1980 (11) TMI 61 - SC - VAT and Sales Tax

Court rules blending ore during loading is 'processing' not 'manufacture' under Section 8(3)(b) and Rule 13.

The Court determined that blending of ore during loading into the ship constituted 'processing' but not 'manufacture' under Section 8(3)(b) and Rule 13. ... Whether the blending of ore whilst loading it in the ship by means of the mechanical ore-handling plant constituted manufacture or processing of ore for sale within the meaning of Section 8(3)(b) and Rule 13? Whether the process of mining, conveying the mined ore from the mining site to the riverside, carrying it by barges to the Marmagoa harbour and then blending and loading it into the ship through the mechanical ore-handling plant constituted one integrated process of mining and manufacture or processing of ore for sale, so that the items of goods purchased for use in every phase of this integrated operation could be said to be goods purchased for use in mining and manufacturing or processing of ore for sale falling within the scope and ambit of Section 8(3)(b) and Rule 13? Held that:- What is produced as a result of blending is commercially the same article, namely, ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore. The process of mining comes to an end when ore is extracted from the mines, washed, screened and dressed in the dressing plant and stacked at the mining site and the goods purchased by the assessee for use in the subsequent operations could not therefore be regarded as goods purchased for use 'in mining'. The requirement of Section 8(3)(b) and Rule 13 is that the goods must be purchased for use 'in mining' and not use 'in the business of mining'. It is only the items of goods purchased by the assessee for use in the actual mining operation which are eligible for inclusion in the certificate of registration under this head and these would not include goods purchased by the assessee for use in the operations subsequent to the stacking of the ore at the mining site. Allow the appeal of the assessee and direct the Sales Tax Officer to examine whether these 14 items of goods the machinery, vehicles, barges and other items of goods purchased by the assessee for use in carrying the mined ore from the mining site to the riverside and from the riverside to the Marmagoa harbour fall within the description of goods intended for use in processing of ore for sale within the meaning of Section 8(3)(b) and Rule 13. If any of these items of goods are purchased by the assessee as being intended for use as 'machinery, plant, equipment, tools, spare parts, stores, accessories, fuel or lubricants' in carrying the mined ore from the mining site to the riverside and from the riverside to the Marmagoa harbour, they would qualify for inclusion in the Certificate of Registration. Issues Involved:1. Whether the blending of ore whilst loading it into the ship by means of the mechanical ore-handling plant constituted manufacture or processing of ore for sale within the meaning of Section 8(3)(b) and Rule 13.2. Whether the process of mining, conveying the mined ore from the mining site to the riverside, carrying it by barges to the Marmagoa harbour, and then blending and loading it into the ship through the mechanical ore-handling plant constituted one integrated process of mining and manufacture or processing of ore for sale.3. Whether items of goods purchased for use in carrying the ore from the mining site to the riverside and from the riverside to the Marmagoa harbour could be said to be goods purchased for use in mining or in processing of ore for sale.Issue-wise Detailed Analysis:1. Blending of Ore as Manufacture or Processing:The Court examined whether blending of ore during loading into the ship through the mechanical ore-handling plant constituted 'manufacture' or 'processing' of ore. It was determined that blending did not amount to 'manufacture' since the blended ore was not a commercially new and distinct commodity from the original ore. However, the Court held that blending constituted 'processing' because the different qualities of ore experienced a change in their chemical and physical composition during blending, fitting within the definition of 'processing' under Section 8(3)(b) and Rule 13.2. Integrated Process of Mining and Processing:The Court considered whether the entire operation from mining to loading the ore into the ship constituted an integrated process. It was held that mining and subsequent processing operations, including transportation and blending, were interdependent and formed one integrated process. Thus, items used in any phase of this process were deemed to be used in the processing of ore for sale.3. Goods Used in Transportation:The Court addressed whether goods used for transporting ore from the mining site to the riverside and from the riverside to the Marmagoa harbour could be considered as goods used in mining or processing. It was concluded that the process of mining ended when the ore was extracted, washed, screened, and dressed. However, the transportation of ore from the mining site to the harbour was integral to the processing operation. Therefore, machinery, vehicles, and other items used for this purpose were eligible for inclusion in the Certificate of Registration as goods used in processing.Conclusion:The Court allowed the appeal of the assessee, directing the Sales Tax Officer to re-examine the 14 disputed items of goods in light of the principles laid down in the judgment. The appeal of the Union of India was dismissed, affirming that the Judicial Commissioner correctly included the four items in the Certificate of Registration. The Revenue was ordered to pay the costs of the assessee throughout.