Gujarat High Court
Saurashtra Calcine Bauxite And Allied ... vs State Of Gujarat on 9 September, 1992
Equivalent citations: 1994(45)ECC17
Author: G.T. Nanavati
Bench: G.T. Nanavati
JUDGMENT S.D. Dave, J.
1. This common judgment shall govern the disposal of these two sales tax references arising under section 69 of the Gujarat Sales Tax Act, 1969.
2. Sales Tax Reference No. 10 of 1987 :
In this reference the applicant, M/s. Saurashtra Calcine Bauxite and Allied Industries has been carrying on the business of manufacturing of calcined bauxite, etc., at Porbandar. It is a dealer registered under the provisions of the Gujarat Sales Tax Act, 1969. Under sub-section (2) of section 49 of the Act, the State Government is empowered to exempt by issuing the necessary notification any specified class of sales or purchases from the payment of whole or part of the tax payable under the Act. Rule 42A of the Gujarat Sales Tax Rules, 1970 (now hereinafter referred to as "the Rules") provides that the commissioner shall subject to the conditions laid down in the sub-rule grant drawback, set-off, or refund of the whole or part of the tax in respect of the puchase of raw materials, processing materials and machinery or packing materials used in the manufacture of goods for sale by a manufacturer holding the exemption certificate. Accordingly by the Government notification dated November 11, 1970, issued under sub-section (2) of section 49 of the Act the Government has exempted a dealer who establishes a new industry and has been certified as such by the Commissioner of Sales Tax, from payment of the whole of the purchase tax under section 15 of the Act in respect of the purchases of raw materials, processing materials, machinery or packing materials from the person who is not a registered dealer. Similar exemption is provided for in respect of purchases made from registered dealers also against the prescribed certificate in form Z. The said exemption is referred to as "certificate of the Commissioner" in entry 53 of the Government notification issued under section 49 of the Act. The assessee in the present reference holds such exemption certificate as a new industry.
3. The main activity of the assessee is to manufacture calcined bauxite. For the aforesaid purpose the assessee had purchased furnace oil and in the course of the assessment year, that is samvat year 2030 (corresponding period being October 27, 1973 to November 13, 1974) the assessee had claimed set-off in respect of purchase tax paid on the purchase of the furnace oil under rule 42A of the Rules on the ground that the furnace oil is a processing material. The Sales Tax Officer, Porbandar, by the assessment order dated April 4, 1978, rejected the claim of the assessee and held that furnace oil was not a processing material but was a fuel falling within entry 10, Schedule II, Part A to the Act. The assessee had preferred the first appeal before the learned Assistant Commissioner of Sales Tax, Bhavnagar, but by the orders dated January 28, 1980 assessee was held not entitled to any set-off either under rule 42 or rule 42A of the Rules. Being aggrieved and dissatisfied with the abovesaid appellate orders, the assessee had preferred second appeal being Second Appeal No. 148/80 before the Sales Tax Tribunal. At the time of the hearing of the aforesaid second appeal the claim of the set-off under rule 42 of the Rules was given up, but the same was pressed for claiming a set-off under rule 42A of the Rules on the ground that the furnace oil purchased by the assessee was a processing material. Reliance was placed on an affidavit filed by one of the partners of the firm; certificate issued by a chemical engineer; and a certificate issued by one Shri Ghanshyam G. Dholaria, who himself was a manufacturer of high allumina refractory bricks by consuming calcined bauxite, as a raw material. Reliance was also placed upon a certificate of analysis given by Itlab Private Limited. On the basis of the aforesaid evidences it was contended on behalf of the assessee that the furnace oil was put to a specific type of use, and that the heat required in the process of the manufacture was being generated by the flames of the furnace oil and that, therefore the abovesaid material, namely, furnace oil should have been accepted as the processing material. Explaining the process of manufacture the assessee had urged that the raw bauxite was brought from the mines and later on was being dumped in the furnace and thereafter heat up to 1100 C was applied to it which would cause evaporation of the chemical water contamination contained in the raw bauxite. The temperature was increased up to 1400 C. It was contended that the furnace oil was a processing material and sulphur and carbon of the furnace oil were found in the calcinated bauxite in addition to the contents and thus there was a physical property change. In support of the abovesaid contention reliance was placed on the Supreme Court decision in the case of Chowgule & Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 and on the decision of this High Court in the case of Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294. Against the abovesaid contentions raised on behalf of the assessee, it was urged on behalf of the Revenue that, the furnace oil was not a processing material but was a fuel simpliciter. It was urged that the furnace oil was required to be ignited and was used for the purpose of heating and thus, the furnace oil was being used as a fuel. Reliance was placed upon the decision of the Tribunal rendered in the case of Prakash Industries v. State of Gujarat. The evidence produced by the assessee was also considered and ultimately it was found that the furnace oil was being used as a fuel only in the process of manufacturing the calcined bauxite, and that the furnace oil can never be treated as the processing material. Thus the appeal filed by the assessee came to be dismissed by the Sales Tax Tribunal by the orders dated June 20, 1983. Later on the necessary application was submitted to the Tribunal for referring the question of law to this Court, and therefore, at the instance of the assessee in this sales tax reference the undermentioned question of law has been referred to this High Court for answer and reply :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to set-off under rule 42A of the Gujarat Sales Tax Rules, 1970, in respect of the tax paid on the purchases of furnace oil which was used in the process of calcination of raw bauxite into calcined bauxite ?"
4. Sales Tax Reference No. 8 of 1988 :
In this sales tax reference the assessee is a registered co-operative society carrying on the business of manufacturing sodium silicate and it holds exemption certificate under entry 53 of the Government notification issued under section 49 of the Gujarat Sales Tax Act, 1969, as a new industry. During the period from July 1, 1974 to June 30, 1975, the assessee had purchased furnace oil valued at Rs. 26,160 against the certificate in form No. 40. The assessee had purchased furnace oil valued at Rs. 1,48,133 by separately paying the tax thereon and had also purchased furnace oil worth Rs. 23,320 from the unregistered dealers. The furnace oil so purchased by the assessee in this case was used in the manufacture of sodium silicate and the assessee had also claimed the set-off under rule 42A of the Rules. The Sales Tax Officer had disallowed the claim of the set-off put forth by the assessee on the ground that the furnace oil in question was consumable stores, for which set-off was not admissible under the aforesaid rule 42A. The contention of the assessee was that the furnace oil was used as a processing material within the meaning of the abovesaid rule. The assessee thereafter had preferred the appeal before the Assistant Commissioner, Sales Tax, and had contended that the business of the applicant was of manufacturing sodium silicate from soda ash and silicate. It was contended that the applicant used to prepare mixture of soda ash and silicate and then spread it in kiln or bhatthi and thereafter hot air was being passed over the abovesaid mixture. For the purpose of creating hot air the assessee used furnace oil. The Assistant Commissioner, Sales Tax, visited the factory of the assessee in December, 1979 and had carried out the personal inspection. He had noticed certain aspects of the manufacturing process as the finding of facts. It was noticed that the furnace oil was carried by means of a pipe to burner, which was fitted in the bhatthi with a blower and the air was blown by means of the blower so as to keep the bhatthi constantly burning. It was found that the flame which was generated in the abovesaid manner used to cover the entire breadth and length of the bhatthi and due to this process, the mixture of silica and soda ash kept in the bhatthi was converted into a honey like semi-liquid, having particular formula, which product is known as sodium silicate. Reliance was also placed upon the affidavit and a sketch showing the working of the bhatthi or the kiln. After hearing the assessee and the Revenue, the view has been taken by the Assistant Commissioner, Sales Tax, that the furnace oil was used as a fuel only. While coming to this decision, reliance was placed upon the Tribunal's decision in Prakash Industries v. State of Gujarat (Second Appeal No. 237/80 ?). Being dissatisfied with the aforesaid order, the assessee had filed the Second Appeal No. 237/80 before the Tribunal. On the consideration of practically the same contentions, the Tribunal had come to the conclusion that the case of the assessee that the furnace oil was being used as a processing material could not have been accepted. It was also observed by the Tribunal that the furnace oil was more or less being used as a fuel. Taking this view the Tribunal had dismissed the second appeal by the orders dated August 24, 1983. Thereupon the assessee had made the necessary application for having a reference on certain questions of law to this Court, which was allowed, as a result of which the undermentioned two questions have been referred to this High Court :
"(1) Whether, on the facts and in the circumstances of this case, the conclusion of the Tribunal arrived at in Second Appeal No. 237 of 1980 decided on August 24, 1983 that the flame generated by the atomised furnace oil in the fusion furnace of the applicant's plant did not come in contact with the raw material, i.e., the mixture of soda ash and silica kept in the boiling pan during the manufacturing activity of sodium silicate, is without any evidence on record ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to set-off under rule 42A of the Gujarat Sales Tax Rules, 1970, in respect of the tax paid on the purchases of furnace oil which was used in the process of manufacturing of sodium silicate ?"
5. Mr. J. S. Joshi and Mr. S. L. Modi, the learned advocates who appear in these two references before us, have urged that, authorities below were at an error in coming to the conclusion that the furnace oil was not a processing material employed in the process of manufacture of the abovesaid products. In the submissions of the learned advocates, the only process involved in the manufacture was of applying of certain high degree of heat to either the raw bauxite or the mixture in the bhatthi and that the furnace oil was being utilised to generate the necessary heat, and that, the furnace oil was being consumed or utilised for the purpose of the generation of the heat. It was also contended by the learned advocates that without the generation of the heat the process of manufacture of the abovesaid two products could never be complete and that, the heat could not be generated without the use of the furnace oil, and therefore the abovesaid article, namely, the furnace oil must be taken as the processing material. They have further contended that, if once this position is accepted, the abovesaid commodity, namely, the furnace oil would fall within the purview of rule 42A of the Rules and the necessary notification issued by the Government, and therefore, the assessee would be entitled to the benefit under the scheme available to the new industries. Anyhow, the contentions raised by Ms. Doshit the learned advocate who appears on behalf of the Revenue is that the decision rendered by the Sales Tax Tribunal and the sales tax authorities below are completely justified on the basis of relevant material before them, and that, there is absolutely no doubt that the furnace oil was being used as a fuel only. It is also contended by Ms. Doshit that, merely because the furnace oil was required to be utilised for the purpose of generation of heat the same cannot be taken as the processing material within the meaning of rule 42A of the Rules and the relevant notification issued by the State Government under sub-section (2) of section 49 of the Act. It is broadly on this basis that Ms. Doshit has urged that the questions referred to us require to be answered and replied in favour of the Revenue.
6. It is not in dispute in both these references that the assessee are new industries. In the same way it is common ground that the benefit is claimed under rule 42A of the Rules and not under rule 42 of the same. It may be recalled that, at one juncture before the sales tax authorities the claim of benefit was based upon both the abovesaid rules, but ultimately before the Tribunal the benefit was claimed only under rule 42A of the Rules. In view of this position the questions referred to us require to be examined in the light of the provision contained under rule 42A of the Rules.
7. Rule 42A of the Rules is in respect of the drawback, set-off, or refund of the tax for the goods purchased by a certified manufacturer establishing a new industry. It has been pointed out by us earlier that, there is no dispute on the question of both the assessees being the new industries. Anyhow, it requires to be pertinently noticed that the benefit under rule 42A can be availed of by a new industry in respect of the whole or any part of the tax in respect of the purchases of (1) raw materials, (2) processing materials, (3) machinery and (4) packing materials used by the certified manufacturer in the manufacture of goods for sale. The explanation appended to rule 42A speaks of the exclusion of certain industries from the scope of new industry with which we are not concerned. Anyhow, the condition No. 6 of the conditions appended to rule 42A would go to show that the goods purchased actually must have been used by the assessee within the State as raw material or processing material or as machinery in the manufacture of any goods for sale, or as packing material in the packing of the goods so manufactured. Therefore, upon a bare reading of rule 42A of the Rules it becomes clear that if the assessee before us want to succeed in their contentions being raised before us, they shall have to establish that the furnace oil falls in any of the abovesaid categories. As noticed above and pointed out by us earlier, the case, of the assessee is that the furnace oil was being utilised as the processing material. It therefore further becomes clear that rule 42A can be availed of by the assessee in these two cases, provided they are able to establish that the furnace oil was the processing material.
8. At one juncture the learned advocates appearing on behalf of the assessee wanted to show us the difference in language and in spirit between rule 42 and rule 42A of the Rules. Anyhow, according to us the questions shall have to be decided on the basis of rule 42A which exist at present. In view of this situation we do not consider it necessary to take up the question of comparative examination of the language and the spirit of rule 42 and rule 42A of the Rules.
9. It is not in dispute that certain notification regarding exemptions can be issued by the State Government under section 49(2) of the Gujarat Sales Tax Act, 1969. In view of this position reference shall have to be made to the relevant notification which is dated November 11, 1970, which says that there would be a refund in respect of the whole of the purchase tax under section 15 of the Act, provided certain conditions are fulfilled. We are not concerned with the other conditions of the notification, but it should be pointed out once again that for claiming the benefit of the notification the purchases must be of raw material, processing material, machinery or packing materials. It is therefore clear that in view of the notification dated November 11, 1970 the assessee shall be required to establish before us that the commodity in question, namely, the furnace oil was being used as the processing material.
10. Reverting back to the facts of both the cases, we would firstly take up to facts in respect of S.T. Ref. No. 10 of 1987. The Sales Tax Tribunal while deciding the question has observed that the furnace oil was being used for giving heat treatment. It was pointed out on the basis of the affidavit and other material that the assessee was manufacturing calcined bauxite from crude bauxite and the assessee was having a rotating kiln with two trap doors through which raw bauxite lumps are fed in the kiln and then doors are shut and the kiln was being rotated. While doing so furnace oil is poured through a burner and is duly fired into the rotating lumps at a very high temperature ranging between 1000 degree C to 1440 degree C. Because of this process the chemical water content of the crude bauxite is evaporated and the gas gets atomised and its sulphur and carbon contents are absorbed by the calcined bauxite. The abovesaid procedure for the manufacture of calcined bauxite is not in dispute before us. Moreover, the abovesaid procedure appears as a finding of facts in the orders accorded by the Tribunal. Therefore, it would be in the fitness of things to proceed further with the said finding of facts in respect of the process being adopted for the manufacture of bauxite.
11. In S.T. Ref. No. 8 of 1988 the assessee a co-operative society was carrying on the business of manufacturing sodium silicate. The process of manufacture of the abovesaid commodity has been explained by the Tribunal in the detailed orders, a reference to which would go to show that the assessee used to prepare mixture of soda ash and silica and then used to spread it in the kiln or the bhatthi, and thereafter, the hot air was passed over the abovesaid mixture. For the purpose of creating hot air the assessee used the furnace oil. The personal inspection as noticed above was carried on by the Assistant Commissioner somewhere in the year December 1979, and it was notice that the furnace oil was being stocked in a big tank and later on it was taken to the bhatthi by means of a pipe to a burner. A blower was fitted on the burner and the air was blown by means of the blower so as to keep the bhatthi constantly burning. It is also noticed as a finding of fact that the abovesaid was the procedure or process as a result of which a honey like semi-liquid known as sodium-silicate was being manufactured, having a particular chemical formula with which we are not concerned. It appears that reliance was also placed upon a sketch or a rough drawing of the kiln or bhatthi, which appears as annexure 5. This sketch would go to show that the furnace oil was being stored in a storage tank and it used to go to a burner through a pipe and later on the furnace oil used to enter in the fusion furnace and thereafter the flames were going to that chamber which contains the boiling pans. This process also is not in dispute before us. Therefore in this reference also the question as to whether the furnace oil was being used as a fuel only or as the processing material requires to be determined on the abovesaid process of manufacture.
12. Reliance has been placed by the assessee in these two reference upon the Supreme Court decision in J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563. The question before the Supreme Court was as to whether certain articles or commodities can be said to have been used "in the manufacture or processing of the goods for sale" within the meaning of section 8(3)(b) of the Central Sales Tax Act, 1956 and rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957. The assessee-mills company carried on the manufacture and processing of yarn and fabrics and the question was as to whether the "drawing instruments and photographic materials, etc." would fall within the meaning of the abovesaid phrase, namely, "in the manufacture or processing of goods for sale". It was pointed out that in the case of a company manufacturing for sale cotton textiles, tiles and other commodities, certain electrical equipments would fall within the terms of rule 13 of the said Rules. It was pointed out that the production of the finished goods would be difficult without the use of the electrical equipments and, therefore, the abovesaid equipments should be regarded as intended for use in the manufacture of the goods for sale. It was also pointed out that without a design of the goods sought to be manufactured in a factory, which is geared to production of goods of uniform pattern, the manufacture would be impossible. The expression "in the manufacture of goods "therefore was taken as encompassing the entire process carried on by the dealer of converting raw materials into the finished goods. It was pointed out that, to read the expression "in the manufacture" of cloth in any restricted sense, would raise many anomalies. The Supreme Court has preferred to observe thus :
"In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in rule 13 will qualify for special treatment. This is not to say that every category of goods 'in connection with' manufacture of, or 'in relation to' manufacture, or which facilitates the conduct of the business of manufacture will be included within rule 13."
13. Placing heavy reliance upon the abovesaid observations of the Supreme Court learned advocates for the assessee before us, have urged that when the question relates to the examination of a particular commodity whether or not falling within the purview of the term processing material in rule 42A of the Rules, it should not be overlooked that certain other commodities or materials which appear to be slightly far related shall have to be regarded as the commodity or the article used in the manufacture of a particular finished commodity. The learned advocates have distinguished between the words "in manufacture and for manufacture". Therefore it appears that the present two references would more or less be required to be decided on the decision rendered by the Supreme Court in the aforementioned decision. It must not be overlooked in that decision certain other goods which were required for the creation of the designs, etc., were also taken as the goods in the manufacture or process of the goods for sale.
14. On the other hand our attention has been drawn to the Supreme Court decision in Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320. In this decision the question was as to whether the cashew shells can be said to have been consumed in the manufacture of other goods within the meaning of section 5A of the Kerala General Sales Tax Act, 1963. The assessee-company were the dealers in tiles, terra-cotta wares and ceramics and had purchased cashew shells which were being used as fuel for manufacturing its products. The Tribunal had held that, as the cashew shells had been used only as fuel in the manufacture of tiles and other goods, section 5A(1) of the Kerala General Sales Tax Act, 1963, was not satisfied as there was no consumption of cashew shells in the manufacture of other goods. The High Court had upheld the decision of the Tribunal in revision and when the department had preferred petition to the Supreme Court for special leave, dismissing the petition the Supreme Court has ruled that, since the cashew shells had been used only as a fuel and did not get transferred into the end-product and were not used as raw materials in the manufacture of other goods, they would not fall within section 5A(1)(a) of the Kerala General Sales Tax Act.
15. Reliance was placed on this decision by the learned advocate Ms. Doshit appearing on behalf of the Revenue to hammer the point that, if in that case the cashew shells were being taken as the fuel in the instant references also there should be no reason for us to take a different view. The arguments of Ms. Doshit proceeds further, urging that, in the instant cases also the furnace oil is being utilised at the most for the generation of the heat and therefore it would be in all propriety to hold in the lines of the Supreme Court decision in the case of Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 that in the instant reference before us also the furnace oil should be regarded as the fuel. We feel that the abovesaid contention raised by Ms. Doshit cannot be accepted for a variety of reasons, which we shall point out immediately. Firstly, it required to be pertinently appreciated that in that case the question was in respect of section 5A of the Kerala General Sales Tax Act, which is in respect of levy of the purchase tax. Section 5A reads thus :
"5A. Levy of purchase tax. - (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 5, and either -
(a) consumes 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 any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in section 5."
16. Ms. Doshit has tried to urge that in the above case also the Supreme Court had taken into consideration the fact that the ruse of cashew shells was taken, as a fuel only. But when the decision is studied in all its entirely, it becomes clear that the question which was in fact, considered by the Supreme Court was as to whether the cashew shells were being consumed as the raw material in the process. This position becomes clear because the Supreme Court has also preferred to consider the decision in the case of Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63, wherein the question was as to whether the sliced pine apple being sold in sealed cans can be said to have been consumed in the process. The Supreme Court has also pointed out that "the cashew shells did not get transformed into the end-product. The consumption must be in the manufacture as a raw material or of other components which go into the making of the end-product to come within the mischief of the section". These observations of the Supreme Court therefore, would go to show that the question which was being examined by the Supreme Court, in that case was as to whether the use of the cashew shells can be said to be the consumption in the manufacture of other goods within the meaning of section 5A of the Kerala General Sales Tax Act. Precisely because of the reasons the following observations, namely, "the goods used for ancillary purpose like fuel in the process of manufacture would not fall within section 5A(1)(a) of the Act", should not come in the way of the assessees when they urge before us that the furnace oil was being used as a processing material. On the basis of the ratio laid down by the Supreme Court in the case of Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 it cannot be concluded that in the instant two references also, the furnace oil should be regarded merely as a fuel and not as a processing material. In view of this position, in our considered view the decision of the Supreme Court in Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 would not assist Ms. Doshit in her submissions before us. On the contrary, as pointed out by us earlier, the instant case appears to be nearer to the Supreme Court decision in J. K. Cotton Spinning & Weaving Mills Co. Ltd. [1965] 16 STC 563 which says that the expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer for converting raw materials into the finished goods. We find no difficulty on the basis of the abovesaid ratio laid down by the Supreme Court that in the instant case also the view shall have to be taken that the furnace oil in question was being utilised as the processing material. For the reasons indicated by us above the decision in the case of Deputy Commissioner of Sales Tax v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 (SC) would not come to the rescue of the Revenue while they urge before us that the furnace oil was being used as a fuel only and not as a processing material.
17. In Chowgule & Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124, the question was whether certain goods purchased by the assessee for use in the operations of handling the ore could be said to be the goods purchased for use "in the manufacture or processing of goods for sale or in mining" so as to attract the lower rate of sales tax under the relevant provisions of the Central Sales Tax Act, 1956. The Supreme Court has pointed out that the mechanical ore handling process can be divided into 7 different operations but all the goods purchased by the assessee for use in the abovesaid operations could be said to be the goods purchased for the abovesaid use.
18. The learned advocates for the assessees have also placed reliance upon a Bench decision of this Court in State of Gujarat v. Wood Polymer Ltd. [1982] 50 STC 229. The aforementioned decision deals with the question of justification and warrant for departing from the legislative dictionary meaning of the term "sale" as defined under section 2(28) of the Gujarat Sales Tax Act, 1969. It appears to us that the abovesaid decision in case of State of Gujarat v. Wood Polymer Ltd. [1982] 50 STC 229 (Guj) is not much relevant for our purpose, and therefore a detailed reference to the same is not called for, though heavy reliance has been placed on the same by the learned advocates appearing on behalf of the assessees. Learned advocates for the assessees have also invited our attention to another Bench decision of this Court in Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294, in which the question to be decided was as to whether the kathi (twine) used for the packing of manufactured goods for sale on certification in form No. 19 can be said to be in the manufacture of taxable goods for sale. It is pointed out that "all the articles or materials which may facilitate the business of manufacture would not be such consumable stores as would entitle the manufacturer to purchase them tax-free ........ It is not possible in the very nature of things to lay down exhaustively or to suggest a straight jacket formula as to what would be the articles or goods required in a process or activity which though not strictly a manufacturing activity itself but is such an integral part thereof that in its absence the manufacturing activity may not be commercially expedient. It would depend on the facts and circumstances of each case". The facts and the question decided in the abovesaid case are not akin to the facts and circumstances of the questions before us. Anyhow, it requires to be appreciated that the view has been taken that certain other articles and materials which may facilitate the business of manufacture can be said to be consumable goods as entitled to be purchased tax-free. The last decision which requires consideration is the Supreme Court decision in Collector of Central Excise v. Ballarpur Industries Ltd. [1990] 77 STC 282. In that case the assessee was a manufacturer of paper and paper boards and in the process relating to the manufacture of the same "sodium sulphate" was used in the chemical recovery cycle of sodium sulphide which forms an essential constituent sulphate cooking liquor used in the digestion operation. On the question whether sodium sulphate used in the manufacture of paper was raw material for which pro forma credit could be allowed in terms of notification dated February 28, 1982, it was held that, for an item to qualify as raw material, it need not necessarily and in all cases go into, and be found, in the end-product. It was also held that sodium sulphate used in the said process therefore was a raw material for the manufacture of paper within the meaning of the said notification dated February 28, 1982. The question indeed related to the expression "raw material" which is not a defined term. While examining this question it has been pointed out that :
"One of the valid tests, in our opinion, could be that the ingredient should be so essential for the chemical processes culminating in the emergence of the desired end-product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burning up is its quality and value as raw material."
19. This decision also in a way goes to assist the submissions canvassed before us by the learned advocates for the assessees.
20. Thus on overall consideration of the factual and legal aspects emerging from these two references, we are inclined to say that the Sales Tax Tribunal and the authorities below were not justified in taking a view that the furnace oil was being used as a fuel only and, therefore, it was not falling within the meaning of the processing material within the meaning of rule 42A of the Rules. On a careful examination of the entire process being adopted for the manufacture of the end-product, we are satisfied that the heat treatment was the key process in the manufacture and that the abovesaid process could not have been acquired without the use of the furnace oil. If the furnace oil was not to be used, the heating process could not have been accomplished and that, therefore, the end-product could not have been achieved. It is therefore abundantly clear that the use of furnace oil in both the references must be regarded as the processing material and not merely as a fuel as has been found and held by the Sales Tax Tribunal and the authorities below.
21. In view of our abovesaid finding, the question referred to us in S.T. Reference No. 10 of 1987 requires to be replied in the negative in favour of the assessee and against the Revenue.
22. So far as S.T. Reference No. 8 of 1988 is concerned, the question No. 2 referred to us requires to be replied and answered in the negative in favour of the assessee and against the Revenue.
23. That takes us to the question No. 1 referred to us in S.T. Reference No. 8 of 1988.
24. A detailed reference made by us to the various aspects of the manufacturing process would go to show that the Tribunal was not justified in coming to the conclusion that the case of the assessee was devoid of any evidence on record. In view of this position, we answer and reply this question in the negative in favour of the assessee and against the Revenue.
25. We reply and answer the abovesaid questions accordingly.
26. Answer accordingly.
27. References answered in the negative.