Expanded definition of raw material covers diesel and lubricants used to generate electricity for manufacturing, making concessional tax rate applicable.

Where the statutory definition of raw material expressly includes fuel required for manufacture, diesel and lubricants used in a captive power plant to generate electricity for running the factory are treated as raw material for tax purposes. The distinction between direct and indirect use in the manufacturing process is immaterial once the legislature has enlarged the definition in this manner. The concessional rate therefore applied, and the demand based on the higher rate was unsustainable.

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Issues: Whether diesel and lubricants used in a captive power plant for generation of electricity for running the factory were liable to tax at the concessional rate applicable to raw material, or at the higher rate applicable to power generation.

Analysis: The controlling principle was that the statutory definition of raw material was an inclusive one and specifically covered fuel required for the purpose of manufacture. Diesel and lubricants used to generate electricity through DG sets for manufacturing yarn therefore fell within the enlarged meaning of raw material. Once the legislature had expressly included such fuel within the definition, the distinction between direct and indirect use in the manufacturing process was immaterial. The issue was already settled by the Supreme Court and there was no contrary legal position shown.

Conclusion: The concessional rate was applicable and the demand based on the higher rate was unsustainable.

Ratio Decidendi: Where the statutory definition of raw material expressly includes fuel required for manufacture, diesel and lubricants used for generating electricity for manufacturing purposes are to be treated as raw material for tax purposes.

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