The essentiality of an input in the manufacturing process and its direct relation to the production of the finished product determine its eligibility for claiming input tax credit under the Orissa Entry Tax Act.

ORDER

Dr. S. Muralidhar, CJ . - Both these revision petitions arise out of an order dated 16th December 2006 passed by the Orissa Sales Tax Tribunal, Cuttack (Tribunal) in SA Nos. 77(E.T.) and 258 (E.T.) of 2004-05, which in turn pertained to orders dated 23rd February 2004 and dated 29th December 2004 of the ACST, Sambalpur Range in Sales Tax Appeal No. AA. 10 (SA-II-ET) of 2003-2004 and in AA 14 (SAII-ET) of 2004-2005 respectively.

2. In both these revision petitions, this Court framed the following substantive questions of law on 12th April 2007:

(A) Whether in the facts and circumstances of the case the Full Bench, Orissa Sales Tax Tribunal is legally competent and correct in cannot be treated as a raw material which direct goes into the composition of finished product, i. giving finding that Coal is not a raw material for manufacturing of cement rejecting the report of a technically qualified person?

(B) Whether in the peculiar facts and circumstances of the case, the Full Bench, Orissa Sales Tax Tribunal is correct to hold that coal e., Cement; and whether such a finding of the Tribunal is not contrary to law laid down by the Hon'ble Supreme Court in case of Collector of Central Excise vs. Ballarpur Industries Ltd., reported in 77 STC 2821

3. The background facts are that the Petitioner is engaged in manufacturing and sale of cement. It is stated that for the purposes of its manufacturing activities, the Petitioner requires raw materials like lime stone, iron ore fine, coal, gypsum etc. For the years in question i.e. 1999-2000 and 2000-2001, the Petitioner in its return filed under the Orissa Entry Tax Act, 1999 (OET Act) claimed set off of Entry Tax paid on purchase of coal which it claimed to be used as a raw material in manufacturing of cement in terms of Section 26(1) of the OET Act read with Rule 19 (5) of the Orissa Entry Tax Rules, 1999 (OET Rules).

4. The Sales Tax Officer (STO) completed the assessments for both the years rejecting the claim of set off. Thereafter, the Assistant Commissioner of Sales Tax (ACST), Sambalpur Range, Sambalpur rejected the Petitioner's appeals observing as under:

"Examining the details of the case and going through the claims of the appellant as per the documents submitted this forum is of the opinion that though the appellant claims that the coal is a raw-material which is used for production of cement this matter is not at all convincing as the analysis of cement production submitted by the appellant clearly speaks that "Coal ash" and not the I "Coal", is the ingredient of cement. It is an undisputed fact that the appellant had purchased coal on payment of entry tax which was used in the process of manufacturing of cement but as the coal in it's original form or in any of its form as coal does not constitute the ingredient of finished products i.e. cement this forum is not convinced with the submission of the learned advocate. It is opt to note here that in the taxation law "coal" and "Coal Ash" are two different commercial commodities, hence the tax paid on coal cannot be adjusted with the coal ash which directly goes into composition of cement."

5. The Petitioner then challenged the orders passed by the ACST filing the aforementioned appeals before the Tribunal.

By the impugned common order dated 16th December 2006, the Full Bench of the Tribunal upheld the conclusion arrived at by the ACST and dismissed the appeals.

6. This Court has heard the submissions of Mr. Siddhartha Ray, learned counsel appearing for the Petitioner and Mr. Sunil Mishra, learned Additional Standing Counsel for the Opposite Party-Sales Tax Department.

7. In the first place, the Court would like to recapitulate what constitutes raw material or 'input' in the process of manufacture. In Collector of Central Excise v. Ballarpur Industries Ltd (1990) 77 STC 282, while answering the question whether sodium sulphate was an 'input' in the manufacture of paper for the reason that in the course of the chemical reactions, sodium