TaxTMI 
TaxTMI 
1989 (9) TMI 99
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.... in the manufacture of "paper" and "paperboard". In the proceedings before the authorities, the dispute initially concerned six other inputs. But the controversy before us was limited, as it should rightly be, only to sodium sulphate inasmuch as even in the appeal before the Collector (Appeals), the Department's grievance, apparently, was confined to the pro forma credits of duty earlier paid on sodium sulphate [See Column 6 of the Assistant Collector's Memorandum Appeal dated July 15, 1987, before the Collector (Appeals)]. The respondent is a manufacturer of paper and paperboards in the processes relating to which "sodium sulphate" is used "in the chemical recovery cycle of sodium sulphide which forms an essential constituent of sulphate cooking liquor used in the digestion operation". The notification dated February 28, 1982, under which the credit is claimed reads: "In exercise of the power conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 178/77-Central Excise, dated 18th June, 1977, the Central Government hereby exempts all excisable ....
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.... in its earlier decision in Seshasayee Paper and Boards Ltd. v. Collector of Central Excise [1985] 22 ELT 163 in which the Tribunal had held : "... the term 'raw material' has to be interpreted in the circumstances of each case in the absence of any acceptable or useful definition of the term either in the dictionary or in the technical literature . . ." "... sodium sulphide lye, sodium sulphate, Daicol (gaur gums) and fluo solid lime used for the bleaching of pulp should be considered as raw materials in the manufacture of paper ; they serve a distinct and definitive purpose in the normal and recognised process of manufacture of paper and are essential for the process of manufacture ..." In this appeal, the Collector challenges the correctness of the decision of the Tribunal. We have heard Sri A. K. Ganguly, learned senior counsel for the appellant, and Sri Soli Sorabjee, learned senior counsel for the respondent-manufacturer. The thrust of Sri Ganguly's arguments is that the amplitude of the expression "raw material" in the notification has to be ascertained with reference to and in the context of the purpose in substituting that expression in place of the words obtaining in ....
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....tantiate this distinction in the present case with reference to certain observations of this court in Deputy CST v. Thomas Stephen and Co. Ltd. [1988] 69 STC 320 (SC). One of the questions there was whether cashew shells used in the kiln by the dealer who was manufacturer of tiles, terracotta ware and ceramic items were exigible to purchase tax under section 5A(1)(a) of the Kerala General Sales Tax Act, 1963, on the ground that the dealer had "consumed such goods in the manufacture of other goods . . ." The Tribunal had held that cashew shells had been used only as fuel in the kiln for the manufacture of tiles and that, therefore, the condition of section 5A(1)(a) of the Act was not satisfied, there having been no consumption of cashew shells in the manufacture of ceramic goods. This court held (at 323 of 69 STC) : "The cashew shells in the instant case had been used as fuel in the kiln. The cashew shells did not get transformed into the end-product. These have not been used as raw materials in the manufacture of the goods. These have been used only as an aid in the manufacture of the goods by the assessee. Consumption must be in the manufacture as raw material or of other compone....
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....ping liquor." [p. 275] Sri Sorabjee submitted that the Tribunal had consistently taken this view in several cases and that the Department not having carried those matters up in appeal must be held to have accepted the correctness of that view. As instances in point, learned counsel referred to two decisions, Collector of Central Excise v. Ballarpur Industries Ltd. [1983] ELT 1263 and Collector of Central Excise v. Titaghur Paper Mills [1985] 21 ELT 901. Adverting to the appellant's contention that the use of sodium sulphate was at a stage of preparation of the pulp which is a stage anterior to the actual manufacture of paper, Sri Sorabjee submitted that, apart from the fallacy inherent in the attempt to dissect an otherwise integrated process of manufacture, the definition of "manufacture" in section 2(f) of the Act which takes within it all ancillary and incidental processes, should secure to render the contention insubstantial. The question, in the ultimate analysis, is whether the input of sodium sulphate in the manufacture of paper would cease to be a "raw material" by reason alone of the fact that, in the course of the chemical reactions, this ingredient is consumed and bur....
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.... actually went into the manufacture of such ceramics. The observations, correctly apprehended, do not lend themselves to the understanding that, for something to qualify itself as "raw material", it must necessarily and in all cases go into, and be found, in the end-product. We also find no substance in the contention of Sri Ganguly that the process in which sodium sulphate was used, was anterior to and at one stage removed from the actual manufacture of paper, Sri Sorabjee's answer to this contention is, in our view, appropriate. That apart, the following observations in Collector of Central Excise v. Eastend Paper Industries Ltd. [1990] 186 ITR 105 (SC) cited by Sri Ganguly himself is, a complete answer (p. 109) : ". . . Where any particular process, this court further emphasised, is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression 'in the manufacture of goods'. " On a consideration of the matter, we are persuaded to the view that the Tribunal was right in its conclusion that sodium sulphate was used ....