AI Drafter 
TaxTMI 
TaxTMI 
1993 (4) TMI 299
X X X X Extracts X X X X
X X X X Extracts X X X X
....r manufacturing C.T.C. segment are S.S. billets and S.S. rounds, which are purchased from various registered dealers and subsequently forged and cut to S.S. rings as per specifications by various dealers on payment of labour charges. These S.S. forged rings are further processed by the applicant in his own factory with the help of its lathe machine. Thus the finished product, viz., S.S. C.T.C. segments are manufactured in the small-scale unit. The applicant is duly registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941, and the Central Sales Tax Act, 1956 as a manufacturer of S.S. C.T.C. segments with effect from November 1, 1988. Production at the said unit started on and from November 11, 1988 and the first sale of manufactured goods took place on December 15, 1988. The applicant was also registered as a small-scale unit with the Directorate of Cottage and Small Scale Industries, Government of West Bengal. In the certificate of such registration the manufacturing/processing activity was indicated as "S.S.C.T.C. segment (forging part is done from outside)". After fulfilling all the conditions laid down in rule 3(66a) of the Bengal Sales Tax Rules, 1941 the dealer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....one. 5.. The case of the respondents is that for tax holiday the goods should be manufactured by the dealer in his own industrial unit. The major part of the manufacturing work, i.e., forging, hammering, cutting, etc., is done from outside and only machining or polishing, which is not manufacture, is being done in the unit. One can be a manufacturing dealer according to the sales tax law, even if he gets the work done from outside on payment of labour charges. But the scheme of tax holiday is different. Here one has to do the manufacturing work in the unit itself. So the granting of registration as a manufacturing dealer to the applicant does not necessarily mean that he is manufacturing the goods in his unit and is eligible for tax holiday. Moreover, registration by the Cottage and Small Scale Industries Directorate as a small-scale industrial unit is not a conclusive proof of the fact that the unit is engaged in manufacture in terms of the sales tax law. 6.. The main issue for determination is whether in the facts and circumstances of the case, S.S.C.T.C. segments are being manufactured in the unit of the applicant within the meaning of rule 3(66a) even though the main part....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 9.. It is not enough that the goods are manufactured by the unit; these should also be manufactured in the unit itself. The registration certificate issued by the Cottage and Small-scale Industries Directorate indicates, inter alia, the manufacturing activity involving specific item or items of manufacture. This, along with other particulars mentioned in the said certificate, gives, as it were, "a local habitation and a name" to the newly set-up unit. This, being an integral part of such registration, is of crucial importance in the matter of determining the nature of the industry and the manufacturing activity it is actually required or supposed to undertake in its factory. It is, therefore, the nature of the industry which will determine what processing is required to be done in the unit itself. 10.. The registration certificate issued by the said Directorate indicates that S.S.C.T.C. segments are required to be manufactured in the factory and the work of forging is to be done from outside. The raw materials or intermediates brought to the factory are S.S. forged rings, which are further processed there, to produce the final product, viz., S.S.C.T.C. segments. The unit, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the unit." 12.. The criterion for deciding whether a product is manufactured in the unit in terms of the tax holiday scheme has thus been spelt out by the Tribunal in the following words: "If an industry is required to manufacture something in its own factory and it does not do it there but gets it done in somebody else's factory, it can be said to have violated a specific condition for eligibility of tax-holiday. It is not such a case here. The industry was not required to manufacture corrugated paper roll ; it was required to buy it from the local market and use it as a raw material in its factory for manufacture of corrugated paper board. It hardly makes a difference whether it locally purchases it or gets the corrugation done in somebody's factory, for the purpose of tax-holiday. So long as corrugated paper remains a raw material for the purpose of the said industry and so long as the nature of the activity of the industry remains what it was required to be in terms of its registration as a small-scale unit, it cannot be assumed that the process of corrugation was a part of its manufacturing activity.........The case of the respondents is, therefore, based on a wrong....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which they are". 17.. The argument of the learned State Representative is based on the premise that the job that the applicant is doing is mere polishing and the cases cited above go to support, the proposition that such polishing is not manufacture. These cases would certainly be applicable if only polishing is involved. But the question here is whether the applicant is really engaged in a polishing job. Mr. Chakraborty submitted that after S.S. forged rings are obtained, these are further processed by the lathe machine in the factory of the applicant before the final product, namely, C.T.C. segment, comes out. He further submitted that had it been a case of polishing only, the applicant need not have made considerable investment on plant and machinery. It was also submitted that in the course of processing in the factory some scrap materials are obtained on the sale of which taxes are paid. He argued that the question of scrap materials would not have arisen had there been only polishing and no manufacture. 18.. It is, however, admitted that before the final product is brought out, machining is done in the factory of the applicant. There is a lot of difference between "p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uct, viz., S.S.C.T.C. segment, emerges from the unit and that S.S. forged rings are being brought to the factory for machining. It has been claimed by the applicant that without further processing of forged rings, the end-product, namely, C.T.C. segments, cannot be obtained. The fact that there is further processing of forged rings in the applicant's factory had been admitted by the Assistant Commissioner and the Additional Commissioner. What they objected to is that only a minor operation is being carried on in the unit. The use of the lathe machine bought at considerable cost for such machining is not denied. In the affidavit-in-opposition it has been averred that only machining is being done in the factory, which is just polishing and cannot amount to manufacture. The basic question is not whether machining is mere polishing. The question is whether by machining a new product emerges. 23.. It is also significant that for manufacturing C.T.C. Segments out of forged rings the applicant pays excise duty under the Central Excises and Salt Act, 1944. Imposition of duty is dependent on emergence of a new commercial commodity. This lends support to the fact that the end-product is a....