Rajasthan High Court - Jaipur
Commercial Taxes Officer vs Surana Minerals Pvt. Ltd. And Anr. on 14 February, 2002
Equivalent citations: 2002(3)WLC598, 2002(4)WLN142
JUDGMENT Balia, J.
1. Heard learned counsel for the parties.
2. This revision raises two issues : (i) firstly, whether the process of converting dolomite into powder by grinding and making chips out of it amounts to process of manufacture so as to bring out any new commercial commodity so as to fall within the definition of manufacture under the Rajasthan Sales Tax Act, 1954.
(ii) The other controversy is whether the grinding of marble into powder result in bringing new commercial commodity distinct from marble which can be considered as manufacture within the meaning of Rajasthan Sales Tax Act.
3. The answer to these questions would determine whether the respondent-assessee is engaged in manufacture unit of goods to make it eligible to avail the benefit of the Sales tax Incentive Scheme for Industries, 1987 notified under the Rajasthan Sales Tax Act, 1954.
4. The District Level Screening Committee rejected the claim of the respondent to treat both the activities as manufacture within the meaning of the Scheme. The Rajasthan Tax Board on appeal, referring to its earlier decision in Assistant Commercial Taxes Officer v. G.S. Industries, Bikaner, decided on 14.7.98 has remanded the case back to the District Level Screening Committee by setting aside its earlier order to re-consider the case of the respondent industry de-novo in the light of the aforesaid judgment.
5. Aggrieved with the order of Rajasthan Tax Board, this revision has been filed by the Commercial Taxes Officer, Rajsamand.
6. At the very outset, it has been pointed out by the learned counsel for the revenue that so far as the issue relating to subjecting dolomite to the process of converting its lump into chip or powder is concerned, is set at rest by Supreme Court in Divisional Deputy Commissioner of Sales Tax & Another v. Bherhaghat Mineral Industries. The apex Court has affirmed the decision of Madhya Pradesh High Court in Bheraghat Mineral Industries v. Divisional Deputy Commissioner of Sales Tax. The apex Court has upheld the decision of M.P. High Court and its conclusion that dolomite and dolomite powder or dolomite chips are not different commercial commodities in the commercial world and therefore, the activity of making powder to dolomite lumps by grinding is not a manufacturing process. Supreme Court in its short order said :
"We are satisfied that crushing of dolomite lumps into chips and powder is not a process of manufacture that brings about a new commercial commodity. The view taken by the High Court must, therefore, be upheld."
7. This takes us to decision of High Court of M.P. in Bheraghat Industries v. Divisional Deputy Commissioner of Sales Tax (supra).
8. Reasonings of the High Court which were affirmed by Supreme Court by reference, unfolds the premises on which the judgment proceeded. The Court found:
"The petitioner in that case after purchasing lumps of dolomite from registered dealers, crushed them and sold chips and powder to glass manufacturers. What was purchased was dolomite and sale was also of dolomite. Chips and powder of dolomite are not different commercial commodities than dolomite lumps. It is not the respondents case in their return that anything more is required to be done, except crushing the lumps to get chips and powder from the lumps and that the composition of the end-product is different from lumps. The lumps are broken into chips and powder for convenience in use but they retain the same characteristics and qualities of dolomite lumps.....It appears from the vouchers produced by the respondents that the petitioner had supplied dolomite lumps, chips and powder to different glass manufacturers as required by them. Some manufacturers may not be having crushing facilities or of sufficient capacity. So they purchased in powder form also."
9. With this background, the commodity purchased was dolomite, in lump shape. The chips or powder brought into existence by crushing the dolomite was also sold as 'dolomite' only and the change in shape only for convenience in use by buyers, but otherwise the commodities in different shapes are being sold to the same kind of buyers for its use for the same purpose. Significantly no change in functional utility of dolomite was brought about. Dolomite remained to be used for same purpose by same persons whether it was sold to them in lump form or in powder or chips form. This premise led to the conclusion that conversion of dolomite lumps into the powder or chips does not bring into existence different commercial commodity, therefore, it does not amount to process and manufacture. Clearly the conclusion depended on finding that there was no functional change in the commodity and there was no change in physical or chemical properties either. Thus, dolomite in different shapes was traded with same nomenclature and was not treated as commercially a different item even by the commercial world.
10. This decision in my opinion, depended upon the finding about recognition of dolomite in different shapes by the assessee himself as commercially same commodity, though traded in different shape with no change in functional utility. In the absence of any finding that dolomite in different shapes in known in commercial world as two different commodities, it must be held that the conversion of dolomite lumps into powder form does not result in bringing into existence any new commercial identity either on the basis of its physical or chemical properties or on the basis of its functional utility, unless otherwise established and it cannot be held to be a manufacturing process under the provisions of Rajasthan Sales Tax Act.
11. Coming to the question of activity of converting marble into powder form, learned counsel for the respondent has brought to the notice of the Court the decision of this Court in CTO v. Parakh Udhyog, laying down the principle that the question has to be considered in the perspective of the taxable article and its effect on the commercial identity of the goods brought into existence by applying certain process. Entry in Schedule of rates notified for taxing different commodities includes the tax on building material and not on stone simplicitor. This Court has an occasion to consider the case whether making of stone ballast (gitty) from a lump of stone amounts to manufacture so as to invite the applicability of the Incentive Scheme, 1987.
12. The Court laid down the principle after considering number of decisions and considering the definition of manufacture provided under the Act that question has to be examined whether processing of boulder or large pieces of stone of uneven sized dimensions into gitty or chips result bringing into existence a commercially different and distinct commodity with distinct functional utility.
13. The Court further considered the taxable commodity included in the list is not 'stone' simplicitor but is 'building material'. With that, and Scheme of that Act in mind the Court concluded that every stone of unspecified size and dimension is not identifiable as a building material of specific use. Stone in different sizes, dimensions and shape are identifiable as distinct commodity from each other amongst group of commodities which constitute building material. While the raw-material at quarry site is identifiable as stone or building stone (stone that can'be used in construction work) ' but when it is given different shape, size by applying some process or processes. It becomes specific items of building material and in the commercial world is traded as different commercial commodity.
14. With this foundation, the Court further concluded that by applying some process, to the stones of larger or uneven dimensions they are brought to the form of different dimensional stones for the purpose of making them fit for different use in construction activity and are traded distinctly- the two commodities are to be treated distinct in their nature and characteristic as a building material, for the purpose of trading. The raw stone in the form of block at the quarry site has to be put to different processes for making it marketable as slab or patti, or khanda, or gitty or ballast or chips etc. So also the waste stones of large and uneven dimension, by grinding or crushing are brought to a definite range of shape and dimension to be used as metal which is known in the masonray jargon as gravel, gitty or chips, ballast, metal or grits. All these commodities are known in the commercial world by different names and traded for the different purposes, as distinct commodity from one another. No one can make a mistake of buying khanda for gitti and 'gitti' for patti as building stone. This principle has not been upset by Supreme Court in Bheraghat Industries' case referred to above. Nor M.P. High Court has taken on principle a different view. But, conclusion was based on finding of fact recorded by the High Court on the basis of evidence that the assessee himself was trading in lump as well as chips of dolomite as the same commercial commodity; which was being used by customers of same class for same purpose and were not usable differently.
15. Prima facie the marble stone is obviously cannot be used for the same purpose as its chips or powder and two commodities are marketed differently. If conversion of marble at the quarry site into different shape and size makes out different marketable commodity to be used differently by specific identity of the their own, then certainly the process of converting uneven sized dimension into different category of distinct marble commodities to be used for distinct purpose shall qualify it to be treated as manufacturing process within the meaning of Rajasthan Sales Tax Act. If the finding is otherwise different conclusion may be possible.
16. It may be recalled that this distinction has also been noticed by the Supreme Court in Commissioner of Sales Tax, U.P. v. Lal Kunwa Stone Crusher (P.) Ltd.. The Court was considering the question of manufacturing process where taxable item stated in the schedule of rates was stone. The Court considering the decision given by the Karnataka Sales Tax Tribunal in Reliable Rocks Builders and Suppliers v. State of Karnataka, wherein the activity of converting stone into marketable commodity was held to be manufacture, was not over-ruled, but was distinguished on the basis of entry in the concerned schedule of rates. The Court explained referring to Karnataka decision that it turned on the concept of consumption of goods for the purpose of bringing into existence new goods and said :
"In that case the Court was not concerned with an entry of the nature with which we are concerned in the present case."
17. In the case before the Supreme Court where goods mentioned in the schedule of rates was stone. In the context of said entry the Court said that stone, as such, and other articles of stones are all similar nature though by size they may be different. The entry with which the Supreme Court was concerned Was 'stone and any article made of stone. Obviously, if stone as stone has attracted the tax in the first point, subsequent sale of article made of that stone would fall in the same category of the schedule.
18. So far as Lal Kunwa's case was concerned so also the case of Reliable Rocks Buildings and Suppliers turned on the concept of functional utility of the goods derived by building process as was held by this Court in Parakh Udhyog referred to above.
19. In this view of the matter, 1 am of the opinion that the DLSC was not right in rejecting the application of respondent without examining the issue on aforesaid principles in respect of both the activities. The Tax Board, therefore, was right in remanding the case to the DLSC for considering the case of the respondent in respect of its activity of making powder out of dolomite and marble. The answer will depend on the finding reached on aforesaid principles.
20. I refrain from making any comments on merits.
21. The revision petition is, accordingly, dismissed with no order as to costs.