IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 19TH MAY 2010 / 29TH VAISAKHA 1932 OP.No. 30015 of 2002(W) ----------------------------------- PETITIONER(S): ----------------------- M/S. INVINCIBLE CHEMICALS PVT. LTD., 7/523 A , P.O. OLAVANA, KOZHIKODE, REPRESENTED BY ITS DIRECTOR MR V. BABU. BY ADV. SRI.E.K.NANDAKUMAR, SRI.A.K.JAYASANKAR NAMBIAR, SRI.ANIL D. NAIR, SMT.PRIYA MAHESH, SMT.PRIYA MANJOORAN. RESPONDENT(S): -------------------------- 1. GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KOZHIKODE 2. DIRECTOR OF INDUSTRIES AND COMMERCE, THIRUVANANTHAPURAM 3. STATE OF KERALA, REPRESENTED BY CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM. R1 TO R3 BY GOVT. PLEADER THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 19/05/2010,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP.No. 30015 of 2002(W) ORDER ON C.M.P. NOS.50755/2002 & 4828/2003 IN O.P. NO. 30015/2002 DISMISSED 19/05/2010. SD/- P.R.RAMACHANDRA MENON, JUDGE APPENDIX PETITIONER'S EXHIBITS: EXT.P1: COPY OF THE NOTIFICATION IN SRO.1729/1993. EXT.P2: COPY OF THE ORDER OF THE 1ST RESPONDENT TO THE PETITIONER DATED 21/07/1999. EXT.P3: COPY OF THE APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DATED 09/09/1999. EXT.P4: COPY OF THE CERTIFICATE ISSUED BY THE REGIONAL RESEARCH LABORATORY DATED NIL. EXT.P5: COPY OF THE ORDER OF THE 2ND RESPONDENT TO THE PETITIONER DATED 03/10/2002. RESPONDENT'S EXHIBITS: NIL //TRUE COPY// P.S. TO JUDGE rs. P.R. RAMACHANDRA MENON, J. .............................................................................. O.P.No. 30015 OF 2002 ......................................................................... Dated this the 19th May , 2010 J U D G M E N T Sustainability of Ext.P2 order passed by the first respondent and Ext.P5 order passed by the appellate authority/second respondent rejecting the claim for exemption raised by the petitioner forms the subject matter of challenge in this Writ Petition. 2. The petitioner is a Small Scale Industrial Unit engaged in the manufacture of Carbonated Silicate and production was started on 16.08.1996. The case of the petitioner is that petitioner is entitled to get exemption from payment of tax by virtue of stipulation in SRO. 1729 /93. On filing an application for exemption , the matter was considered by the first respondent and holding that there was no manufacturing process as defined in Ext.P1 notification , the claim was rejected, which was subjected to challenge by filing Ext. P3 before the O.P.No. 30015 OF 2002 2 second respondent. The reason for rejection as evident from Ext. P2 is that Carbonated Silicate and Sodium Silicate are one and the same products, viz, Soap Grade Sodium Silicate, since it is stipulated in Ext. P1 notification under Clause (d) of exemption from the definition of 'Manufacture' that 'Converting Sodium silicate into liquid silicate' is not a process involving manufacture, the application was rejected . 3. During the pendency of the proceedings before the second respondent/appellate authority, the petitioner had submitted samples of both the products to be examined by the expert bodies i.e, Regional Research Laboratory, Thiruvananthapuram of the CSIR , which is a Govt. of India Institution. As per Ext.P4 it was certified that samples of Sodium Silicate and Carbonated Silicate are chemically different products. The said report was produced by the petitioner, which however is stated as not considered by the second respondent/appellate authority. Instead, the said auhority sought to obtain opinion from elsewhere, based on which a decision was taken that both are the same products and O.P.No. 30015 OF 2002 3 accordingly Ext.P3 appeal was rejected confirming Ext.P2, as per Ext.P5, which is under challenge. 4. The learned Counsel for the petitioner submitted that the finding and reasoning given by the appellate authority are not corret, due to many a reason. It is stated that Ext.P5 order was passed without considering Ext.P4 report submitted by the Regional Research Laboratory owned by the Central Government, while placing undue reliance on the alleged report submitted by the Head of Department of Chemical Engineering, Govt. Engineering College, Thrissur. It is also pointed out that neither a copy of the said report was given to the petitioner nor was he given an opportunity of hearing to question the contents and credibility of the said report. 5. The learned Government Pleader appearing for the respondents conceded that there is no reference in Ext. P5 as to the veracity or credibility of Ext. P4 report submitted by the Regional Research Laboratory or as to why it was not acceptable . That apart, it is also not discernible from Ext. P5 whether a copy of the alleged expert report obtained from the O.P.No. 30015 OF 2002 4 Department of Chemical Engineering was served to the petitioner giving opportunity of hearing so as to sustain the case. What is stated in Ext. P5 is only that the State Level Committee held on 29.07.2002 discussed the issue in detail and accepted the expert opinion of the Professor and Head of the Department of Chemical Engineering, Govt. Engineering College, Thrissur and resolved to reject the appeal, as 'Soap Grade Sodium Silicate' is in the 'negative list' and carbonated silicate is nothing but liquid sodium silicate. 6. It is submitted by the learned Government Pleader that both the products ie., carbonated silicate as well as sodium silicate are used for the very same purpose and since utility is same both are considered as the same product . This Court finds it very difficult to accept the proposition. Similarly, the submission that both, 'carbonated silicate' and 'sodium silicate' contain very same components also does not appear to be palatable to this court. This is for the reason that the very same components may give rise to different products. For example, two atoms of Oxygen and one atom of Sulphur will give rise to O.P.No. 30015 OF 2002 5 one molecule of Sulphur Dioxide (SO2) while one atom of Sulphur and three atoms of Oxygen will give rise to one molecule of Sulphur Trioxide (SO3), though the components remain to be same in both the products. 7. As borne by Ext.P1 notification, the term 'Manufacture' is defined as follows: “Manufacture' shall mean the use of raw materials and production of goods commercially different from the raw materials used but shall not include mere packing of goods, polishing, cleaning, grading, drying, blending or mixing different varieties of the same goods, sawing, garbling, processing one form of goods into another form of the same goods by mixing with chemicals or gas, fumigation or any other processing applied for preserving the goods in good condition or for easy transportation. The process of producing desiccated coconut out of coconut, (chemical treatment of rubber wood and production of dressed or tanned hides out of raw hides) shall be deemed to be 'manufacture' for the purpose of this O.P.No. 30015 OF 2002 6 notification. 8. The circumstance under which a process will not be deemed as manufacturing process is also specified in the very same notification , which is extracted below: .”Thefollowing proceesing shall not be deemed to be 'manufacture' for the purpose of this notification. (a) Crushing copra and producing coconut oil and coconut oil cake. (b) Converting timber logs into timber sizes (c) Crushing rubble into small metal pieces. (d) Converting sodium silicate into liquid silicate (e) Tyre-retreading. (f) Cutting granite or marble slabs into smaller pieces and/or polishing them. (g) Such other processes as may be notified by Government in this behalf. [(h) Conversion of rubber latex into centrifugal latex, raw rubber sheet, ammoniated latex, crepe rubber, crumb rubber or any other item falling under entry 110 of the First Schedule to the Kerala General Sales Tax Act, 1963 or O.P.No. 30015 OF 2002 7 treating the raw rubber in any form with chemicals to form a compound of rubber by whatever name called. ] 9. Clause (d) of the term 'Manufacture' provides for exclusion of a specified instance from the purview of the manufacture such as 'converting Sodium Silicate into liquid silicate will not be deemed as manufcturing process. But here, the process involved is manufcature of 'Carbonated silicate. Prima facie, it cannot be said that it is a simple convervison of sodium silicate into liquid silicate. This is for the reason that the process of 'Manufacture ' of carbonated silicate is clearly explained by the petitioner in paragraph 3 of the Original petition which is as follows: “........Carbonated silicate is manufactured by dissolving soluble glass in water under steam pressure and temperature. Thereafter certain percentage of soda ash and sodium hypo chlorite is also added to make the product carbonated silicate. Mere addition of these raw O.P.No. 30015 OF 2002 8 materials does not result in the end product of carbonated silicate. These raw materials are to be heated at 165 degree centigrade by introducing steam produced by the boiler and stirred. Ext. P1 contemplates that conversion of sodium silicate into liquid silicate is not a manufacturing process.” 10. The process of 'manufacture' as above is not disputed by the respondents in the counter affidavit. On the other hand, the only assertion in the counter affidavit is that the 'carbonated silicate' produced by the petitioner is mainly used presumably in the soap industry, in place of 'liquid sodium silicate', which by itself cannot be a reason to hold that the products are one and the same, especially when it is certified otherwise as borne by Ext. P4. Anyhow, this Court does not propose to go into the technical aspects or correctness as to the findings or reasoning given by the experts, but for expressing the doubts as to the correctness of the stand revealed from the proceedings and the pleadings on record. When there is a clear O.P.No. 30015 OF 2002 9 report given by the Regional Research Laboratory owned by the Council of Scientific and Industrial Research, an Institution of the Central Govt. of India as borne by Ext. P4, certifying that 'Carbonated Silicate' as well as the 'Sodium Silicate' are two different products, how both the items could be considered as the same product is not discernible from the materials on record. Since there is no reference with regard to Ext.P4 report in Ext. P5, what prompted the said authority to obtain another opinion from the Department of Chemical Engineering, Govt. Engineering College, Thrissur is quite obscure. That apart, since there is a contention raised from the part the petitioner that copy of the expert opinion stated as received by the State Level Committee is not supplied to the petitioner and the petitioner was not given any opportunity of hearing before passing Ext. P5, this Court finds that the order cannot stand the test of law. Accordingly, Ext.P5 is set aside. This Court finds that the matter requires to be considered by the second respondent in the light of the observations made above and also with specific reference to Ext.P4. The second respondent is O.P.No. 30015 OF 2002 10 at liberty to obtain expert opinion from still higher authority, if so necessitated and the matter shall be finalised in accordance with law, giving clear and effective opportunity of hearing to the petitioner. Final orders shall be passed as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a copy of the judgment The Writ Petition is allowed to the above extent. No cost. P.R. RAMACHANDRA MENON, JUDGE. lk O.P.No. 30015 OF 2002 11 P.R. RAMACHANDRA MENON, J. ................................................... O.P. No. 30015 of 2002 ................................................... Dated this the 19th May, 2010 J U D G M E N T