Skip to content


Commissioner, Sales Tax Vs. Standard Metal Industries - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtDelhi High Court
Decided On
Case NumberS.T. Reference No. 2 of 1978
Judge
Reported in[1980]45STC229(Delhi)
AppellantCommissioner, Sales Tax
RespondentStandard Metal Industries
Appellant Advocate Inder Mohan Sehgal, Adv
Respondent Advocate Balram Sangal, Adv.
Cases ReferredK. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer
Excerpt:
- - 8. the words of section 8(3)(b) of the central sales tax act are clearly wider in scope than the present words of section 5(2)(a)(ii) of the local act......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 fall within the expression 'in the manufacture of goods'.12. the supreme court has drawn a distinction between the process carried out for manufacture and the raw material to be used for the finished goods. according to the provisions of section 8(3)(b) read with rule 13 of the central sales tax rules, the assessed was entitled to exemption 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. the local act, however, restricts the exemption to the goods for use by the.....
Judgment:

N.N. Goswamy, J.

1. This judgment and order will also dispose of Sales Tax Reference No. 3 of 1978. In these two sales tax references, at the instance of the Commissioner of Sales Tax, Delhi, the following common question of law has been referred to this Court for opinion:

Whether, on the facts and in the circumstances of the case, the learned Additional District Judge was justified in directing that calcium carbide, oxygen gas, electrodes and acetylene gas be included in the certificate of registration of the dealer for purposes of Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, as then extended to the Union Territory of Delhi

2. The relevant facts are that the assessed is a registered dealer and carries on the business of manufacturing iron chains and bolts. The assessed moved an application on 1st December, 1973, to the Sales Tax Officer for addition of the following items in columns 3(a) and 3(b) of the certificate of registration issued under the Bengal Finance (Sales Tax) Act, 1941, as then extended to the Union Territory of Delhi (hereinafter referred to as the local Act), and the Central Sales Tax Act, 1956, w.e.f. 15th November, 1973, for the purpose of use as raw materials by him in the manufacture of iron chains and bolts:

(i) Calcium carbide and (ii) oxygen gas.

3. That application was allowed by the learned assessing authority: vide his order dated 5th April, 1973. The order of the assessing authority was, however, subsequently revised and the aforesaid amendment in the certificate was set aside by the Assistant Commissioner of Sales Tax by his order dated 20th March, 1975. The assessed moved another application for addition of the following items in column 3(a) of the certificate of registration for the purpose of resale:

(i) Oxygen gas (ii) calcium carbide (iii) electrodes and (iv) acetylene gas.

4. By order dated 17th/18th April, 1974, the dealer was informed that as the said items were not raw materials the same could not be allowed in the certificate. It was also mentioned that these items were not being allowed for resale because the dealer was not engaged in reselling them. The revision against the said order filed by the assessed was rejected by the Assistant Commissioner, Sales Tax, by his order dated 13th March, 1975. The assessed filed a second revision before the learned Additional District Judge, who by his order dated 10th March, 1976, allowed the said revision and held that the items mentioned above were raw materials required and consumed in the process of manufacture of finished products and these, according to him, were to be inserted in the certificate of registration. Dissatisfied with the order of the learned Additional District Judge, the Commissioner of Sales Tax moved an application before the Appellate Tribunal, Sales Tax, Delhi, for making a reference of a question of law to this Court. The Appellate Tribunal was of the opinion that a question of law did arise and, consequently, referred the aforesaid question of law for the opinion of this Court.

5. The only question that arises for decision in this reference is whether the items mentioned above can be said to be 'raw material' within the meaning of Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi. The said section before its amendment by Act 20 of 1959, read as under:

Section 5. (2)(a)(ii) Sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for resale by him, or for use by him in the manufacture of goods for sale or for use by him in the execution of any contract; and of containers or other materials for the packing of goods of the class or classes so specified.

6. After its amendment by Act 20 of 1959, which came into force on 1st October, 1959, the provision is as follows:

Section 5. (2)(a)(ii) Sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for resale by him, or for use by him as raw materials in the manufacture of goods for sale; and of containers or other materials for the packing of goods of the class or classes so specified for sale.

7. The learned Additional District Judge was of the opinion that since the words 'raw material' had not been defined in the local Act it was proper that a wider definition should be given to the same and, as such, relied on a previous decision of the Commissioner of Sales Tax, who, in turn, had based his decision on a judgment of the Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur [1965] 16 S.T.C. 563. In our opinion, the learned Additional District Judge overlooked the fact that in the said case the Supreme Court was called upon to interpret Section 8(3)(b) of the Central Sales Tax Act read with Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1958. Section 8(3)(b) of the Central Sales Tax Act is as follows:

Section 8(3)(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.

8. The words of Section 8(3)(b) of the Central Sales Tax Act are clearly wider in scope than the present words of Section 5(2)(a)(ii) of the local Act. In the absence of a definition in the relevant Act, it is not open to us to adopt the definition of the words 'raw materials' given in other local Acts or in the Central Sales Tax Act. We can only interpret the words 'raw material' according to the common parlance or as defined in the dictionary. The words 'raw material' as used in the definition of 'manufacture' denote merely material from which a final product is made; in other words, which after undergoing process gets converted into a distinct product. The dictionary meaning of the words 'raw material' as given in Chambers's Twentieth Century Dictionary is as follows:

Material (often in its natural state) that serves as the starting point of a manufacturing or technical process; that out of which something is made, or makable, or may develop.

9. As we read the provision of Section 5(2)(a)(ii), as it stands after the amendment of 1959, the goods which were intended to be exempted should be required by the manufacturer as 'raw materials' in the manufacture of goods and not the goods required for use by him in the process of manufacture. The process of manufacture, no doubt, involves a variety of operations some direct and some indirect and the items of goods claimed by the assessed may be required for such process but are certainly not 'raw materials' for the manufacture of iron chains and bolts. By holding otherwise we will be nullifying the effect of the amendment by Act 20 of 1959. It cannot be said that gases, electrodes or calcium carbide by undergoing the manufacturing process are turned into iron chains or bolts.

10. The Tribunal had relied on the Judgment of the Supreme Court in the case of /. K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, and that is reported in [1965] 16 S.T.C. 563 . In our opinion, the judgment supports the contention of the petitioner which is clear from the following observations made in the judgment:

The expression in the manufacture of goods' in Section 8(3)(b) 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 fall within the expression 'in the manufacture of goods'.

12. The Supreme Court has drawn a distinction between the process carried out for manufacture and the raw material to be used for the finished goods. According to the provisions of Section 8(3)(b) read with Rule 13 of the Central Sales Tax Rules, the assessed was entitled to exemption 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. The local Act, however, restricts the exemption to the goods for use by the manufacturer as raw materials in the manufacture of goods for sale.

13. For the reasons recorded above, we answer the question referred to in the negative, i.e., in favor of the petitioner and against the assessed. In the circumstances, there will be no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //