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Issues: Whether ship-breaking is a manufacturing process under the Gujarat Value Added Tax Act, 2003, and whether LPG and oxygen used in the cutting and dismantling process are raw material or consumable stores so as to entitle the assessee to tax credit.
Analysis: The activity of breaking ships results in the emergence of different commercially identifiable goods and therefore answers the statutory concept of manufacture. The gases used in the process are integral to the dismantling operation and fall within the inclusive definition of raw material, which covers processing materials and consumable stores. Once the assessee is engaged in a manufacturing activity and the goods purchased are used as raw material in that process, tax credit becomes admissible under the Act. The Tribunal's view was supported by the surrounding statutory scheme and the consistent treatment of ship-breaking as manufacture in the relevant legal context.
Conclusion: The issue is answered in favour of the assessee. Ship-breaking is a manufacturing process, and LPG and oxygen used therein are eligible for tax credit.
Ratio Decidendi: Where a process transforms a ship into commercially distinct goods, the process amounts to manufacture, and goods used as processing materials or consumable stores in that process qualify as raw material for tax credit purposes.
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