S.V.Sivalinga Nadar And Sons vs 2 The Assistant Commissioner (St) ...
2021 Latest Caselaw 15773 Mad

                                                                               W.P. Nos.15880 & 15881 of 2020



                               IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                 DATED: 05.08.2021

                                                       CORAM

                             THE HONOURABLE DR. JUSTICE ANITA SUMANTH

                                        W.P. Nos.15880 & 15881 of 2020 and
                                         WMP.Nos.19737 & 19738 of 2020

                 S.V.Sivalinga Nadar and Sons
                 rep by its Partner S.V.S. Velkumar,
                 No. 866 (Old No. 444),
                 Pandit Jawarharlal Nehru Road
                 Villupuram 605 602.                                          ...Petitioner in both WPs

                                                          Vs.
                 1 The Commissioner
                   Commercial Tax Department
                   Chepauk, Chennai 05.

                 2 The Assistant Commissioner (ST) (FAC),
                   Villupuram II, Villupuram.                              ...Respondents in both WPs


                 Common Prayer: Writ Petition filed under Article 226 of the Constitution of India
                 praying to issue Writ of certiorari, calling for the records relating to the assessment
                 order dated 17.09.2020 & 18.09.2020 passed by the 2nd respondent in respect of the
                 petitioners TNGST No.4700269 for the assessment year 2004-2005 & 2005-06 and
                 to quash the same.



                 1


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                                                                                          W.P. Nos.15880 & 15881 of 2020




                                     For Petitioner         : Mr.V.S.Sivasundaram in both WPs

                                     For Respondents        : Mr.TNC.Kaushik,
                                                              Government Advocate

                                                              ********

COMMON ORDER

The challenge is to two orders of assessments for the periods 2004-05 and

2005-06 passed under the provisions of the Tamil Nadu General Sales Tax Act,

1959. The only issue that arises is as to whether the refining of oil from crude

vegetable oil into refined vegetable oil would amount to 'manufacture'.

2.This very issue has been considered in the petitioner's earlier assessments

and the Sales Tax Appellate Tribunal by its order in Tribunal Appeal No.286 of 2007

for the period 2003-04 has held the issue in favour of the petitioner.

3. The issue has been discussed in the following terms:

' ' 8(v) Now let us discuss whether conversion of crude oil into refined oil

would amount to manufacture?

Rs.27,79,060/- represented purchase of furnace oil, carton boxes, plastics cans, chemicals, machinery spares, installation bricks etc. against Form XVII by the respondent for use of the same in conversion of crude sunflower, vegetable,, groundnut oil into refined oil, according to the Assessing Officer crude groundnut oil, sunflower oil whether in crude from or in the refined form, is one and the

http://www.judis.nic.in W.P. Nos.15880 & 15881 of 2020

same commodity and no new commodity emerged. The Assessing Officer contended that the process of conversion of crude oil into refined oil does not amount to manufacture and therefore, the purchase of consumables and capital goods against Form XVII under section 3 (3) and under section 3(5), in such case is not permissible. Thus, the Assessing Officer levied differential rate of tax on respective commodity aggregating Rs.27,79,060/-. The Assessing Officer levied consequential penalty under section 23 at Rs.4,88,528/-. Now the question remains to be resolved is whether purchase of furnace oil as consumables against Form XVII is permissible. In this regard, the Commissioner of Commercial Taxes in letter No.Acts Cell 1/11336, dated 31.7.2000 had clarified as below:

“ If the terms "raw materials" and "consumables “ are synonyms there is no need to add the words including consumables. Since HSD oil and LSD oil can also be classified as consumables they have been specifically excluded in section 3(3). In such circumstances consumables like other fuels, welding electrodes, welding rods, abrasives, carbide tip tools and lubricant oils are eligible for concessional rate under section 3(3) of the Act, subject to other conditions laid down therein. However the fuels must be directly used in the manufacturing process like heating/heat treatment, etc, but if the fuel is used for generation of electricity the concession of section 3(3) is not available, as such generation is one step remote from the actual manufacture."

Therefore, it is pertinent to note that furnace oil could be purchased as consumables under section 3(3) of the TNGST Act, 1959 against concessional rate of tax or use in manufacture like heating treatment in the manufacturing process by utilizing fuel. Next question is whether the conversion of crude vegetable oil into refined vegetable oil amount to emanation of new commercial commodity. In this context, it is seen as per entry 1/B/67, vegetable oil of all kinds including refined vegetable oil other than those specified elsewhere in the Schedule is assessable at the rate of 4% at the point of first sale. Crude vegetable oil and refined vegetable oil, in commercial parlance, are two different commodities. "Trade" meaning is always to be given preference as against “dictionary” meaning. In trade parlance, crude vegetable oil and refined oil are two different commodities. Therefore, when the trade meaning is given preference,

http://www.judis.nic.in W.P. Nos.15880 & 15881 of 2020

(73 STC 195 (SC), crude vegetable and refined vegetable oil could be different commodities of the same genus.

(a) In the Collector of Central Excise, Bombay vs. S.D. Fine Chemicals (P) Ltd., 99 STC P313 (S.C), the Apex Court held that the expression of 'manufacture in section 2(f) of the Central Excise and Salt Act, 1944 is not confined to the natural meaning since it is an expansive definition. On interpretation at page 315, it held that

"the expression 'manufacture is defined in clause (f) of section 2 of the Act (Central Excise Act). The definition, as substituted by Finance Act (No:25) of 1975, with effect from March 1, 1975 reads thus:

'manufacture includes any process' :

i. incidental or ancillary to the completion of manufactured product.

ii. which is specified in relation to any goods in the section or chapter notes of the Schedule to the Central Excise Tariff Act 1985, as amounting to manufacture, and the word 'manufacture shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture if excisable goods, but also any person who engages in their production or manufacture on his own account.

(b) In Union of India and Others vs. Tvl.J.G.Glass Industries Ltd, 114 STC P..387(S.C), the Apex Court at page 39 held that,

“ 'Manufacture' implies a change, but every change it not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformations; a new and different article must emerge having a distinct name, character or use”.

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Further in the above case, to decide about whether a process is manufacture, it has been held at page 395 that,

“ ...... a two fold test emerges for deciding whether the process is that of manufacture'. First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity already in existence will be of no commercial use but for the said process."

(c) In Tvl. Ujagar Prints vs. Union of India and Others 74 STC P.401 (S.C-Full Bench), the Full Bench of the Apex Court affirmed the decision of Empire Industries Limited and Others, 64 STC P.42. This is a land mark judgment on the term 'manufacture'. The Apex Court held at page 424 while meaning the term ' manufacture' that,

"The prevalent and generally accepted test to ascertain that there is 'manufacture' is whether the change or the series of changes brought about by the process take the commodity to the point were commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged as a result of the processes."

To a question, whether the processing of 'grey fabric' amounts to a manufacture, it is held at page 424 that, “ 'grey fabric' after it undergoes the various processes of bleaching dycing sizing, printing, finishing, etc., emerges as a commercially different commodity with its own price structure, custom and other commercial incidents and that there was in that sense a 'manufacture within the meaning of section 2(1) even as unamended, it eminently plausible view and is not shown to suffer from any fallacy.”

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(d) In Indian Poultry and Others vs. Sales Tax Officer, Rajnandgaon and Others, 113 STC P.597(S.C), at page 509, the definition of manufacture is given as under:' “ 'manufacture' includes any process or manner or producing, collecting, extracting, preparing or making any goods and in respect of trees which have been served from the land or which have been felled, also the process of lopping the branches, cutting the trunks or converting them into logs, poles or ballies or any other articles of wood, but does include such manufacturers or manufacturing processes.”

From the above decisions, “process” of crude vegetable oil into refined vegetable oil of edible grade, amounts to manufacture in wider sense. Thus, in true and common parlance, crude vegetable oil and refined vegetable oil are two different goods, even though, they are classified under single entry vegetable oil of all kinds including refined oil as per entry 1/B/75 at the rate of 4%. As now commodity in commercial and market parlance, emerged as refined vegetable oil, out of crude oil and the process of conversion of crude oil into refined oil would amount to manufacture. Therefore, purchase of furnace oil against Form XVII for conversion of crude vegetable oil into refined vegetable oil is found in order and maintainable. The Appellate Assistant Commissioner(CT) went wrong to hold that purchase of furnace oil against Form XVII at the hands of the respondent is not in order.'

4.The order has, admittedly, attained finality and has not been challenged

further. Apart from the case law that has been discussed by the Sales Tax Appellate

Tribunal, the Supreme Court in the case of B.P Oil Mills V. Sales Tax Tribunal and

others (111 STC 188) after considering a slew of judgments, has considered this

identical issue holding the same in favour of the assessee.

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5.In the light of the discussion as aforesaid, the conclusion of the assessing

authority to the effect that the process of conversion of crude vegetable oil into

refined vegetable oil would not amount to 'manufacture' is set aside. The impugned

orders of assessments are quashed and these writ petitions allowed. No costs.

Connected Miscellaneous Petitions are closed.

05.08.2021 Sl Index: Yes Speaking order

To

1 The Commissioner Commercial Tax Department Chepauk Chennai 05.

2 The Assistant Commissioner (ST) (FAC) Villupuram II, Villupuram.

http://www.judis.nic.in W.P. Nos.15880 & 15881 of 2020

DR. ANITA SUMANTH, J.

sl

W.P. Nos.15880 & 15881 of 2020 and WMP.Nos.19737 & 19738 of 2020

05.08.2021

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