Raw material and concessional tax relief apply when wrapping paper is consumed in manufacture and declarations are properly obtained.

Paper used to wrap bidis, agarbattis and fire-works is treated as raw material because it is consumed in the manufacturing process and serves more than a mere packing function. The analysis distinguishes wrapping that preserves aroma, freshness or protection from moisture from ordinary sale packaging, and treats such paper as falling within the statutory definition. It also states that a selling dealer may claim the concessional rate once the prescribed declaration is obtained from the purchasing dealer and the goods are specified in the purchaser's registration certificate; the tax authority cannot separately investigate the purchaser's actual use against the seller.

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Issues: (i) Whether paper used in wrapping bidis, agarbattis and fire-works is raw material within the meaning of clause (1) of section 2 of the Madhya Pradesh General Sales Tax Act, 1958. (ii) Whether a selling dealer is entitled to the concessional rate under section 8(1) of the Madhya Pradesh General Sales Tax Act, 1958 when he obtains the prescribed declaration from the purchasing dealer and the article is specified in the purchaser's registration certificate.

Issue (i): Whether paper used in wrapping bidis, agarbattis and fire-works is raw material within the meaning of clause (1) of section 2 of the Madhya Pradesh General Sales Tax Act, 1958.

Analysis: The definition of raw material covered both an article used as an ingredient in manufactured goods and an article consumed in the process of manufacture. The paper was not merely a packing material for convenience of sale. It was used as wrapper to preserve aroma and freshness in the case of bidis and agarbattis, and to protect fire-works from moisture and atmospheric interference. On that footing, the paper was consumed in the process of manufacture even if it was not itself an ingredient in the finished goods.

Conclusion: Yes. The paper used in wrapping bidis, agarbattis and fire-works is raw material within section 2(1).

Issue (ii): Whether a selling dealer is entitled to the concessional rate under section 8(1) of the Madhya Pradesh General Sales Tax Act, 1958 when he obtains the prescribed declaration from the purchasing dealer and the article is specified in the purchaser's registration certificate.

Analysis: The statutory scheme and the rules placed the primary responsibility on the purchasing dealer and the registering authority. Once the article was specified in the registration certificate and the selling dealer obtained the prescribed declaration, no further enquiry was open to the sales tax authorities against the seller as to the actual use of the goods by the purchaser. The seller's obligation ended with obtaining the proper declaration from a registered dealer.

Conclusion: Yes. The selling dealer was entitled to the concessional rate once the prescribed declaration was obtained and the goods were specified in the purchaser's registration certificate.

Final Conclusion: The reference was answered in favour of the assessee, and the sales tax authorities were not entitled to deny the concession on the ground that the paper was only packing material.

Ratio Decidendi: Where goods are specified as required raw material in the purchasing dealer's registration certificate and the selling dealer obtains the prescribed declaration, the seller cannot be denied concessional taxation by an independent enquiry into the purchaser's actual use of the goods; an article used as wrapping that is consumed in the manufacturing process falls within raw material.

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