TaxTMI 
TaxTMI 
2016 (4) TMI 717
X X X X Extracts X X X X
X X X X Extracts X X X X
....as per section 11(3)(b)(iii) of the Act? [2] Whether the Hon'ble Tribunal has erred in law and in facts in deleting levy of interest and penalty?" 2. Since both the appeals arise out of a common order of the Tribunal and the parties as well as the facts are also common, they were taken up for hearing together and are decided by this common judgment. 3. For the purpose of properly appreciating the controversy in issue, it may be germane to refer to the relevant statutory provisions. 3.1 Section 2 (19) of the Gujarat Value Added Tax Act, 2005 (hereinafter referred to as "the GVAT Act") defines the expression "raw materials" to mean the goods used as ingredient in the manufacture of other goods and includes processing materials, consumable stores and material used in the packing of the goods so manufactured but does not include fuels for the purpose of generation of electricity. 3.2 Section 11 of the GVAT Act makes provision for "tax credit". Clause (a) of sub-section (11) provides that a registered dealer (hereinafter referred to as the "purchasing dealer") who has purchased the taxable goods shall be entitled to claim tax credit equal to the amount of - (i) tax col....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11, inter alia, provides that the amount of tax credit in respect of a dealer shall be reduced by the amount of tax calculated at the rate of four per cent on the taxable turnover of purchases within the State of the fuels used for the manufacture of goods. Therefore, in respect of the fuels used in the manufacture of goods, the tax credit is required to be reduced by four per cent of the taxable turnover of purchases of such inputs. 5 The respondent - dealer is carrying on the business of manufacturing and selling of cement within the State of Gujarat as well as outside the State and is holding registration as a dealer both under the GVAT Act as well as the Central Sales Tax Act (hereinafter referred to as "the CST Act"). While submitting the returns for the assessment period 2007-08 and 2008-09, the dealer claimed input tax credit on purchases of pet coke. It was the case of the dealer that considering the manufacturing process adopted by it wherein pet coke is used as a raw material, the amount of tax credit is not required to be reduced by four per cent as contemplated under section 11(3)(b)(iii) of the GVAT Act in respect of the pet coke used by it in the manufacture of cem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... kind of energy but does not form part of the product and it accordingly, allowed the appeals and set aside the orders passed by the authorities below in respect of reduction of tax credit in respect of pet coke under section 11(3)(b)(iii) of the GVAT Act and consequentially, also set aside the order charging interest and levying penalty. 6. Ms. Nisha Thakore and Ms. Maithili Mehta, learned Assistant Government Pleaders appearing on behalf of the appellant vehemently assailed the impugned order by submitting that though in the present case, while manufacturing cement, petroleum coke is mixed along with the raw material, considering the process which is undertaken by the respondent, it is clear that the pet coke is necessary for the purpose of the exothermic reaction which takes place inside the kiln when it is heated externally. It is on account of this exothermic reaction that the raw material is converted into clinker. The fact that there is an exothermic reaction is clearly indicative of the fact that the petroleum coke acts as a fuel which causes such exothermic reaction. It was submitted that the petroleum coke having been used as fuel, the dealer is not entitled to input c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t being Tax Appeal No.252 of 2013, which has been admitted on a substantial question of law. Referring to the impugned order it was pointed out that the Tribunal has placed strong reliance upon the said decision, under the circumstances, this appeal also deserves to be admitted on a similar question of law. 6.2 It was further submitted that ample material was produced before the Tribunal as regards the process of manufacturing cement; however, the Tribunal, without adverting to such material, has relied upon the manufacturing process of VSK plant as supplied by the dealer. It was submitted that in the present case, there is determination order of the Commercial Tax Commissioner (Legal), State of Gujarat, under section 80 of the GVAT Act in the case of M/s Digvijay Cement Co. Ltd., wherein it has been held that use of petroleum coke in the manufacture of cement is by way of fuel; however, the Tribunal has turned a blind eye to the same. It was submitted that therefore, the impugned order passed by the Tribunal is bad in law as it has been passed without appreciating the correct process of manufacturing of cement. It was, accordingly, urged that the appeals require consideration o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... its conclusion thereon and that in the absence of any perversity being pointed out in the impugned order, the same does not give rise to any question of law so as to warrant interference. 8. In the present case, the sole controversy that arises for consideration is as to whether the pet coke used in the manufacture of cement is 'raw material' as contended by the dealer, or 'fuel' as contended by the appellant. 9. For the purpose of better appreciating the controversy in issue, it may be germane to refer to the impugned order which describes the process of manufacture as follows: "14. .... .... The process undertaken by the appellant own as Vertical Shaft Kiln (VSK) for manufacturing clinker. For making clinker (semi finished good), the raw material like lime stone, silica, pet coke / coal, red oxide and bauxite is used. These materials are mixed in definite proportion as per the formula. They are stored as different hoppers. In different percentage mixed is fed to raw mill. The raw mill is a ball mill type. Mill to grind the mixture of raw material. This raw material will become a homogeneous powder. The raw material mixture powder is stored in a silo. From the silo the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... purposes was brought out. Goods used for ancillary purposes like fuel in the process of manufacture were held not to be exigible to tax. Since cashew shells were used only as fuel and they did not get transformed into the end product they were held to be not exigible to tax. Cashew shells were used in aid of manufacture of goods and as such they did not attract levy of tax. 27. In the case in hand also, coal which leads to production of cinder is not used as a raw material for the end product. It is being used only for ancillary purpose, that is, as a fuel. Therefore, irrespective of the fact whether any manufacture is involved in the production of cinder it should be held to be out of the tax net for the reason that it is not a raw material for the end product. 28. In producing "cinder", there is no manufacturing process involved. Coal is simply burnt as fuel to produce steam. Coal is not tampered with, manipulated or transformed into the end product. For purposes of manufacture the raw material should ultimately get a new identity by virtue of the manufacturing process either on its own or in conjunction or combination with other raw materials. Since coal is not a raw mate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture of cement, during the course of the manufacturing process gives rise to an exothermic reaction, as a result whereof it loses its apparent identity and forms part of the end product. Essentially, therefore, pet coke forms one of the ingredients of cement and merely because there is an exothermic reaction in the preparation of cement which may be facilitated by its presence, pet coke would not cease to be a raw material. 13. As regards the submission that the appeal against the decision of the Tribunal in the case of M/s Welspun Steel Ltd. v. The State of Gujarat has been admitted on a substantial question of law and the Tribunal having placed reliance upon such decision, this appeal also deserves to be admitted on a similar question of law, it may be noted that the Deputy Commissioner in the assessment order has categorically recorded that the said decision would not be applicable to the facts of the present case. Similarly, the first appellate authority, viz. the Joint Commissioner of Commercial Tax has also held that the decision in the case of M/s Welspun Steel Ltd. cannot be made applicable to the present case as the same relates to the use of pet coke in the manufacture....