TaxTMI 
TaxTMI 
2010 (2) TMI 1068
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....tioners under section 50 of the Act on the ground of alleged breach of condition of exemption by the petitioners. It was further clarified that the petitioners in response thereto would be at liberty to lead evidence and make submissions before the authorities to establish that the goods used by them fall within the expression "used by him as raw material, processing material or consumable stores . . . in the manufacture of taxable goods." The petitioners would also be at liberty to raise before the authorities all available contentions including those raised in the petitions as well as the contention that the circular dated September 2, 2005 and the decision of the Sales Tax Tribunal in the case of Pandesara (supra) are bad in law. With regard to the alternative plea the court accepted the said plea and declared that the circular dated September 2, 2005 shall not operate with retrospective effect. The court further held that the respondents would not be entitled to reopen the completed assessments and notices issued for reassessment, which are impugned in the petitions, were quashed. The court further clarified that circular dated February 19, 2001 held the field till the same was....
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....directions regarding pending and disposed of proceedings and accordingly the court directed that the proceedings shall continue to remain pending till the Gujarat High Court gives its answers to the questions framed and no demands for sales tax will be raised on the assessees in respect of purchase of fuels during the period for which assessments have been completed on the basis of requisite forms furnished by the assessees under the exemption notification and where no issue in that regard is pending before the assessing officer/appellate authority. The court has also directed that regarding pending cases of assessments/appeals, no recovery shall be made for a period of six weeks after the judgment of the High Court answering the above questions. The apex court thereby stayed the pending proceedings till the High Court decides the above questions. It is in the above light of the directions and/or observations made by the apex court all these matters are taken up for hearing. All these petitions can be divided into two groups, viz., group one consisting of Special Civil Application Nos. 9169 to 9190 of 2006 and group two consisting of the remaining matters. In group one, th....
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...., in particular, the following two questions by this court on remand, vide judgment and order dated February 4, 2009 (State of Gujarat v. Ami Pigments Pvt. Ltd. [2009] 22 VST 615 (SC)): "Whether the fuels consumed, namely, natural gas, furnace oil, light diesel oil, naphtha, etc., by the industry to generate electricity which is then used in the manufacture of end-products, namely, caustic soda, industrial chemicals, etc., can be considered to be 'raw material' or 'processing material' or 'consumable stores' for the purposes of section 15B of the Gujarat Sales Tax Act, 1969 or for the purposes of rule 42 or for the purposes of exemption notification issued from time to time under the Act? Whether the tests laid down by this court in the case of Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465 would apply for deciding the above question or whether the tests laid down by this court in the case of J.K. Cotton [1965] 16 STC 563 (SC) and in the case of Ballarpur Industries Ltd. [1990] 77 STC 282 (SC); [1989] 4 SCC 566; AIR 1990 SC 196 would apply? In other words, which line of decisions would apply, while deciding the above question, to the Gujara....
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....le for recognition under the relevant provision. Thereafter, the apex court in J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563, interprets the expression "for use by him in the manufacture or processing of goods for sale" appearing in section 9(3)(b) of the Central Sales Tax Act. The apex court took the view that if the process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in rule 13 will qualify for special treatment. The court however, clarified that this is not to say that every category of goods in connection with manufacture of, or in relation to manufacture, or which facilitates the conduct of the business of manufacture will be included within rule 13. The Gujarat Sales Tax Act, 1969 came into force on March 13, 1969. The Division Bench of this court in Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294, had an occasion to consider the expression, "goods purchased by him for use by him as raw or processing material....
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.... On December 23, 1986, exemption entry 175(2) was inserted by the exemption notification of the Finance Department dated April 29, 1970 issued under section 49(2) of the Gujarat Sales Tax Act. The said notification provided that sale of raw materials, processing materials, consumable stores or packing materials by a registered dealer who was specified manufacturer to the extent to which the amount of sales tax exceeds one fourth per cent and to the extent to which the amount of general sales tax exceeds one fourth per cent will be exempted. The condition being that the goods shall be used by the manufacturer as raw material, processing material or consumable stores in the industrial unit for which he has obtained eligibility certificate in the manufacture of goods. On June 25, 1987, the Government of Gujarat vide resolution No. INC1086-2236-I introduces the Composite Sales Tax Incentive Scheme, 1987 for Pioneer Units 1987. Clause 7 thereof states that the eligible unit will be entitled to purchase free of tax, the raw materials, processing materials, or consumable stores or packing materials for the purpose of use in the manufacture of goods or for packing of goods so manufact....
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....him as raw material or processing materials or as consumable stores in the manufacture of taxable goods under section 13(1)(b) of the Gujarat Sales Tax Act. The court however held that "ghan" and "hammer" being tools are not consumable stores. On March 5, 1992 exemption entry 255(2) was inserted by the exemption notification of the Finance Department dated March 5, 1992 issued under section 49(2) of the Gujarat Sales Tax Act. The said notification provided that the sale of raw materials, processing materials, consumable stores or packing materials by a registered dealer to an eligible unit to the extent to which the amount of sales tax exceeds one fourth per cent and to the extent to which the amount of general sales tax exceeds one fourth per cent will be exempted. The condition being that the goods shall be used by the manufacturer as raw material, processing material or consumable stores in its unit for which it has obtained the eligibility certificate in the manufacture of goods. On September 9, 1992 two references bearing Sales Tax Reference Nos. 10 of 1987 and 8 of 1988 in the case of Saurashtra Calcine Bauxite and Allied Industries v. State of Gujarat [1993] 91 STC 435....
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.... the section refers only to material utilized as an input in the manufacturing process but is not identifiable in the final product by reason of the fact that it got consumed therein. On February 19, 2001, in response to queries with regard to the applicability of the judgment of the apex court in the case of Coastal Chemicals Ltd. [2000] 117 STC 12; [1999] 8 SCC 465 to Gujarat, a circular was issued by the Commissioner of Sales Tax clarifying that the judgment of the apex court in the matter of Coastal Chemicals Ltd. [2000] 117 STC 12 (SC); [1999] 8 SCC 465 could not be applied for determining the scope of the word "consumable stores" used in the Gujarat Sales Tax Act and Rules, since the language of both the provisions is absolutely different. On September 28, 2004, the Gujarat Sales Tax Tribunal in the case of Pandesara Industries Pvt. Ltd. v. State of Gujarat, took the view that the words "consumable stores" refer only to material which is utilized as an input in the manufacturing process but is not identifiable in the final produce and that natural gas used as fuel is not "raw material", "processing material" or "consumable stores" in the manufacture of dyes and chemical....
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.... STC 435 (Guj), (6) Commissioner of Sales Tax v. Vadilal Dairy Frozen Food Industries [2006] 146 STC 9 (Guj) and the decision of the apex court in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563, when read together, lay down the propositions that "use in the manufacture" is not to be given a narrow and constricted meaning and that it would take in the entire process carried on by the manufacturer with a view to converting raw materials into finished goods and that if any particular process is so integrally connected with or related to the ultimate manufacture of goods that without that process or activity, manufacture, even if theoretically possible, would be commercially inexpedient, goods required in that process (as distinguished from the ultimate manufacture) would fall within the expression "goods" used in the manufacture. The Revenue's argument that "manufacture" in the Sales Tax Act has to be interpreted narrowly so as to not cover processing in view of the distinct language between the Central Sales Tax Act and the Gujarat Sales Tax Act, is inconsistent with the ratio of the Division Bench judgments of this court and cann....
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....tical. In the instant case, since the language of the statute being interpreted in Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465 and the language of the statute as well as notification of this court are distinct, the principle of implied overruling will have no applicability. Alternatively, it is also contended that the Division Bench cannot even hold on the basis of Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465 that the earlier judgments are impliedly overruled. For that, this Division Bench will have to refer the matter to the Larger Bench. For this purpose, reliance is placed on the decision of the apex court in the case of K. Sahadev v. Suresh Bir [1995] Supp. (3) SCC 668. It is further submitted that referring the matter to the Larger Bench is not at all necessary in facts of the case as the judgment of the apex court in Coastal Chemicals [2000] 117 STC 12; [1999] 8 SCC 465 neither expressly nor impliedly overruled the decisions of this court which are binding precedents and ought to be followed and the question be answered accordingly. It is further contended that in the case of Partap Steel Rolling Mills Ltd. v. State of Punjab [2007] 9 VS....
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....ords "for use by him as raw material, processing material or consumable stores in the manufacture of taxable goods found in sections 13(B) and 15B of the Gujarat Sales Tax Act, 1969". The Tribunal has also completely erred in brushing aside these decisions by observing that this court applied irrelevant decisions of the Supreme Court in giving meaning to the words "consumable stores" used in the Gujarat Sales Tax Act and Rules framed thereunder, inspite of the fact that in two of the above decisions, this court had itself noticed the different language of the Kerala statute and the Gujarat statute and did not apply the decision of the Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320; [1988] 2 SCC 264 to the Gujarat statute. It is further contended that the Tribunal has completely erred in applying the decision of the Supreme Court in the case of Coastal Chemicals Ltd. v. Commercial Tax Officer, Andhra Pradesh [2000] 117 STC 12; [1999] 8 SCC 465, even when the language of the Gujarat Act and the Andhra Pradesh Act are completely distinct and an interpretation placed by the Supreme Court on on....
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.... principles of construction, it is to be used only as an instrumentality for determining the intent of the Legislature where it is in doubt. In Sutherland on Statutes and Statutory Construction, the principle of noscitur a sociis (associated words) is explained as under: In case the legislative intent is not clear, the meaning of doubtful words may be determined by reference to their association with other associated words and phrases. Thus, when two or more words are grouped together, and ordinarily have a similar meaning, but are not equally comprehensive, the general word will be limited and qualified by the special word. But this is so, only if the result is consistent with the legislative intent, for the maxim noscitur a sociis is a mere guide to legislative intent. The rule will not be applied where there is no ambiguity, or to thwart the legislative intent, or to make general words meaningless. . . At the best the maxim merely represents a conclusion that considering the language of the entire Act, its subject-matter, and the available evidences of legislative intent, the interpretation of the court is consistent with the legislative purpose. It is submitted that th....
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...., it is submitted that the object of the notification was to encourage industries to establish their units in backward area ensuring them that they would not be liable to pay sales tax on all the purchases required in the manufacture of goods for sale. It is in this context that the words used are "raw material or processing material or consumable stores in the manufacture of goods for sale". The three words have a distinct connotation and together would encompass all revenue expenditure on purchases incurred by the manufactory for carrying on the manufacturing activity. There is no justification to construe any words on the basis of maxim noscitur a sociis, since neither the words "consumable stores" nor the word "processing material" on their own are of wide import or are of doubtful nature or are required to be construed narrowly. They are words which are understood by men of business having distinct meaning. In Shriram Vinyl & Chemical Industries v. Commissioner of Customs, Mumbai [2001] 4 SCC 286, while considering the question of exemption to parts requiring for initial setting up, or for the assembly or manufacture of articles specified in Notification No. 155/86-Cus d....
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....ualify as and is eligible to be called "raw material" for the endproduct but for that the ingredient should be so essential for the chemical process culminating in the emergence of the desired end-product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burning-up is its quality and value as raw material. In such a case, the relevant test is not its absence in the end-product, but the dependence of the end-product for its essential presence at the delivery end of the process. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus. While explaining the word "consumable stores", it is submitted that consumable stores is a composite word and must be construed as such and not as two individual words. Consumable stores cannot be equated to the word "consumables" which is generic in nature and could partake the colour of its neighbours and be given constricted meaning as was done in Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465. Construing it as a composite word, it has an ordinary meaning in business parl....
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....held that the word "raw material" has not been defined in the Act. It has, therefore, to be understood in the ordinary and well-accepted connotation of it in the common parlance of the persons who deal with it. It is further held that the word raw material has no fixed meaning. It may vary with the use to which it is put. An item may be raw material for manufacturing goods A and the goods so produced may themselves be raw material for goods B, for instance, batteries, tyres and tubes are by themselves finished products. They on their own cannot be considered to be raw material. But when they are used for manufacture of a vehicle then they become raw material for it as they are essential and necessary for producing the goods in which they have been used. For explaining the term "processing material", it is submitted that to appreciate the meaning of the term "processing material", it would be necessary to understand what is processing in the context of manufacture. Whenever a commodity undergoes a change as a result of some operations performed on it or in regard to it such operation would amount to processing. The nature of change is not material. What is necessary in o....
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....al imported by him for processing of raw material and such activity is also included in the definition of "business". In Commercial Taxation Officer, Udaipur v. Rajasthan Taxchem Ltd. [2007] 5 VST 529 (SC), the question came up before the apex court whether diesel can be called raw material in the manufacture of polyester yarn. The apex court answered the question in affirmative, although fuel was being used for generation of electricity in view of the definition of raw material which included fuel and lubricants required for the process of manufacture. Based on the above judgments, it is strongly contended that the fuel used for generating power for running the machines is a processing material and consequently, a raw material or consumable stores within the expansive definition given in the said statute. Any material required for carrying on any activity or operation which is the essential requirement and is so related to further operations for the end result would be a processing material. Lastly, it is submitted that the interpretation to the above clause must be placed which has been consistently placed thereon by the Department for contemporaneo expositio. Rel....
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....no demand for sales tax could be raised on an assessee in respect of the past period when he was prohibited from recovering the amount of tax in question from his customers. In this view of the matter, the court may answer the question referred by the apex court in its order dated February 4, 2009 read with the order dated February 12, 2009 in the affirmative and decide question No. 2 by approving the tests laid down by the apex court in the decisions rendered in the case of J.K. Cotton [1965] 16 STC 563 and Ballarpur Industries [1990] 77 STC 282; [1989] 4 SCC 566; AIR 1990 SC 196. Mr. K. B. Trivedi, the learned Advocate-General appearing for the respondent, on the other hand, has strongly objected to grant of the relief prayed for by the petitioners in all these petitions and submitted that the questions referred by the apex court while remanding the matters to this court should be answered in favour of the Department and against the petitioners and this court should hold that fuel consumed, viz., natural gas, furnace oil, light diesel oil, naphtha, etc., by the industry to generate electricity which is used in the manufacture of end-products, namely, caustic soda, industrial c....
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....t transformed into the end-product . . . These have been used only as an aid in the manufacture of the goods by the assessee . . . Cashew shells do not tend to the making of the end-product". (2) In Collector of Central Excise v. Ballarpur Industries Ltd. reported in [1990] 77 STC 282 (SC); [1989] 4 SCC 566; AIR 1990 SC 196, it is observed that "one of the valid tests . . . that its very consumption on burning-up is its quality and value as raw materials . . . The ingredient goes into the making of the end-product in the sense that without its absence, the presence of the end-product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilization is in the manufacturing process as distinct from the manufacturing apparatus". (3) In Kerala Electric Lamp Works Ltd. v. Collector of Central Excise reported in [1994] 74 ELT 807 (Ker), it is observed that "hydrogen is used only as a fuel for the melting of quartz by a burner and when lead in wires are fixed in the quartz . . . Such use as fuel cannot be treated as raw material". (4) In Tata Engineering & Locomotive Company Ltd. v. State of Bihar reported in [1995] 96 STC 211 (SC); [....
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....ained by reference to the meaning of the words associated with it. One is known by his companions; the meaning of a word or expression is to be gathered from the surrounding words, that is, from the context. It is known by its associates. It is a rule laid down by Lord Bacon that the coupling of words together shows that they are to be understood in the same sense. And where the meaning of a particular word is doubtful or obscure, or where a particular expression when taken singly is inoperative, the intention of a party who used it may frequently be ascertained by looking at adjoining words, or at expressions occurring in other parts of the same instrument. One provision of an instrument must be construed by the bearing it will have upon another. (2) In K. Bhagirathi G. Shenoy v. K. P. Ballakuraya reported in [1999] 4 SCC 135, it is held that it is not a sound principle in interpretation of statutes to lay emphasis on one word disjuncted from its preceding and succeeding words. A word in a statutory provision is to be read in collocation with its companion words. The pristine principle based on the maxim noscitur a sociis (meaning of a word should be known from its accompanying....
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.... the aforesaid words belong to the society of a mere general word "input". This can be very well substantiated by taking into account the observations of this court in case of Madhu Silica Private Limited v. State of Gujarat reported in [1992] 85 STC 258; 34 (1) GLR 143, wherein the logic behind the whole scheme of the Act and more particularly behind the provisions of section 15B of the Act has been discussed in the following words, taxable event under section 15B of the Act becomes complete when taxable goods, viz., raw materials, consumer stores, etc., are purchased in the State with the obvious intention of utilizing them in the manufacturing process as inputs and moment such intention gets fructified by such actual user. . . . It must, therefore, be held, that section 15B in pith and substance imposes purchase tax on purchase of concerned goods which are ultimately used in manufacturing process as inputs, and the later phraseology "used then in manufacture" as employed in section only deals with the description of charge goods and represent subsequent event. This decision of this court came to be confirmed by the apex court in the case of Hotel Balaji v. State of Andhra Prades....
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....nd not scientific accounting or technical ones. This is because of the fact that in dictionaries, words are explained and elucidated in different shades and therefore, the dictionaries are not to be taken as authoritative exponents of the meanings of words used in taxing legislation. For this purpose he relied on the decision of Mahabir Singh Ram Babu v. Assistant Sales Tax Officer reported in [1962] 13 STC 248 (All), and State of Orissa v. Titaghur Paper Mills Co. Ltd. reported in [1985] 60 STC 213 (SC); AIR 1985 SC 1293. In this view of the matter reliance placed on behalf of the judgment of apex court in case of Ram Lal v. State of Rajasthan reported in [2001] 1 SCC 175, does not apply to the facts of the present case, more particularly when, in the said case the apex court referred to Encyclopedia Americana (International Edition) while interpreting not a taxing legislation but Prevention of Food Adulteration Rules, 1955. Mr. Trivedi further submitted that reliance on the affidavit dated April 9, 2007 filed by Arvind Mills Ltd., in Special Civil Application No. 11810 of 2006 for bringing on record documents/information indicating the meaning of the terms "consumable stores" ....
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....learly explained the definition between the word "manufacture" on one hand and the "processing " on the other. Mr. Trivedi also refers to the definition of the term "manufacture" as defined in section 2(16) of the Act, reading as under: "2. (16) 'manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, collecting, altering, ornamenting, finishing or otherwise processing, treating or adopting any goods; but does not include such manufactures or manufacturing processes as may be prescribed." In this definition, the word "processing" is used with reference to the "goods", i.e., raw material, meaning thereby when any process is carried out with reference to the raw material for getting altogether a new commodity with distinctive name, character and use, then in that case the same would amount to "manufacture". The said highlighted expression cannot be equated with the words "in the manufacture or processing of goods" as used in section 8(3) of the Central Sales Tax Act read with rule 13, wherein the "goods" referred to are final taxable goods. Mr. Trivedi further submitted that the words "in the manufactur....
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....es Tax Act and Rules that the apex court observed that if any particular process was so integrally connected with the ultimate production of goods that but for that process, manufacture of goods would be impossible or commercially inexpedient, then the goods required in that process would fall within the expression in the manufacture of goods. Mr. Trivedi further submitted that the above judgment came to be fully followed in the case of Commercial Taxes Officer v. Rajasthan Electricity Board reported in [1997] 104 STC 89 (SC); [1997] 10 SCC 330 on the wider interpretation of the words "goods intended for use in the manufacture or processing of goods". In this case it was held that the authority had rightly specified under section 8(3) of the Central Sales Tax Act, the goods, viz., tools, plants including vehicles and other transportable goods including their spare parts, tubes and tyres, attracting concessional rate of tax for the State Electricity Board engaged in the business of electricity. Mr. Trivedi further submitted that the same was the position in the case of Collector of Central Excise v. Rajasthan State Chemical Works reported in [1991] 4 SCC 473, wherein an exempt....
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....135 STC 562; [2004] 4 SCC 437, as relied upon by the petitioners, would not apply to the instant matter since in the said case, the apex court was dealing with definition of the term "business" as defined under section 2(aa) of the U.P. Sales Tax Act, 1948 which, in relation to business of buying or selling goods, included various aspects including "processing materials" as included within the definition of the term "business". It was held that coal used by the company as a fuel for the manufacture of refined oil would be "processing material". The Department's contention was to the effect that the company should have used the coal imported by it only in connection with its own business and since the same was also used in the job-work of the other parties, the same does not involve purchase or sale of goods and hence, form No. 31 cannot be issued. It was in light of the specific provision that the apex court negatived the said contention. However, in the present matter, the applicable provisions of law are totally different. Mr. Trivedi further submitted that in case of Commercial Taxation Officer v. Rajasthan Taxchem Ltd. reported in [2007] 5 VST 529, the apex court was con....
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....y was entitled to avail of input credit. In the said case, the definition of the term "input" is very wide like the provisions in case of J.K. Cotton Spinning Weaving Mills Co. Ltd. [1965] 16 STC 563 (SC) and hence, cannot be compared to the facts and legal provisions involved in the present case. Mr. Trivedi further submitted that similarly, the judgment of the Allahabad High Court rendered in the case of Rama Paper Mills Limited v. State of Uttar Pradesh reported in [2003] 132 STC 8, will not apply to the instant matter since in the said case the High Court dealt with section 4B(2) of the U.P. Trade Tax Act, which is very much wider in nature as compared to the provisions of the State Act in question since section 4B(2) of the U.P. Trade Tax Act also includes fuels and lubricants at par with raw materials, processing materials, consumable stores, etc., and on that ground, it was held that benefit should be given to diesel oil purchased by the appellants for using the same in diesel generating set for generating electricity. Mr. Trivedi further submitted that the judgment of the apex court rendered in the case of Commissioner of Income-tax, Kerala v. Tara Agencies reported i....
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....les being used in the manufacture of oil engines. The contention of the assessee in the aforesaid case was to the effect that ghan and hammer are tools and they do not form part of the final product and that therefore the same should be treated as consumable goods. While negativing the aforesaid contention, this court observed that, neither "ghan" nor "hammer" are being used in the process of manufacture of oil engine . . . "ghan" and "hammer" are being used to give shape to certain articles which may be used in the oil engine. By no stretch of reasoning can it be said that "ghan" and "hammer" at any stage become an integral part of the taxable goods so as to make the taxable goods marketable. Mr. Trivedi further submitted that similarly in the case of Saurashtra Calcine Bauxite reported in [1993] 91 STC 435, this court was dealing with "furnace oil" used to produce heat required in the processing of calcine bauxite. Sulphur and carbon of the furnace oil were admittedly found in the final product calcine bauxite. It was in this context that this court held that furnace oil is a processing material. Mr. Trivedi further submitted that in Commissioner of Sales Tax v. Vadilal Dai....
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....t the machinery can be manufactured without the crates, but if the machinery is not packed in the crates immediately after they being manufactured so as to carry them safely without disturbing the precision prescribed by the customer, it would not be commercially expedient for the manufacturer to carry out his manufacturing activity. However, in the absence of the facts gathered, placed and co-related so as to justify the said conclusion this court held that it would not be possible to answer the question referred to it. Mr. Trivedi further submitted that in the case of Commissioner of Sales Tax v. Ajay Printery Ltd. [1964] GSTB 12, this court while dealing with section 12(b) of the Bombay Sales Tax Act, which is differently worded as compared to the provisions of the Act in the present case, held that the case in respect of which recognition can be granted with reference to section 12(b) of the Bombay Sales Tax Act, 1959 are not only the goods which, in the process of manufacture merged in or become integral part of the finished goods, but also include all the goods, such as consumable stores and non-consumable goods, which are required for use in the process of manufacture in ....
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....ion with regard to another decision of the apex court in the case of Govind Prasad v. R.G. Prasad reported in [1994] 1 SCC 437, dealing with the service law wherein it was held that an executive order of the Government cannot be made operative with retrospective effect laying down conditions of service. Similarly, the judgment of the apex court in the case of MRF Ltd. v. Assistant Commissioner (Assessment), Sales Tax reported in [2006] 148 STC 225; [2006] 8 SCC 702, will not apply to the facts of the instant case inasmuch as in the said case, the assessee-manufacturers were granted exemption for the period of seven years from the payment of sales tax by statutory notifications and before the expiry of the said period, the State Government withdrew the said benefits by issuing subsequent notifications and in that context, the doctrine of promissory estoppel was pressed in service. It was in response to this position that the apex court held that in view of the earlier exemption notifications, a vested right was created in favour of the assessee-manufactures which cannot be taken away retrospectively since the same is hit by the principle of promissory estoppel. Mr. Trivedi furthe....
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....ed that all these judgments cannot be made applicable to the facts of the instant case. It is true that a contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in the statute. However, when such interpretation is clearly wrong and against the provisions of law and when it was so realized in view of the judgment of the apex court in case of Coastal Chemicals Ltd. [2000] 117 STC 12 (SC); [1999] 8 SCC 465, the same can very well be disturbed as held by the apex court in various cases: (i) Commissioner of Income-tax v. Firm Muar (P) reported in [1965] 56 ITR 67 (SC); AIR 1965 SC 1216. (ii) Plasmac Machine Manufacturing Co. Pvt. Ltd. v. Collector of Central Excise reported in [1992] 84 STC 107 (SC); [1991] Supp. 1 SCC 57. (iii) Bangalore Development Authority v. R. Hanumaiah reported in [2005] 12 SCC 508. Mr. Trivedi further submitted that the situation contemplated under one statute cannot, in the absence of any express or clear intendment, be made to apply or be given effect to while applying the provisions of another statute. For this purpose he relied on the decision of Vadilal Chemical....
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....y to be applied so as to ascertain the meaning of the said terms, i.e., "processing material" and "consumable stores" with reference to the meaning of the word "raw material" associated therewith. (iii) The judgment of the apex court in case of Collector of Central Excise v. Ballarpur Industries Ltd. [1990] 77 STC 282; [1989] 4 SCC 566; AIR 1990 SC 196 squarely applies in the present matter so as to find out the correct meaning, scope and purview of the term "raw material" and on the basis thereof the correct meaning, scope and purview of the terms "processing material" and "consumable stores". (iv) Admittedly, the provisions contained in section 8(3)(b) of the Central Sales Tax Act, 1956 and rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957 being of wider import and expansive in nature as compared to the provisions in question under the Gujarat Sales Tax Act, 1969, goods which can be covered under the provisions of the Central law as being "goods intended for use in the manufacture or processing of final taxable goods", cannot be covered under the State legislation as "raw material or processing material or consumable stores in the manufacture of final....
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....f rule 42 or for the purpose of exemption notification issued from time to time under the Act. We are also of the view that the test laid down by the honourable Supreme Court in the case of Coastal Chemicals [2000] 117 STC 12; [1999] 8 SCC 465 would not apply but the tests laid down in the case of J.K. Cotton [1965] 16 STC 563 (SC) and in the case of Ballarpur Industries [1990] 77 STC 282 (SC); [1989] 4 SCC 566; AIR 1990 SC 196 would apply, while deciding the above question, to the Gujarat law. For arriving at the above conclusion, we have also considered the relevant provisions of section 15B of the Gujarat Sales Tax Act, 1969, rule 42 and entry Nos. 118 and 255 of the notifications issued under section 49(2) of the Act. The relevant statutory provisions are as under: "15B. Purchase tax on raw or processing materials or consumable stores used in manufacture of goods.-Where a dealer who being liable to pay tax under this Act purchases either directly or through a commission agent any taxable goods (not being declared goods) and uses them as raw or processing materials or consumable stores, in the manufacture of taxable goods, then there shall be levied in addition to any tax ....
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....s of the honourable Supreme Court on this issue: (i) J.K. Cotton Spinning & Weaving Mills [1965] 16 STC 563. The honourable Supreme Court interpreted the expression "in the manufacture of goods" in section 8(3)(b) of the Central Sales Tax Act, 1956 and held that manufacture should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression "in the manufacture of goods". In this case, the issue was whether amongst others drawing and photographic materials required for preparing designs in a textile mill can be considered to have been used in the manufacture of goods or not. The honourable Supreme Court held that the process of designing might be distinct from the actual process of turning out of the finished goods. But there is no warrant for limiting the meaning of the expression "in the manufacture of goods" to the process of production of goods only. The expression "in the m....
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....in the end-product. Merely because this ingredient was consumed and burnt up in the course of chemical reactions, it did not ipso facto cease to be raw material. Although sodium sulphate was utilized in the preparation of an anterior, intermediate product at the stage of digestion of the pulp, this process was so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of paper would be commercially inexpedient. The sodium sulphate used in this process, therefore, was raw material for the manufacture of paper within the meaning of Notification No. 105/82-CE dated February 28, 1982. (iii) Deputy Commissioner of Sales Tax (Law) v. Thomas Stephen Co. Ltd. [1988] 69 STC 320 (SC); [1988] 2 SCC 264. In this case, section 5A of the Kerala General Sales Tax Act provided for the levy of purchase tax amongst others on goods consumed in the manufacture of other goods. The question was whether purchase tax was attracted on purchases of cashew shells used as fuel in the manufacture of goods. The honourable Supreme Court held that since cashew shells had been used only as fuel and did not get transformed into the end-product and were not us....
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....ised in section 12(b) are not only the goods which in the process of manufacture merge in or become integral part of the finished goods but also include all goods such as consumable stores and non-consumable goods which are required for use in the process of manufacture in the sense that they are necessary to be used for converting raw materials into finished goods by the process of manufacture. (ii) Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294 (Guj). In this case, following the decision of the honourable Supreme Court in J.K. Cotton Spinning & Weaving Mills case [1965] 16 STC 563, this court held that kathi (jute twine) purchased and used for packing of goods for sale would fall within the expression "goods purchased by him for use by him as raw or processing material or consumable stores in the manufacture of taxable goods for sale by him" as provided in section 13(1)(B) of the Gujarat Sales Tax Act, 1969. This was so held inspite of the fact that the words "packing material" were not used therein. This court held that a process or an activity must not be necessary theoretically for the production of finished goods, but if it is such an integral part of the u....
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....t of nameplates, without which the end-product was not marketable. The court also held that the expression "used in the manufacture of goods" had to be given a liberal construction to include not only the process of actual production of finished goods but also processes which are an integral part of the ultimate manufacture in the absence of which the manufacture may not be commercially expedient. Therefore, wooden strips, cellac glue, hose pipes, hardware, packing material and timber were all used in the manufacture of oil engines and set-off claimed in respect thereof was rightly allowed. (v) M. N. Khambhatwala v. State of Gujarat [1992] 87 STC 170 (Guj). This court held that wooden boxes used as packing materials are consumable stores used in manufacture of goods. (vi) Vadilal Dairy Frozen Food [2006] 146 STC 9 (Guj). This court by applying the decision of the honourable Supreme Court in the case of J.K. Cotton Mills [1965] 16 STC 563 and its earlier decision in the case of Vasuki Carborundum [1979] 43 STC 294 (Guj) held that ice-cream manufactured by the assessee has to be kept in containers and preserved at a certain temperature so as to ensure that ice-cream retains its....
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....ifferent class and hence the principle of noscitur a sociis would not apply. From the earlier discussion, it is very clear that this court has in the case of Vasuki Carborundum [1979] 43 STC 294 (Guj) impliedly held that the principle of noscitur a sociis is not required to be applied in interpretation of the word "consumable stores" in rule 42. In Coastal Chemicals [2000] 117 STC 12; [1999] 8 SCC 465, the honourable Supreme Court has followed Thomas Stephen [1988] 69 STC 320 (SC); [1988] 2 SCC 264. This court in K. Rasiklal [1992] 86 STC 238 (Guj) and Saurashtra Calcine Bauxite's case [1993] 91 STC 435 (Guj) held that Thomas Stephen [1988] 69 STC 320 (SC); [1988] 2 SCC 264 is not applicable to the Gujarat Act in view of different provisions. It is, therefore, by implication required to be held that the Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465 decided on the basis of Thomas Stephen [1988] 69 STC 320 (SC); [1988] 2 SCC 264 is not applicable to the Gujarat provisions. We have also taken into consideration the fact that subsequent to Coastal Chemicals' decision [2000] 117 STC 12 (SC); [1999] 8 SCC 465, determining fuel as consumables, various High Court....
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.... of the view that the questions referred to this court by the honourable Supreme Court in the case of Ami Pigments Pvt. Ltd. [2009] 22 VST 615 wherein the honourable Supreme Court has specifically asked this court to decide as to which of the tests as emerging from the decision in the case of Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465 on the one hand and the decision in the case of J.K. Cotton [1965] 16 STC 563 (SC) on the other hand would apply to the Gujarat provisions, would itself indicate that the honourable Supreme Court was aware of the fact that both the judgments are valid and operate in different fields. This means that Coastal Chemicals [2000] 117 STC 12 (SC); [1999] 8 SCC 465 has not changed the legal principles laid down in J.K. Cotton [1965] 16 STC 563 (SC) or has not overruled J.K. Cotton's judgment [1965] 16 STC 563. Thus, both the lines of judgments are mutually exclusive. The honourable Supreme Court in the case of Coastal Chemicals [2000] 117 STC 12; [1999] 8 SCC 465 had pointed out that the court therein had discussed J.K. Cotton [1965] 16 STC 563 (SC) and distinguished the same as being not applicable in that case. Thus, where J.K. Cotton....
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....res" would comprise all those goods which are integrally connected with the manufacturing activity and without which the activity of manufacture may be commercial inexpedient. In this case, kathi which was used for packing glass produced was held as being used as consumable stores, fuel which is very much required for the production of goods would qualify as consumable stores. Thus, if goods used post-manufacture of finished goods are consumable stores as they are necessary for the marketing of the product, then fuel which is integrally required for the manufacture of goods and without which finished goods will not emerge would certainly be considered as being used as consumable stores. In Vadilal Dairy Frozen Food [2006] 146 STC 9 (Guj), dry ice used for the transportation of ice-cream to maintain the quality of ice-cream was treated to be consumable stores. In this case also, dry ice was used independently after the ice-cream was manufactured and yet it was held as being used as consumable stores in the manufacture of ice-cream. Thus, use of fuel stands on a stronger footing and certainly qualifies as either consumable stores or processing material. The term used in the ....
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.... The provisions of section 11(3)(a) of the VAT Act are also required to be taken note of. This section provides for tax credit wherein it is specifically stated that raw material used in the process of manufacture of goods would get tax credit. This provision is further followed by the exclusion contained in section 11(3)(b)(iii) of the VAT Act wherein input-tax credit is to be reduced by four per cent of the purchase price of goods used as fuel in the manufacture of goods. The very fact that section 11(3)(b) of the VAT Act provides for reduction of input-tax credit by four per cent means that input-tax credit is admissible of tax paid on purchase of goods used as fuel in excess of four per cent. Such input-tax credit for the manufacturer is only of raw materials and, therefore, it is clearly accepted by the Legislature that goods used as fuel are used as processing materials or consumable stores in the manufacture of goods. Thus the legislative history prior to the incorporation of the Act and subsequent to its repeal clearly establishes that all those goods which play some role in the manufacture and marketing of goods without which the manufacture of goods would be commercia....
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.... Before parting, one more submission made on behalf of the petitioners is required to be considered. It is argued by Mr. Tanvish Bhatt on behalf of the petitioners that the order of remand of the honourable Supreme Court dated February 12, 2009 by which all the petitions were remanded to this court has not clarified as to the application of principle of promissory estoppel pleaded by the assessees in relation to the circular of 2001 issued by the Government. The honourable Supreme Court while remanding the matters back to this court restrained the assessees to plead promissory estoppel in relation to the circulars before this court and directed that the matter be decided only by considering the specific questions referred by it to this court. This action of the honourable Supreme Court in effect restrains the petitioners from pleading a valid ground available to them in law and restrains them from pursuing a valid legal remedy. According to the petitioners, it is a settled legal principle that no court can take away the right to pursue a valid right or remedy available to any person. In support of this submission, reliance was placed on the decision of the apex court in the case o....