2001 (1) TMI 958

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....d as such under the provisions of the Companies Act, 1956. It claims to be engaged in the business of manufacture of various drugs which according to the petitioner are basic drugs used in manufacture of other medicines. It has its manufacturing units at Mandideep in district Raisen. The petitioner is a registered dealer both under the State Sales Tax Act as also under the Central Sales Tax Act, 1956. 3. The State Government in exercise of its powers conferred under section 17 of the M.P. Commercial Tax Act, 1994 (for short called "the Act") has issued a Notification bearing No. A-3-32-97-STV-(22) dated May 9, 1997 exempting certain specified class of goods from payment of tax under the Act for the period (April 1, 1997 to March....

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....as under: "SCHEDULE S. No. Class of goods Extent of exemption 3. Basic drugs, when used as raw material for manufacture of medicines. Partly so as to reduce the rate of tax under section 9 to 2 per cent." 5. According to the petitioner, they were entitled to payment of concessional rate of tax on the basic drugs manufactured by them as per aforementioned notification. Since, according to petitioner, the sales tax authorities instead of demanding concessional rate of tax, demanded usual rate of tax from the petitioner by sending a demand under the Central Sales Tax Act for the periods 1997-1998, 1998-1999 and 1999-2000 (annexure P5), the petitioner invoked the provisions of section 68 of the Act by making an application (an....

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....tually used or would be used for manufacturing some other drug by the purchaser of those drugs. Learned counsel urged that the exemption benefit is essentially to goods which are capable of being used for manufacturing other drugs and not on its actual use ultimately. In other words, the submission is that use of goods (drugs) in manufacture of other goods cannot be taken to be or/and should not be the basis for claiming the benefit/exemption contained in the notification. This in substance was the submission of learned counsel for the petitioner while assailing the view taken by the Commissioner on the interpretation of the relevant entry 3 of the notification. Learned counsel made reference to several authorities and the observations made....

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....ther words, the benefit of notification is available to a dealer only when the basic drugs to which benefit is given are used as a raw material for manufacture of other medicines. If those drugs are not used in manufacture of medicines then in that event the benefit of notification cannot be given. 13.. In effect, therefore, the grant of exemption/benefit is conditional one. The use of the words "when used as raw materials" is decisive in claiming the benefit on the basic drugs. The right to claim the benefit of exemption arises only on satisfying the authorities that a particular drug--say A or B is used as a raw material for manufacture of other medicines. In other words, if the dealer is able to satisfy the authorities that a ....

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....decide whether a case for claiming benefit in payment of lesser rate of tax on that particular drug is made out or not. 16. Learned counsel for the petitioner has cited several authorities in support of his submissions. These authorities are [1968] 22 STC 152 (MP) (Commissioner of Sales Tax, Madhya Pradesh v. Kapoor Dori Niwar and Co.), 26 Cur. T.J. 175 (MP), [1996] 101 STC 529 (SC); (1996) 29 VKN 356 (SC) [State of Uttar Pradesh v. Hindustan Safety Glass Works (P.) Ltd.], [1995] 96 STC 355 (SC) (Commissioner of Sales Tax, Jammu and Kashmir v. Pine Chemicals Ltd.), [1987] 67 STC 427 (MP); (1987) 20 VKN 380 (M.P. Shoe House v. State of M.P.) and W.P. No. 2744 of 1998, decided on December 8, 1998. 17.. Having perused these authorities cite....