Madras High Court
P.C. Balaramaraja vs State Of Tamil Nadu on 25 February, 1991
JUDGMENT Mishra, J.
1. This petition by the assessee is directed against the imposition of tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959, on charcoal allegedly, used as fuel in the manufacture of Janathacem, a product of the petitioner. The Tribunal's opinion on the subject in a proceeding before the Additional Bench of the Tribunal at Madurai in M.T.A. No. 182 of 1978 dated July 14, 1978, has been extracted by the Appellate Assistant Commissioner in these words, "It is not stated that the goods purchased and used for manufacture of other goods should themselves be converted into new article. Charcoal in this case has been used as fuel for the manufacture of handloom weaving reeds. In the course of manufacturing process, the appellant has consumed the charcoal for heating purposes. The manufacture of the handloom reeds cannot be done without heat and hence heating forms an integral part of manufacture in this case. In these circumstances, I am of opinion that the liability under section 7-A exists in respect of purchases of charcoal effected by the appellant. Charcoal is an article liable to tax under single point. No minimum turnover is necessary."
Following the said decision, the Appellate Assistant Commissioner in the instant case has also held :
"It is not in dispute that the charcoal was not purchased from, non-dealers and there is no profit of sufferance of tax at the point of sale to the appellant and therefore the levy of tax under section 7-A is in order. Charcoal being a commodity taxable at 5 per cent single point, the levy of tax at 5 per cent is also correct. The decision in [1978] 42 STC 1 (Ker) (Burmah-Shell Oil Storage & Distributing Co. of India Ltd. v. State of Kerala) has been misquoted as it does not relate to the point at issue in the present case."
2. Section 7-A of the Act reads as follows :
"(1) Every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable under section 3, 4 or 5, as the case may be not being a circumstance in which goods liable to tax under sub-section (2) of section 3 or section 4, were purchased at a point other than the taxable point specified in the First or the Second Schedule and either, -
(a) consumes or uses such goods in the manufacture of other goods for sale or otherwise; or
(b) disposes of such goods in any manner other than by way of sale in the State; or
(c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in section 3, 4 or 5, as the case may be, whatever be the quantum of such turnover in a year :
Provided that a dealer other than a casual trader or agent of a non-resident dealer purchasing goods the sale of which is liable to tax under sub-section (1) of section 3 shall not be liable to pay tax under this sub-section, if his total turnover for a year is less than one lakh of rupees."
The words "or uses" were inserted by Act 78 of 1986 and became effective from January 1, 1987. The assessment year in the instant case being 1978-79, these words were not available for interpretation. The only words available there were "consumes such goods in the manufacture of other goods for sale or otherwise". We however think that it will be useful to consider whether the expression "or uses" shall make any difference in the understanding of the nature of the levy of purchase tax under section 7-A of the Act or not. The words used are "consumes or uses ..... in the manufacture of other goods" not for manufacture of other goods. The words "in the manufacture of other goods" thus show that such consumption or use must be as one of the ingredients or the raw material in the manufacture of other goods. We are not required however to make any independent research on the subject as the Supreme Court of India has already made a clear pronouncement on it in Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 in the case of a similar imposition of tax on the fuel used in the manufacturing process. Interpreting the provision in section 5A(1)(a) of the Kerala General Sales Tax Act, 1963, which uses the words "consumes such goods in the manufacture of other goods for sale or otherwise" as in the Tamil Nadu Act before amendment the Supreme Court has said :
"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 components which go into the making of the end-product to come within the mischief of the section. Cashew shells do not tend to the making of the end-product. Goods used for ancillary purposes like fuel in the process of the manufacture, do not fall within section 5A(1)(a) of the Act. Cashew shells, therefore, do not attract levy of tax under the said section. The same is the position with regard to the lime shell and consumed stores, which have been used only in the maintenance of the kiln and the factory and not used in the manufacture of the end-product. The Revenue, therefore, was wrong in its contention on this aspect."
Rejecting a further argument that the expression used was "either consumes such goods in the manufacture of other goods for sale or otherwise" and therefore the expression "or otherwise" is intended to denote a conjunctive introducing a specific alternative to the words "for sale" immediately preceding, the Supreme Court observed :
"These observations, in our opinion, have no relevance to the present facts of the case. Further this very contention was negatived, though without reference to Ganesh Prasad's case in the passage set out hereinbefore in Deputy Commissioner of Sales Tax v. Pio Food Packers . The expression consumption otherwise must in the context mean consumption of other goods for purposes other than sale."
3. The error is so apparent that no elucidation is necessary. In the result, the application is allowed. The impugned orders are set aside. The respondents are directed to treat the charcoal used by the petitioner as fuel not taxable under section 7-A of the Tamil Nadu General Sales Tax Act, 1959. No costs.
4. Petition allowed.