Rajasthan High Court - Jodhpur

M/S Jk Lakshmi Cement Ltd vs C.T.O. Anti Evasion, Circle-Ii, Jaipur on 23 April, 2025

Author: Rekha Borana

Bench: Rekha Borana

[2025:RJ-JD:17098]

      HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
                       JODHPUR
               S.B. Civil Revision Petition No. 169/2014

Hindustan Zinc Ltd., Yashad Bhawan, Udaipur.
                                                                    ----Petitioner
                                      Versus
Assistant     Commissionier         Commercial           Taxes    Special    Circle,
Udaipur.
                                                                  ----Respondent
                               Connected With
               S.B. Civil Revision Petition No. 170/2014
Hindustan Zinc Ltd., Yashad Bhawan, Udaipur.
                                                                    ----Petitioner
                                      Versus
Assistant     Commissionier         Commercial           Taxes    Special    Circle,
Udaipur.
                                                                  ----Respondent
               S.B. Civil Revision Petition No. 217/2014
M/s    Jk   Lakshmi     Cement         Ltd.     Jaykaypuram,        Distt,   Sirohi
(Rajasthan) through P.C. Jain S/o Sh. C.M. Jain by caste Jain,
aged about 71 years, (an Authorized signatory and power of
attorney holder) Resident of B-54, Triveni Nagar, Gopalpura
Byepass, Jaipur (Rajasthan).
                                                                    ----Petitioner
                                      Versus
The Commercial Taxes Officer, Anti-Evasion, Circle II, Jaipur
                                                                  ----Respondent
               S.B. Civil Revision Petition No. 218/2014
M/s    Jk   Lakshmi     Cement         Ltd.     Jaykaypuram,        Distt,   Sirohi
(Rajasthan) through P.C. Jain S/o Sh. C.M. Jain by caste Jain,
aged about 71 years, (an Authorized signatory and power of
attorney holder) Resident of B-54, Triveni Nagar, Gopalpura
Byepass, Jaipur (Rajasthan).
                                                                    ----Petitioner
                                      Versus
The Commercial Taxes Officer, Anti-Evasion, Circle II, Jaipur
                                                                  ----Respondent

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For Petitioner(s)          :    Mr. Sharad Kothari with
                                Mr. Pranjul Mehta
                                Mr. Rahul Sharma for
                                Mr. P.K. Bohra
For Respondent(s)          :    Mr. Mahaveer Prasad Pareek, AGC
                                Mr. Bhagwana Ram



              HON'BLE MS. JUSTICE REKHA BORANA

Order

23/04/2025

1. The matters have been listed in the category of 'Oldest

Cases for early disposal'.

2. The present revision petitions have been filed against orders

dated 17.02.2014 and 26.06.2014 passed by Rajasthan Tax

Board, Ajmer whereby the claim/benefit of Input Tax Credit on

capital goods/raw material used in the process of mining activities

and manufacture of non-ferrous metals/cement has been denied

to the petitioner-Companies.

3. The present revision petitions involve the same questions of

law hence are being decided by this common order. For brevity,

facts of S.B. Civil Revision Petition Nos.169/2014 and 170/2014

are taken into consideration.

4. On 13.07.2015 while admitting the revision petitions, the

following questions of law were framed:

"(1) Whether the mining of mineral viz. zinc

and lead in the captive mines of the assessee

amounts to manufacturing of goods or not; and

(2) Whether the amendment of Rajasthan

Finance Act, 2011 in Section 18 (1) (g) of the

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Rajasthan VAT Act, 2003 will apply to the

Assessment Years 2007-08 and 2008-09 in the

present case?"

5. The facts are that the petitioner Company being engaged in

the work of mining and manufacture of non-ferrous metals,

availed the Input Tax Credit applicable on the material and goods

under Section 18 of the Rajasthan Value Added Tax, 2003

(hereinafter referred to as the 'Act of 2003'). Vide assessment

orders dated 25.03.2010 and 25.02.2011 respectively, the

Assessing Authority disallowed the Input Tax Credit to the

petitioner-Company amounting to Rs.4,33,71,922/- and

5,00,00,000/- qua the assessment years 2007-08 and 2008-09

respectively. Vide the said orders, the Assessing Authority

observed that the petitioner-Company was not entitled to avail

the Input Tax Credit. While relying upon the Hon'ble Apex Court

judgment in the case of Chowgule & Co. Pvt & Ors. VS. Union

of India & Ors; (1981) 1 SCC 653 the Assessing Authority

observed that 'mining' does not fall within the definition of

'manufacture'.

6. The above orders were assailed before the Deputy

Commissioner (Appeals), Commercial Taxes, Udaipur who

dismissed the appeals vide orders dated 21.03.2011 and

27.07.2012 respectively while affirming the findings of the

Assessing Authority.

7. Second appeals preferred before the Rajasthan Tax Board,

Ajmer were also rejected vide impugned order dated 17.02.2014

whereby the Board too held that the process of mining cannot be

[2025:RJ-JD:17098] (4 of 11) [CR-169/2014]

termed to be a part of the process of 'manufacturing' and hence

the material/machinery used in the process of mining cannot avail

the Input Tax Credit.

8. Learned counsel for the petitioners raised the following

grounds:

(i) The authorities erroneously applied amended Section 18 of

the Act of 2003 which came into effect from 09.03.2011 whereas

the relevant assessment years in the present matters were

2007-08 and 2008-09 respectively. Therefore, so far as the

purchase of capital goods is concerned, to avail the Input Tax

Credit, it was not mandatory as per the unamended provision of

Section 18 (1) (g) of the Act of 2003 to use the said goods for

manufacturing activity.

Learned counsel while relying upon the unamended

provision of Section 18 (1)(g) of the Act of 2003 submits that the

said provision provides only for use of the capital goods in the

State and does not provide for its use in the process of

manufacturing.

(ii) Secondly, the petitioner-Company is not engaged merely in

mining activities rather mining is only the first step to excavate

ore. The said excavated ore is further used for manufacturing of

the final products like Zinc, lead & Silver etc. Meaning thereby,

the process from excavation till the manufacturing of the final

finished goods is one integrated process of manufacturing and as

held by the Hon'ble Apex Court in Chowgule's case (supra), the

mining process and processing of ore is one integrated process

carried out to create the final goods for sale therefore, the capital

[2025:RJ-JD:17098] (5 of 11) [CR-169/2014]

goods like machinery, vehicles, barges and other goods are an

essential part of the said integrated process. Hence, the capital

goods used by the petitioner Company firstly for excavating,

secondly for processing ore, thirdly for carrying it for the process

of smelting and lastly to create final goods are all covered within

the ambit of the complete integrated process of manufacturing.

9. Learned counsel while relying upon Section 2 (22) of the Act

of 2003 submits that 'manufacture' is a wide term which includes

complete processing of goods which brings into existence a

commercially different and distinct commodity. Herein, the raw

material derived from mining activities is not sold directly in the

market, but is utilised for manufacturing the final goods which

definitely is a commercially different and distinct commodity. The

process therefore, as a whole falls within the ambit of

manufacturing.

10. So far as the raw material is concerned, counsel submits

that the requisites in terms of Section 18(1)(e) are firstly that the

raw materials essentially should be used in the manufacture of

goods other than exempted goods. Secondly, the same should be

for sale within the State or in the course of inter-State trade or

commerce.

11. So far as the present matter is concerned, the raw material

excavated in the process of mining was undisputedly used in the

second process of manufacturing the final finished goods. The

complete process being an integrated process, the authorities

erroneously held that the same was not an integrated process of

manufacturing.

[2025:RJ-JD:17098] (6 of 11) [CR-169/2014]

12. Learned counsel submits that the learned Tax Board wholly

misinterpreted the ratio laid down in Chowgule's case (supra)

and even an incomplete sentence was quoted in the order

impugned. He submits that a bare reading of the next sentence of

the portion of judgment as quoted in the order impugned would

make it clear that the processing/excavation was held to be a part

of integrated process and the raw material as well as the capital

goods used in the said integrated process could not have been

excluded from consideration of entitlement for Input Tax Credit.

13. Per contra learned counsel for the respondents submits that

Section 18 of the Act of 2003 pre-supposes certain manufacturing

activity so as to entitle the entity to avail Input Tax Credit

whereas admittedly, the petitioner-Company is engaged in mining

activities and the said activity to excavate metal which is already

in existence cannot be termed to be a manufacturing activity.

14. Learned counsel further submits that the term 'Manufacture'

as defined under Section 2(22) of the Act of 2003 requires a

resultant and commercially distinct commodity whereas the

mining activities as conducted by the petitioner-Company does

not result into the production of any distinct commodity.

15. Lastly, the authorities rightly applied the unamended

provision of Section 18 of the Act of 2003 and rightly arrived to

the finding that the capital goods essentially need to be used for

the purpose of manufacturing so as to avail the benefit of the

Input Tax Credit.

16. Heard learned counsel for the parties and perused the

material available on record.

[2025:RJ-JD:17098] (7 of 11) [CR-169/2014]

17. After hearing the counsels, this Court deems it proper to

frame the third question of law as under:-

"(3) Whether the capital goods used in the

process of mining in the captive mines of the

assessee can be termed to be used in the process

of manufacturing of goods?"

18. Coming on to question No.2 as framed, this Court is of the

opinion that firstly, the amended provision of Section 18 (1) (g) of

the Act of 2003 could not have been applied in the present case

as admittedly, the respective assessment years were 2007-08 and

2008-09 whereas the amendment in the said provision was

brought into effect from 09.03.2011. Secondly, even if the same

is termed to be applicable, it can apply only qua capital goods as

the unamended provision of Section 18 (1) (g) of the Act of 2003

pertained only to capital goods. So far as the raw material is

concerned, even the unamended provision provided for the

necessity of using the same in manufacture of the final goods.

Meaning thereby, the amended and the unamended provisions

both are akin so far as the raw material is concerned. Therefore,

this Court is not required to delve into the said issue so far as the

raw material is concerned.

19. Question No.1 and newly framed question No.3 are dealt

with jointly.

Both these questions have already been answered by the

Hon'ble Apex Court in the case of Chowgule (supra). In

[2025:RJ-JD:17098] (8 of 11) [CR-169/2014]

Chowgule's case (supra), the Court dealt with a similar question

framed as under:

"5. The point which arises for consideration under

the first question is as to whether blending of ore in

the course of loading it into the ship through the

mechanical ore handling plant constituted

manufacture or processing of ore."

20. Replying to the above issue, the Hon'ble Apex Court held as

under:

"7....It must therefore follow as a necessary corollary

that if any items of goods were purchased by the

assessee as being intended for use as "machinery,

plant, equipment, tools, spare-parts, stores,

accessories, fuel or lubricants" for the mechanical ore

handling plant, they would be eligible for inclusion in

the Certificate of Registration of the assessee."

21. The next question which was dealt with by the Hon'ble Apex

Court in Chowgule's case (supra) was as under:

"8. The question which then arises is as to whether

items of goods purchased by the assessee for use in

carrying the ore from mining site to the riverside and

from the riverside to the Marmagoa harbour could be

said to be goods purchased for use in mining or in

processing of ore for sale."

22. Dealing with the above question, the Hon'ble Apex Court

observed as under:

[2025:RJ-JD:17098] (9 of 11) [CR-169/2014]

"9. But the claim of the Assessee for including in the

Certificate of Registration items of goods purchased

for use in carrying ore from mining site to the river

side and from river side to the Marmagoa harbour was

not based solely on the ground that these items of

goods are purchased for use 'in mining'. The

alternative contention of the Assessee was that these

items of goods are purchased for use in processing of

ore for sale. The Assessee submitted that mining of

ore and processing it for the purpose of sale by

carrying out blending through the Mechanical Ore

Handling Plant constitute one integrated process and

carrying the ore from the mining site to the river side

and from the river side to the Marmagoa harbour

where the processing is being done, is part of this

integrated process and hence the items of goods

purchased for use in this latter operation are eligible

for inclusion in the Certificate of Registration. We

think there is great force in this submission of the

Assessee. Where a dealer is engaged both in mining

operation as also in processing the mined ore for sale,

the two processes being inter-dependent, it would be

essential for carrying on the operation of processing

that the ore should be carried from the mining site

where the mining operation comes to end to the place

where the processing is carried on and that would

clearly be an integral part of the operation of

[2025:RJ-JD:17098] (10 of 11) [CR-169/2014]

processing and if any machinery, vehicles, barges and

other items of goods are used for carrying the ore

from the mining site to the place of processing, they

would clearly be goods used in processing of ore for

sale."

23. After observing as above, the Court held as under:

"9.... These reasons apply with equal force in the

present case and strongly support the conclusion

that the machinery, vehicles, barges and other items

of goods purchased by the assessee for use in

carrying the mined ore from the mining site to the

river side and from the river side to the Marmagoa

harbour fall within the description of goods intended

for use in processing of ore for sale within the

meaning of Section 8 (3) (b) and Rule 13. If any of

these items of goods are purchased by the assessee

as being intended for use as "machinery, plant,

equipment, tools, spare-parts, stores, accessories,

fuel or lubricants" in carrying the mined ore from the

mining site to the river side and from the river side

to the Marmagoa harbour, they would qualify for

inclusion in the Certificate of Registration."