Industrial raw material test excludes fuel used only as a manufacturing aid, denying concessional tax treatment for kerosene.

Kerosene oil used only as fuel in the calcination stage for manufacturing titanium dioxide is not an industrial raw material under the Kerala General Sales Tax Act, 1963. The relevant test is whether the input goes into the making of the finished product, forms part of the manufacturing stream, or is consumed in a way that leaves it physically identifiable in the end product. Because kerosene operated merely as an aid to the process and did not physically enter or remain identifiable in titanium dioxide, it did not qualify for concessional treatment or form 18 declarations. The denial of concessional tax treatment for such fuel use was upheld.

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Issues: Whether kerosene oil used as fuel in the calcination stage for manufacturing titanium dioxide qualifies as an industrial raw material so as to entitle the assessee to issue form 18 declaration under the Kerala General Sales Tax Act, 1963.

Analysis: Section 5(3) of the Kerala General Sales Tax Act, 1963 grants concessional tax only when the goods sold are industrial raw materials, component parts, containers or packing materials used in the production of finished products inside the State for sale. The expression "industrial raw material" was construed to mean an input or ingredient that goes into the making of the end product, is used in the manufacturing stream, and either physically enters the composition of the finished product or is consumed in the process in a manner rendering its presence in the end product impossible. Applying that test, kerosene oil used in the calciners was found to operate only as fuel and an aid to the manufacturing process. It did not physically enter the finished product, was not identifiable in titanium dioxide, and did not answer the description of raw material.

Conclusion: Kerosene oil used as fuel in the calcination process is not an industrial raw material for the purpose of section 5(3); the assessee was not entitled to form 18 declarations.

Final Conclusion: The clarification denying concessional treatment for kerosene used as fuel in manufacturing titanium dioxide was upheld, and the appeal failed.

Ratio Decidendi: A commodity used only as fuel or as an aid in the manufacturing process, without physically entering or becoming identifiable in the finished product, is not an industrial raw material for concessional tax treatment.

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