TaxTMI 
TaxTMI 
1980 (11) TMI 61
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....to state a few facts giving rise to the controversy between the parties. 2. The Assessee is a private limited company carrying on business of mining iron ore and selling it in the export market after dressing, washing, screening and blending it. The assessee owns mines at Sirigoa, Pale and various other places in the territory of Goa. The extraction of ore from the mines at Sirigoa and Pale is carried on by mechanised process while the extraction of ore from the other mines is done by manual labour. When the ore is extracted from the mines it is carried to the dressing plant where it is washed, screened and dressed and then it is stacked at the mining site from where it is carried by conveyor belts to the riverside for being carried by barges to the Marmagoa harbour. Before the ore is carried from the mining site to the riverside, its chemical as well as physical composition is ascertained by taking samples and testing them in the laboratories at each major mine and this process is carried on every day round the clock in order to ascertain the chemical and physical composition of the ore which comes to Marmagoa harbour. Since the chemical and physical composition of the ore varies....
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....es tax under Section 8(1)(b) of the Central Sales Tax Act, 1956. 3. It would be convenient at this stage to set out the relevant provisions of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Act') which have a bearing on the question before us. Section 6 provides that, subject to the other provisions contained in the Act, every dealer shall be liable to pay tax under the Act, on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year. Section 7 provides for registration of dealers and sub-section (1) of this section states that every dealer liable to pay tax under the Act shall make an application for registration to such authority in the appropriate State as the Central Government any specify and every such application shall contain such particulars as may be prescribed. Sub-section (3) of Section 7 enacts that if the authority to whom an application under sub-section (1) is made is satisfied that the application is in conformity with the provisions of the Act and the Rules made thereunder, he shall register the applicant and grant to him a certificate of registration in the prescribed form wh....
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....mentioned in the application were specified in the certificate of registration, the dealer selling these goods to the assessee in the course of inter-State trade or commerce would be liable to pay sales tax only at the rate of 3 per cent of the turnover of these sales and the assessee in its turn would have to reimburse the selling dealer only at the rate of 3 per cent of the sale price, whereas otherwise the amount payable would be at a much higher rate. The assessee therefore pressed this application before the Sales Tax Officer with a certain amount of vehemence, but the Sales Tax Officer by his order dated March 4, 1968 granted specification only in respect of 11 items and disallowed the remaining 25 items. The view taken by the Sales Tax Officer was that the blending of ore which was done in the course of loading through the mechanical ore-handling plant did not amount to manufacture or processing of ore and, therefore, the only goods in respect of which specification could be claimed by the Assessee in the certificate of registration were goods purchased for use in mining and since the process of mining came to an end when ore was extracted from the mines and washed, screened....
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....s ultimately remained unincluded in the Certificate of Registration. It is not necessary to reproduce here these 15 items of goods in respect of which the application of the Assessee was disallowed, but it is sufficient to state that they were Item Nos. 1, 2, 3, 5, 6, 8, 9, 10, 12, 14, 15, 16, 17, 19 and 20 in the list, Ex. 6. The Assessee being aggrieved by the disallowance of these 15 items preferred Appeal 1632 of 1973 after obtaining certificate from the Court of the Judicial Commissioner. Item 9 which consisted of "Safety Boards and Posters" was not pressed at the hearing of the appeal and hence the controversy between the parties before us centred round the remaining 14 items of goods only and the question is whether these 14 items of goods were eligible for inclusion in the Certificate of Registration. The Union of India also felt aggrieved by the order of the Judicial Commissioner allowing 4 items of goods to be included in the Certificate of Registration and hence it preferred Appeal 107 of 1974 against the order of the Judicial Commissioner to the extent to which it was adverse against it. 4. There are two questions which primarily arise for consideration in these appeal....
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....modity but instead is recognised as a new and distinct article that a manufacture can be said to take place. The test that is required to be applied is : does the processing of the original commodity bring into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of ore possessing different chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely, ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore. 6. It still remains to consider whether the ore blended in the course of loading through the mechanical ore-handling plant can be said to undergo processing when it is blended. The answer to this question depends upon what is the true meaning and connotation of the word ....
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....ion of each kind of ore which goes into the blending is changed, there can be no doubt that the operation of blending would amount to "processing" of ore within the meaning of Section 8(3)(b) and Rule 13. It is no doubt true that the blending of ore of diverse physical and chemical compositions is carried out by the simple act of physically mixing different quantities of such ore on the conveyor belt of the mechanical ore-handling plant. But to our mind it is immaterial as to how the blending is done and what process is utilised for the purpose of blending. What is material to consider is whether the different quantities of ore which are blended together in the course of loading through the mechanical ore-handling plant undergo any change in their physical and chemical composition as a result of blending and so far as this aspect of the question is concerned, it is impossible to argue that they do not suffer any change in their respective chemical and physical compositions. 7. The Revenue however relied on the decision of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay - 10 STC 500 (Bom. HC). The assessees in this case were registered dealers in tea un....
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....which seem to suggest that if instead of manual application of energy in mixing the different brands of tea, there had been application of mechanical force in producing the tea mixture, the court might have come to a different conclusion and these observations were relied upon by the Assessee, since in the present case the blending was done by application of mechanical force, but we do not think that is the correct test to be applied for the purpose of determining whether there is 'processing'. The question is not whether there is manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes 'processing'. We are clearly of the view that the blending of ore in the course of loading through the mechanical ore-handling plant amounted to 'processing' of ore within the meaning of Section 8(3)(b) and Rule 13 and the mechanical ore-handling plant fell within the description of "machinery, plant, equipment" used in the processing of ore for sale. It must therefore follow....
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....is integrated process and hence the items of goods purchased for use in this latter operation ate eligible for inclusion in the Certificate of Registration. We think there is great force in this submission of the Assessee. Where a dealer is engaged both in mining operation as also in processing the mined ore for sale, the two processes being inter-dependent, it would be essential for carrying on the operation of processing that the ore should be carried from the mining site where the mining operation comes to end to the place where the processing is carried on and that would clearly be an integral part of the operation of processing and if any machinery, vehicles, barges and other items of goods are used for carrying the ore from the mining site to the place of processing, they would clearly be goods used in processing of ore for sale. It is obvious that, in the present case, the mining of ore is done by the assessee with a view to processing the mined ore through the mechanical ore-handling plant at the Marmagoa harbour and the entire operation of mining ore and processing the mined ore is one integrated process of which transportation of the mined ore from the mining site to the ....
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....ocessed goods from the factory to the place of storage. If this be the correct view, the restrictions imposed by the High Court in respect of the vehicles and also the spare parts, tyres and tubes would not be justifiable. These reasons apply with equal force in the present case and strongly support the conclusion that the machinery, vehicles, barges and other items of goods purchased by the assessee for use in carrying the mined ore from the mining site to the riverside and from the riverside to the Marmagoa harbour fall within the description of goods intended for use in processing of ore for sale within the meaning of Section 8(3)(b) and Rule 13. If any of these items of goods are purchased by the assessee as being intended for use as "machinery, plant, equipment, tools, spare parts, stores, accessories, fuel or lubricants" in carrying the mined ore from the mining site to the riverside and from the riverside to the Marmagoa harbour, they would qualify for inclusion in the Certificate of Registration. 10. It is in the light of this discussion that the question whether the 14 items of goods disallowed by the Sales Tax Authorities and the Judicial Commissioner are eligible for i....