1. These two revision petitions arise out of an application made by M/s. The Ballarpur Straw Board Mills Ltd., Karwar, (hereinafter referred to as the assessee), under section 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act), for inclusion of certain items of goods in its registration certificate for the year 1971-72 for the purpose of obtaining C forms. The assessee had commenced the construction of a factory for manufacturing caustic soda and liquid chlorine at Karwar in or about the year 1971-72. For the purpose of erecting the said factory and manufacturing the chemicals referred to above, it required certain items of goods which had to be purchased from outside the State. It, therefore, requested the Commercial Tax Officer to include those items in the registration certificate to enable it to have the benefit of the concessional rate of taxation under the Act. He however rejected the prayer of the assessee in respect of the following eight items :
(1) Timber of all kinds.
(2) Drawing office equipments and instruments.
(3) Weighing machines and bridges.
(4) Laboratory instruments and apparatus.
(5) Paints, varnishes and pastes of all kinds.
(6) Packing of all kinds (steam lubricating, graphite, asbestos packings).
(7) Firebricks, fire cement, cement compound, china-clay and all types of building materials.
(8) Glazed tiles.
Aggrieved by the order of the Commercial Tax Officer, the assessee filed an appeal before the Deputy Commissioner of Commercial Taxes. He allowed the prayer in regard to only three items, namely, (1) Laboratory instruments and apparatus; (2) Weighing machines and bridges; and (3) Packings of all kinds. On further appeal to the Karnataka Sales Tax Appellate Tribunal, the Tribunal further modified the order of the Commercial Tax Officer by directing inclusion of firebricks, fire cement, cement compound and china-clay for the purpose of putting up boilers and timber for the purpose of manufacturing racks. It rejected the other claims. Aggrieved by the order of the Tribunal, the assessee has filed S.T.R.P. No. 6 of 1976 and the department has filed S.T.R.P. No. 9 of 1976.
2. It is contended by Sri S. P. Bhat, learned counsel for the assessee, that the Tribunal was in error in not allowing the inclusion of the following five items for the purposes specified against each of them in the registration certificate :
'1. Timber of all kinds. - To be used as a perforator structure in salt saturation; as a special design working platform in-between the electrolytic cells and as special cover for various tanks; in the construction of hopers for treating various materials for water-cooling plants; to be used in the buildings within the precincts of the factory.
2. Drawing office equipments and instruments. - Designing and drawing office equipment is necessary for fabrication, remodelling of machines; to manufacture spare parts, etc.
3. Paints and varnishes. - To be used for various machines and plants; factory buildings and in places wherever they are required within the precincts of the factory.
4. Firebricks, fire cement, china-clay, etc. - To be used in the factory in the construction of factory buildings and other buildings within the precincts of the factory; as lining materials in the various equipments and plants in the factory.
5. Glazed tiles. - To be used as lining materials in the factory.'
3. An application for registration has to be made by a dealer under section 7 of the Act. In order to claim the benefit of the concessional rate of tax, he has to apply for the inclusion of the goods which he requires for the purposes mentioned in section 8(3)(b) read with rule 13 of the Central Sales Tax (Registration and Turnover) Rules (hereinafter referred to as the Rules) when the goods in question have to be purchased in the course of inter-State trade or commerce. The relevant part of section 8 of the Act during the year 1971-72 read as follows :
'8. Rates of tax on sales in the course of inter-State trade or commerce. -
(1) Every dealer, who in the course of inter-State trade or commerce -
(b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3);
shall be liable to pay tax under this Act, which shall be three per cent of his turnover.
(3) The goods referred to in clause (b) of sub-section (1) -
(b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power ..........'
Rule 13 of the Rules reads :
'13. Prescription of goods for certain purposes. - The goods referred to in clause (b) of sub-section (3) of section 8 which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel, or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power.'
4. The contention of the department is that the inclusion of timber for the purpose of manufacturing racks and firebricks, fire cement and china-clay for the purpose of putting up of boilers was not warranted by rule 13 as the said purposes did not fall within the category of 'raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants in the manufacture or processing of goods for sale'. On the other hand, it is urged on behalf of the assessee that the exclusion of the five items, referred to above in para 2 for the purposes mentioned against each item, was contrary to section 8(3)(b) read with rule 13.
5. Rule 13 of the Rules came up for interpretation before the Supreme Court in Indian Copper Corporation Limited v. Commissioner of Commercial Taxes, Bihar : AIR1965SC891 . Among the items which the assessee in that case, which was engaged in mining operations, wanted to be included in the registration certificate were : (1) Locomotives and motor vehicles, used in carrying raw materials and removing materials during the process of manufacture and thereafter to different places; (2) Accessories and spare parts for locomotives and motor vehicles; (3) Hospital equipment and furnishings and fittings which were required for the hospitals run by the corporation for maintaining the health and fitness of persons employed in mining operations and manufacture of goods; (4) Laboratory fittings which were essential for sampling and analysis of ore and other raw materials in mining operations and in the process of manufacture; (5) Medical supplies which were required for treatment of the workers employed in the mining of ore and manufacture of goods; (6) Stationery required for the maintenance of records, etc.; (7) Tyres and tubes for motor vehicles; and (8) Cane baskets required for carrying ore and other materials used in the course of manufacture and also for being used by the sanitary department for collecting refuse and thereby ensuring the health and cleanliness of the colony of workmen employed in the manufacture of goods. The Supreme Court held :
'We are also of the opinion that in a case where a dealer is engaged both in mining operations and in the manufacturing process - the two processes being interdependent - it would be impossible to exclude vehicles which are used for removing from the place where the mining operations are concluded to the factory where the manufacturing process starts. It appears that the process of mining ore and manufacture with the aid of ore copper goods is an integrated process and there would be no ground for exclusion from the vehicles those which are used for removing goods to the factory after the mining operations are concluded. Nor is there any ground for excluding locomotives and motor vehicles used in carrying finished products from the factory. The expression 'goods intended for use in the manufacturing processing of goods for sale' may ordinarily include such vehicles as are intended to be used for removal of processed goods form the factory to the place of storage. If this be the correct view, the restrictions imposed by the High Court in respect of the vehicles and also the spare parts, tyres and tubes would not be justifiable. We are, therefore, of the opinion that the corporation was entitled to specification as set out in the petition and explained in annexure B-2 to the petition in respect of items (i), (ii) and (vi) ............
Those cane baskets which are intended to be used by the sanitary department for collecting refuse to protect the health and cleanliness of the colony and the workmen employed in the manufacture of goods, cannot, on the test set out earlier, be specified in the certificate of registration. But we are unable to agree with the High Court that the cane baskets which are required for carrying ore and other materials used in mining or in the manufacture of goods are not intended for use in the process of manufacturing or mining operations.
We are also unable to appreciate why the High Court specified laboratory fittings used for analysis and sampling ore and other raw materials only in the initial stages of mining operations and in the process of manufacture. There is no discussion in the judgment in support of this observation, and we see no ground to support the reservation which restricts the specification to laboratory fittings used only in the initial stages.'
6. In the case of J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur : 1SCR900 , the Supreme Court observed :
'The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression 'in the manufacture of goods'.'
It further observed :
'This is not to say that every category of goods 'in connection with' manufacture of, or 'in relation to' manufacture will be included within rule 13.'
7. Keeping the above observations of the Supreme Court in view, we shall now examine the case before us. The Tribunal has allowed the inclusion of timber for making racks and firebricks, fire cement and china-clay, etc., for the purpose of putting up of boilers. We do not think that there is any substance in the contention of the department that the Tribunal should not have included the above two items for the purposes mentioned above, because without the racks which are used as equipment and boilers which constitute part of the machinery, it would not be possible to carry on the business of manufacture of caustic soda and liquid chlorine in which the assessee is engaged. Hence the revision petition filed by the department has to fail.
8. Now we shall advert to the case of the assessee. The assessee asks us to direct the Commercial Tax Officer to include the items mentioned in para 2 above for the purposes specified against each of them. It is claimed that the purposes for which the assessee requires (1) timber of all kinds, (2) paints and varnishes, (3) firebricks, etc., and (4) glazed tiles are integrally connected with the efficient and proper working of the 'plant' in the factory and the drawing office equipment and instruments constitute 'equipment' in the manufacture of the goods in question. We feel that the case of the assessee to the extent it seeks inclusion of (1) timber of all kinds for using it in the construction or maintenance of building within the precincts of the factory, (2) paints and varnishes for using them in painting the factory buildings, and (3) firebricks, fire cement, cement compound and china-clay for using them in the construction of the factory buildings cannot be allowed in view of the following observations of the Supreme Court in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. : 1SCR900 :
'Building materials including lime and cement not required in the manufacture of tiles for sale cannot, however, be regarded within the meaning of rule 13, as raw materials in the manufacture or processing of goods or even as 'plant'. It is true that buildings must be constructed for housing the factory in which machinery is installed. Whether a building is a 'plant' within the meaning of rule 13, is a difficult question on which no opinion need be expressed. But to qualify for specification under section 8(3)(b) goods must be intended for use of the nature mentioned in rule 13, in the manufacture of goods. Building materials used as raw materials for construction of 'plant' cannot be said to be used as plant in the manufacture of goods. The legislature has contemplated that the goods to qualify under section 8(3)(b) must be intended for use as raw materials or as plant, or as equipment in the manufacture or processing of goods, and it cannot be said that building materials fall within this description. The High Court was, therefore, right in rejecting the claim of the company in that behalf.'
We are, however, of the view that the other purposes for which the items mentioned in para 2 above are required are activities which are integrally connected with ultimate manufacture of goods for sale and even if the manufacture of such goods without the above items is theoretically possible, it would be commercially inexpedient to do without them. They either form part of plant or equipment. The Tribunal was, therefore, in error in disallowing the inclusion of the above five items mentioned in para 2 for the purposes specified against each of them excluding those relating to the construction or maintenance of buildings as stated above. We accordingly allow S.T.R.P. No. 6 of 1976 and direct the Commercial Tax Officer to include in the registration certificate of the assessee for the year 1971-72 in addition to what is already directed by the authorities below, the five items mentioned in para 2 above for the purpose specified against each of them excluding the purposes relating to the construction or maintenance of factory buildings as indicated above. S.T.R.P. No. 9 of 1976, filed by the department, is dismissed. The parties shall bear their own costs.
9. Ordered accordingly.