Indian Kanoon - Search engine for Indian Law

2. The case of the applicant-company is that it set up an industrial unit at Jangalpur, P.O. Andul in the district of Howrah in September, 1993 as an extension of its existing industrial unit at Liluah, also within the same district. It manufactures CR strips by using HR strips as raw materials in the said extended unit. The first sale of the product of the extended unit was effected on October 30, 1993. The applicant-company obtained licence under the Central Excises and Salt Act, 1944 as a manufacturer of CR strips and the Central excise authorities have been treating it as a manufacturer of that product. Total value added to the finished product is about 20 per cent over the value of the inputs, namely, HR strips. HR strips and CR strips are completely different commercial commodities with different uses and character. HR strips can be used by tube and pipe manufacturers and cold reducers. CR strips are used for manufacturing steel furniture, automobile bodies, refrigerators, casings, cooking range, drums, barrels, etc. The two items do not serve the same purpose. The Indian Standards Institution has given separate specifications for HR strips and CR strips, namely, IS 10748 and IS 153 respectively. The applicant prayed for amendment of registration certificate under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act") for addition of manufacture of CR strips out of HR strips used as raw materials by purchasing the latter at a concessional rate of tax. From the fact that the sales tax authorities issued declaration forms to the applicant for purchase of HR strips, it is presumed that the amendment prayed for was granted, though the amended registration certificate was not sent to the applicant. As a manufacturer of CR strips, the applicant filed an application before respondent No. 2, Assistant Commissioner, Commercial Taxes, Special Cell for remission of tax under Section 10G of the aforesaid Act of 1941. On being satisfied after examining the applicant's activities in the extended unit, respondent No. 2, issued eligibility certificate (E.C.) to the applicant on January 20, 1994 making it valid for the period from October 30, 1993 to October 29, 1994. By virtue of that E.C. applicant became eligible for remission of tax to the extent of 60 per cent of the gross value of the additional fixed assets of Rs. 2,89,80,807. The E.C. was renewed for a further period of one year up to October 29, 1995 under Section 10G of the Act of 1941, treating the applicant as a manufacturer of CR sheets or strips. Since the applicant was entitled to the E.C. for remission of tax over a period of four years, it made an application for further renewal of E.C. for the period from October 30, 1995 to October 29, 1996. That application is still pending. On 20th June, 1996 the applicant received a notice in form 55 issued under rules 245 and 249 of the West Bengal Sales Tax Rules, 1995 (in short, "the 1995 Rules"), by which respondent No. 1 directed the applicant to show cause why an order should not be passed cancelling the E.C. granted to it with effect from October 30, 1993, since no new product was manufactured. The applicant appeared before respondent No. 1 and after taking some adjournments, argued on the basis of the judgment of this Tribunal in the case of Hindusthan Wires Limited, reported in [1995] 97 STC 652 ; (1994) 27 STA 190 that HR strips and CR strips are two commercially different commodities having different use and character but are treated as same goods for the limited purpose of Section 15(a) of the Central Sales Tax Act, 1956 (in short, "the 1956 Act"). It was also contended that according to the ratio of that judgment, the applicant should be held to be a manufacturer of CR strips, but no tax can be charged on the sales thereof despite grant of E.C. under Section 10G of the Act of 1941, because HR strips are purchased on payment of tax and both HR strips and CR strips fall under the same sub-clause of Section 14(iv) of the 1956 Act. The judgment of this Tribunal in the case of Precision Strips Private Limited [1996] 102 STC 82 was also cited by the applicant. The respondent No. 1 reserved the order, but informed Mr. B.N. Saraf, applicant's advocate, that he would cancel the E.C. on the instructions of its superior officers. However, no written order has been communicated to the applicant.

3. The contention of the applicant is that it is a manufacturer of CR strips, although CR strips manufactured out of HR strips cannot be subjected to tax by the State Revenue in terms of Section 15(a) of the 1956 Act because the two commodities fall under the same sub-clause of Section 14(iv) of the 1956 Act and because sales tax was paid on purchases of HR strips which are used as raw materials. A manufacturing process is involved for production of CR strips out of HR strips. The two are commercially different commodities. The applicant contends that the extended unit in which CR strips are produced was set up with the particular object of manufacture of that item, and for that purpose plant and machinery consisting of skin pass mill, flying shear, electric furnace, rewinding machine, oil fired furnace, slitting machine, pickling plant, cold rolling mill and overhead cranes were installed. It also contends that the manufacturing process consists of longitudinally slitting HR coils, then pickling or removing oil or greasy substances and sealing in the HR slits, rinsing in water in order to remove any acid residue, giving anti-corrosive treatment, then cold rolling for reducing thickness and for elongation in length for use in manufacturing different types of commodities, then annealing, or reducing hardness of strips during cold rolling operation and processing for bringing glaze in CR strips with anti-corrosive coating thereon and finally slitting the product for obtaining strips of the required width for despatch and marketing.

4. The application has been resisted by the respondents. Their case in the affidavit-in-opposition is that the licence granted under the Central Excises and Salt Act, 1944, is no conclusive proof that the applicant is a manufacturer. CR strips processed out of HR strips are the same commodities and in no way different. In common parlance, CR strips and HR strips are treated as one and the same commodity, namely, iron and steel strips. Use of character of the commodities is no criterion for deciding whether those are different commercial commodities. Similarly, ISI specifications are no indications as to whether the commodities are commercially different. The ISI specifications only indicate that HR strips and CR strips undergo different processings, but do not indicate that those are commercially different commodities. The specifications are technical in character and do not indicate how the two commodities are treated in the trade parlance. Respondents further contend that remission of tax under Section 10G of the Act of 1941 was granted to the applicant under a wrong conception of law. That mistake is intended to be rectified by issuing the impugned notice in form 55, It is repeated that under the provisions of law the process undertaken by the applicant does not amount to manufacture. No order has been passed on the basis of the impugned notice in form 55, since the applicant has challenged it before this Tribunal. The decisions in the cases of Hindusthan Wires Limited [1995] 97 STC 652 (WBTT) ; [1994] 27 STA 190 and Precision Strips Private Limited [1996] 102 STC 82 (WBTT) are distinguishable. Every processing does not amount to manufacture. Although by processing CR strips acquire some qualitative change, the activity does not amount to manufacture within the meaning of Section 2(dd) of the Act of 1941 or Section 2(17) of the 1994 Act. The applicant is, therefore, not entitled to benefit of remission under Section 1OG of the Act of 1941 or Section 41 of 1994 Act.