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of <h1>Natural gas as manufacturing input: whether it counts as 'consumables' u/s5-B(1) for concessional sales tax, denied</h1> The dominant issue was whether natural gas used in a manufacturing process qualified as 'consumables' to claim the concessional tax rate under s. 5-B(1) ... Entitlement to the concessional rate of tax that was provided for under section 5-B(1) of the Andhra Pradesh General Sales Tax Act, 1957 - term 'consumables' under section 5-B(1) - Held that:- The word “consumables” in the said provision takes colour from and must be read in the light of the words that are its neighbours, namely, “raw material”, “component part”, “sub-assembly part” and “intermediate part”: So read it is clear that the word “consumables” therein refers only to material which is utilised as an input in the manufacturing process but is not identifiable in the final product by reason of the fact that it has got consumed therein. It is for this reason that “consumables” have been expressly referred to in the said provision, though they would fall within the broader scope of the words “raw material”. To use the words of Thomas Stephen & Co. [1988 (3) TMI 59 - SUPREME COURT] the natural gas used by the appellant does “not tend to the making of the end- product”. It is not a “consumable”. Issues:1. Interpretation of the term 'consumables' under section 5-B(1) of the Andhra Pradesh General Sales Tax Act, 1957.Analysis:The judgment by the Supreme Court dealt with the interpretation of the term 'consumables' under section 5-B(1) of the Andhra Pradesh General Sales Tax Act, 1957. The appellant had purchased natural gas from the Oil and Natural Gas Commission for manufacturing paper products and claimed a concessional tax rate under section 5-B(1). The High Court, relying on a previous judgment, held that natural gas did not fall under the definition of 'consumables.' The Supreme Court analyzed various judgments but found none directly relevant to the specific issue at hand. The Court emphasized that 'consumables' must be materials used in the manufacturing process but not identifiable in the final product as they get consumed during production. The Court referred to a previous case involving cashew shells used as fuel, where it was held that consumption must occur in the manufacturing process. Applying this reasoning, the Court concluded that natural gas, not being essential to the final product, did not qualify as a 'consumable.'In conclusion, the Supreme Court dismissed the appeal, upholding the High Court's decision and ordering the appellant to pay costs. Another appeal related to the same issue was also dismissed in light of the main judgment. The judgment provides clarity on the interpretation of 'consumables' for tax purposes and establishes the criteria for determining whether a material qualifies as a consumable in the manufacturing process.
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