The main legal point established in the judgment is that the activity of filling LPG into cylinders from a bulk container did not amount to manufacturing or processing of LPG for sale, based on the definitions and interpretations of 'manufacture' and 'processing' in sales tax laws.

R. V. RAVEENDRAN, J.

( 1 ) THE appellant, a registered dealer under the Karnataka Sales Tax Act, 1957 ("the Act", for short), engaged in the business of sale of LPG (liquid petroleum gas ).

( 2 ) THE appellant purchases LPG in bulk from M/s. Reliance Industries Limited and fills it in small cylinders of different capacities and sells such gas in cylinders. It is stated that transferring gas from a bulk container into small cylinders is a complicated process involving use of compressors, evacuating systems, filling guns, etc. It is alleged that without the use of such machinery/equipment, it will not be possible to transfer gas which is received by it in bulk to small cylinders. It is submitted that machinery that are used by the appellant for this purpose fall under Entry 1 (iii) (a) of Part M of the Second Schedule to the Act.

( 3 ) THE Government of Karnataka, by notification dated March 31, 2000 issued under Section 8a of the Act reduced the tax payable by a dealer under Section 5 of the Act in respect of sale of machinery and tools specified in Sl. No. 1 (iii) (a) of Part M of the Second Schedule to an industrial unit located in the State for use by such unit in the manufacture or processing of goods for sale, to four per cent. Appellant wants to purchase some machinery and equipment falling under entry Kiiixa) of Part M of the Second Schedule for being used in its unit, for transferring lpg from bulk container to small cylinders. The appellant contends that its activity of transferring LPG from bulk container to smaller cylinders amounts to "manufacturing or processing of goods for sale" and any machinery used for that purpose will be eligible for the concessional rate of tax under a notification dated March 31, 2000. To get the position clarified, the appellant made an application to the Authority for Clarification and Advance Rulings under section 4 of the Act posing the following question : whether form 37 can be issued for purchase of the following goods required for breaking of bulk gas to fill in cylinders,- 1. Bullets, 2. Compressors, 3. Pipeline, 4. Evacuating system, 5. Safety valves, 6. Ball valves, 7. Filling guns, 8. Dip testing system, etc.

( 4 ) THE Authority for Clarification and Advance Rulings made on order dated February 11, 2003 holding that appellant is not entitled to claim concessional rate of tax as the activity of the appellant, that is purchasing bulk gas and filling the gas into cylinders of different capacities, cannot be considered either as manufacturing or processing of any goods.

( 5 ) THEREAFTER, the appellant made an application for rectification of the said clarification order dated February 11, 2003 on the ground that the definition of the term "manufacture of gas" in the gas Cylinders Rules, 1981 and the definition of "manufacture" in the Indian Explosives Act, 1884 were not considered by the Authority. 5. 1 The Explosives Act, 1884 was enacted to regulate the manufacture, possession, use, sale, transport, import and export of explosives. Section 17 enables the Central Government to declare any substance which appears to it to be specially dangerous to life and property, by reason either of its explosive properties or of any process in the manufacture thereof being liable to explosion, shall be deemed to be an "explosive" within the meaning of the said Act. The said section further provides that the provisions of the said Act, shall extend to that substance, as if it were included in the definition of the term "explosive" in the Act. The Central Government in exercise of power under the said provision, has by notification, declared liquid petroleum gas (LPG) compressed in metal cylinders for use for domestic purpose would be covered by the expression "explosives". The Central Government has made the Gas Cylinder Rules in exercise of its rule-making power under the said Act. 5. 2 The term "manufacture of gas" is defined under the Gas Cylinders Rules as meaning filling of a cylinder

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