TaxTMI 
TaxTMI 
1990 (12) TMI 301
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...., it purchases natural gas from the Oil and Natural Gas Commission within the State. So far as the petitioner in W.P. No. 5532 of 1990 which also manufactures paper and pulp, it purchases gas and diesel from local dealers in Andhra Pradesh. Again, the petitioner in W.P. No. 5533 of 1990 purchases gas and diesel, coal, husk, bamboo dust, grease, lubricant oil, HCL lime, caustic soda flakes and used driger screen from within the State. The petitioner in W.P. No. 7315 of 1990, which manufactures magnesium metals, purchases natural gas from Oil and Natural Gas Commission within the State. These purchases are made at the concessional rate of 4 per cent of tax and the claim of the petitioners is that the said percentage is applicable to them in view of section 5-B of the A.P. General Sales Tax Act, 1957, hereinafter referred to as "the Act". In the counter-affidavit filed in W.P. Nos. 5532 and 5533 of 1990, it is pointed out that the natural gas is taxable at 10 per cent under entry 118 of the First Schedule of the Act, that the Oil and Natural Gas Commission was paying at that rate on their sales made to the customers till January, 1989, but that they suddenly started paying at th....
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.... at 4.17 per cent as provided in section 5-B. The writ petitioners' contention is that the word "consumables" used in section 5-B applies not only to such goods which become part and parcel of the ultimate product but also such goods which are used during the process of manufacture or for running the machines, etc., and which are integrally so connected. In W.P. No. 3541 of 1990 an additional counter-affidavit was filed stating that the writ petitioner not being a party to the assessment against the Oil and Natural Gas Commission he could not file the writ petition. The main contention of the learned counsel for the writ petitioners, Sri S. Dasaratharama Reddi, Sri S. Venkata Reddy and Sri P. Venugopal, is that the writ petitioners are manufacturers in the State of Andhra Pradesh of various finished goods and that they purchase gas and diesel oil and the various commodities referred to above from local dealers in Andhra Pradesh. Such commodities purchased by the manufacturers, which are of the nature of raw material, component part, sub-assembly part, intermediate part, consumables and packing material which are intended to be used in the manufacture of other goods are to be tax....
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.... whichever is lower on the turnover relating to such sale: Provided that the provisions of this sub-section shall not apply to any sale unless the dealer selling the goods furnished to the assessing authority in the prescribed manner a declaration duly filled in and signed by the dealer to whom the goods are sold containing the prescribed particulars in the prescribed form obtained from the prescribed authority on payment of prescribed fee." The other sub-clauses of section 5-B deal with the penalties for acting contrary to the declaration, and also furnish the procedure in respect of maintenance of accounts and the consequences of non-maintenance of accounts as prescribed. There is an important explanation to section 5-B at the end of all sub-sections, which reads thus: "Explanation.-For the purpose of this section,- (i) the words 'raw material' mean any material from which another product can be made through the process of manufacture either by itself or in combination with other raw materials; (ii) the words 'component part', 'sub-assembly part' and 'intermediate part' mean the article which forms an identifiable constituent of the finished product and which along....
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....State shall be issued. (3) to (8)............................." "30-B(1)(a). Every manufacturer shall prepare a declaration in form G in triplicate and issue the original and duplicate thereof to the dealer from whom he purchases raw materials, component parts, subassembly parts, intermediate parts, consumables and packing materials at the concessional rate of tax: Provided that the manufacturer may issue declarations in form G (revised) to the selling dealers for all the purchases of goods mentioned in the certificate of registration on and from 21st January, 1989 and used in the manufacture of goods mentioned in the certificate of registration on and from 21st January, 1989. (b)......................... (c) The manufacturer shall use or consume the goods so purchased for manufacturing goods specified in the certificate of registration issued under rule 30-A of the Rules. (d) to (g).................. (h) The raw materials, component parts, sub-assembly parts, intermediate parts, consumables and packing materials purchased at the concessional rate of tax on issue of form G shall be used in the manufacture of goods within 12 months from the date of purcha....
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....the above, the learned counsel for the petitioners have also placed reliance on the historical background contained in the book "Scheme for levy of Concessional Tax on Component Parts in Andhra Pradesh" by Sri S. Suri Babu, which reads as follows: "1:0 Historical background: 1:1 Most of the intermediates and components required by the manufacturers are scheduled goods and are subjected to higher rates of tax. If those items are purchased from other States they will bear only the incidence of Central sales tax which is always lower than the State rate. Since most of the components are of high value and even after meeting transport and other incidental costs it would be cheaper for the manufacturers in Andhra Pradesh to buy their requirements from other States instead of purchasing them locally. 1:2 The National Council of Applied Economic Research headed by Dr. S. Bhoothalingam appointed by the Government of Andhra Pradesh to review the system of sales tax in Andhra Pradesh recommended in its report that the components purchased by manufacturers to be used for the manufacture of other items may be subjected to a concessional rate of tax so as to encourage such units to buy ....
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.... writ petitioner's case before the authorities, fall within the meaning of the word "consumables". Before dealing with the rulings cited for the writ petitioners, it is necessary to refer to the decision of the Kerala High Court under the Kerala General Sales Tax Act, 1963 and to the judgment, on appeal therefrom of the Supreme Court which have interpreted the word "consume" and which are strongly relied upon by the learned Government Pleader Sri M. Ramaiah. The Kerala High Court's decision is reported in Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1987] 66 STC 34. The dealer there was a manufacturer in tiles, terra-cotta wares and ceramics. He purchased cashew shells for fuel for the kiln in the factory and lime shells and certain stores described as consumed stores for use in maintenance of the kiln and factory. The assessing authority taxed the purchases under section 5-A of the Kerala General Sales Tax Act, 1963. The assessee contended that the purchase turnover of cashew shells was exempt from levy of tax under section 5-A of the Kerala General Sales Tax Act, 1963, by virtue of a notification issued by the Government of Kerala under section 10 of the Act.....
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....er pointed out that this very contention was negatived in Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC). In our view, the abovesaid rulings of the Kerala. High Court and Supreme Court are applicable. Consumables under section 5-A of the Kerala Act are liable to tax, if they are used in the manufacture of the endproduct provided they get transformed into end-product and are not merely used as raw material in the manufacture of other goods or for ancillary purposes. It must, therefore, be held in view of the abovesaid decision of the Kerala High Court and the Supreme Court in Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1987] 66 STC 34, [1988] 69 STC 320, respectively, that the consumables such as diesel oil and gas in the present case must be used directly in the manufacture of end-product by the manufacturer in the sense that the said goods are transformed as part and parcel of the end-product. It is not sufficient if diesel oil and gas are merely used as fuel or for ancillary purposes for running the machinery which produces the end-product. It is, therefore, clear that in respect of gas and diesel oil and the other items claimed as b....
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....fficer [1966] 17 STC 510 (SC) and Chowgule & Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 (SC) are also cases where the abovesaid decisions arising under Central Sales Tax Act were followed. In our view, the abovesaid decisions arising under the Central Sales Tax Act are not in point. It is true that in the said decisions the Supreme Court had occasion to interpret the words goods used "in the manufacture or processing of goods for sale". In that context, the Supreme Court held that the wider meaning is to be given to the said words rather than a restricted meaning. It is true that the Supreme Court pointed out that not merely the goods which get transformed into end-products but also goods which were used for running the machinery which produces the end-product, being integrally connected with the process of manufacture, would come within the meaning of the abovesaid expression in section 8(3)(b) of the Central Sales Tax Act and rule 13 of the Central Sales Tax Rules. But the abovesaid decisions do not consider the meaning of the words "consumables" or "consumes" which arise for interpretation in the cases before us. These words "consumables" or "consumes" have on the cont....