Certain goods, such as welding electrodes, should be treated as raw material and be eligible for input tax credit.

JUDGMENT:

S.K. MISHRA, J.

The following substantial questions of law arise in this case:-

“i. Whether on the facts of the case, the learned Commercial Tax Tribunal was justified in law in not giving the benefit of input tax credit regarding those goods which were consumed by the petitioner during the manufacturing of finished goods (pre-fabricated structures)?

ii. Whether on the facts of the case, the learned Assessing Authority and the learned Commercial Tax Tribunal was justified in law in not giving the input tax credit to the revisionist regarding those goods which were approved by the Assessing Authority as goods essential for manufacturing the finished goods on the garb of goods treated as consumable?

iii. Whether on the facts of the case, the leaned Assessing Authority and the learned Commercial Tax Tribunal was justified in law in giving the benefit of notification dated 31.03.2008 prospectively?”

2. By means of this revision, the revisionist challenges the order passed by the Assessing Authority, by which the Assessing Authority refused to give the input tax credit to the revisionist to those goods, especially welding electrodes, which have been used in the manufacturing of the finished goods. The order of assessment was passed on 25.06.2010. The said order was challenged before the learned Commercial Tax Tribunal, Dehradun (hereinafter referred to as the “Tribunal” for brevity), in Second Appeal No.25 of 2012, which was also dismissed on 25.06.2013. The matter relates to the Assessment Year 2006-07.

3. It is apparent from the records that the Assessing Authority, while assessing the commercial tax of the revisionist, treated certain goods, especially welding electrodes, which were used by the revisionist in manufacturing of pre-fabricated structures, as consumables, and not as raw material, and therefore, the benefit of input tax credit was denied to the revisionist. The revisionist assailed the said assessment order before the learned Tribunal, which in its impugned order, has held that the Uttarakhand Value Added Tax, 2005, the Amending Act, 2008 is prospective in effect, and is not applicable to the consumables which were used by the assessee for the Assessment Year 2006-07. The learned Tribunal also held that those materials, especially welding electrodes, were consumables, and therefore, are not eligible for input tax credit.

4. Mr. S.K. Posti, the learned Senior Counsel appearing for the revisionist, at the outset, concedes that the revisionist, at this stage, do not raise the plea that welding electrodes are consumables, and that it is covered by the Amending Act, 2008. He, on the other hand, relying upon several judgments of the Hon’ble Supreme Court, would argue that welding electrodes are raw material for the industry run by the revisionist. Such welding electrodes are used in fabricating different structures, and those electrodes lose its character and assimilate totally in the finished product of the assessee, and therefore, they should be treated as raw material, and not as consumables.

5. This aspect has been dealt by the Hon’ble Supreme Court on several occasions. In the case of “Collector of Central Excise, New Delhi vs. Ballarpur Industries Ltd.”, reported in (1990) 77 STC 282, the Hon’ble Supreme Court examined “whether sodium sulphate which is used in the chemical recovery cycle of sodium sulphide which forms an essential constituent of sulphate cooking liquor used in the digestion operation in manufacturing of paper and paper boards is raw material, or not?” The Hon’ble Supreme Court has held that for an item to qualify itself as “raw material”, it need not necessarily, and in all cases go into, and be found, in the end-product. Merely because this ingredient was consumed and burnt up in the course of chemical reaction, it will not ipso facto ceased to be raw material. Sodium Sulphate was utilised in the preparation of an anterior, intermediate product at the stage of 'digestion' of the pulp. It is so int