.

3. In the present case, the respondent is engaged in the business of manufacture of polyester yarn and for the said purpose, it purchased diesel and used it for manufacturing electricity by D.G.-sets. The respondent has claimed a benefit under Section 10(1) of Rajasthan Sales Tax Act, 1994 (hereinafter referred to as ‘the Act’) claiming that diesel purchased is a raw material for the manufacture of the ultimate final product – Polyester Yarn.

4. Under the notification issued under Section 10(1) of the Act, purchase of raw material for manufacture of final product is entitled to a concessional rate of tax @ 3% instead of the normal tax of 4%. The appellant submits that diesel is not a raw material for the manufacture of polyester yarn and, therefore, exigible to tax @ 4%.

5. The said Section 10(1) of the Act and the notification issued thereunder are reproduced hereinbelow:

“Sec. 10- Levy of Tax on raw material and processing articles

(1)Notwithstanding anything contained in section 4, but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture in the State of goods for sale by him within the state or in the course of inter-state trade or commerce or in the course of export outside the territory of India shall be at such concessional rate as may be notified by the State Government.”

“NOTIFICATION

In exercise of the power conferred by section.10(1), RST Act, 1994, The State Govt. hereby notifies that the rate of tax payable on sale to or purchase by a registered dealer of any raw material, for the manufacture in the state of goods (other than exempted goods), for sale by him within the state or in the course of inter state trade or concessional rate of 3% on the condition that the buying dealer issues a declaration from ST 17 to the selling dealer.”

It is also beneficial to reproduce the definition of raw material which reads as under:-

“Section 2(34) – Raw Material – means Goods used as an ingredient in the manufacture of other goods and includes preservatives, fuel and lubricant required for the process of manufacture.”

6. In this case, the Officers of the Department inspected the firm/office of the respondent and also examined the account- books and documents of the respondent. It was found that the respondent has purchased diesel in the year 1997-98 by paying 3% sales-tax whereas 4% sales-tax is leviable on purchase of diesel (according to the Department).

7. The assessment for the year 1996-97 was completed by the Assessing Authority and it was found that the respondent had paid a lesser rate of tax on the purchase of diesel contending that the same was a raw material used in the manufacture of final product. The Assessing Authority held that since diesel was not directly used for the manufacture of final product, the respondent was not entitled to the benefit under the notification dated 29.09.1995 and it ought to have paid the tax @ 4%. The Assessing Authority, therefore, levied a differential tax @ 1% along with interest in total amounting to Rs.15,02,224/-.

8. Being aggrieved with the above order, the respondent filed an appeal before the Deputy Commissioner (Appeals) Udaipur being Appeal No. 164/RST/1999-2000. The Deputy Commissioner (Appeals) dismissed the appeal of the respondent and affirmed the order passed

Click Here to Read the rest of this document

2007 Supreme(SC) 46

IMPORTANT POINTDiesel can be called raw material in the manufacture of polyester yarn as the diesel used by the assessee is a fuel and lubricant as defined under Section 2(34) of the Rajasthan Sales Tax Act.

IMPORTANT POINT
Diesel can be called raw material in the manufacture of polyester yarn as the diesel used by the assessee is a fuel and lubricant as defined under Section 2(34) of the Rajasthan Sales Tax Act.