Case: Tata Engineer and Locomotive Company Limited Vs. State of Bihar

2.The appellant, a registered dealer, under the Central Sales Tax Act, 1956 and the Bihar Finance Act, 1981 for purpose of manufacturing and processing its products, namely, motor vehicles, trucks and bus chassis, excavators and other engineering products, purchased commodities including such commodities as tyres, tubes, batteries and various other items which are used for producing the goods and making them saleable commodities. The appellant claimed that such goods being raw material having been required directly for use in the manufacturing of goods for sale in the State or in course of inter-State trade, the appellant was entitled to concessional rate of tax at 1% on such goods. It made an application on 27-4-1982 before the Deputy Commissioner for issuing certificate to enable the appellant to purchase the goods at concessional rate on which the order was passed to the followingOnly industrial raw material purchases will be subject to tax at I%. Consumables, machinery, equipments etc., will still be subject toaccording to appellant, the order was vague, it filed another application on 16-8-1982 in which the details of the industrial raw material that the appellant intended to purchase were mentioned. To this the reply given by the Deputy Commissioner was that complaints were received that the appellant w as paying tax of 1% only, on all kinds of purchases irrespective of whether materials were raw material or not. In pursuance of this letter, the appellant submitted its reply and on 26-11-1982, the Deputy Commissioner rejected the claim of the appellant and observed asmy opinion the term industrial raw materials (input) means those inputs to the extent they are raw materials. To be very clear items of inputs which are in a finished state and are just to be fitted in the chassis without any further modifications etc., which are not undergoing any further process of manufacture are not industrial raw materials and are merely fittings. The purchases of such fittings to bring a chassis in saleable condition are not covered by the aforesaid Notification No. SO604 dated 12- 4-82."appellant challenged this order by way of a writ petition in the High Court which was dismissed by the Division Bench and it was held that the claim of the appellant that the notification should be so read as to extend to all the goods required for use in manufacture or processing as contemplated by Section 13(1)(b) and not only to raw material as mentioned in the notification, was not correct as the section itself permitted the appellant, a manufacturer, to avail of the benefit subject to the conditions and restrictions to be prescribed. Since there was no unconditional right to pay concessional rate of tax and it depended on satisfying the conditions mentioned in the notification, the appellant could not claim that the notification suffered from any infirmity or that the appellant was not liable to be subjected to tax on what was raw material even though used as finished products for the manufacture of the vehicles.The High Court held that the words industrial raw material (inputs) could not be given such a wide meaning as to result in widening the scope of concessional rate even to finished products nor did it find any merit in the submission of the appellant that the Deputy Commissioner had passed the order, mechanically, without applying his mind.

Reasoning: 4.Raw material has been further explained by using the word inputs, which dictionarily means, what is put in, enter, enter system. The concessional rate of tax is thus applicable to that raw material that is put in the manufacture or use of the goods. In C.C.E. v. Jay Engineering Works Ltd.4 a question arose whether name-plates used by manufacturer of fans being, input were exempt from payment of excise duty which provided that duty of excise leviable on such goods falling under Item 1-A of Serial No. 68 as used inputs would be exempt. It was held that name-plate affixed on the fan was not a piece of decoration and the fan without name-plate could not be marketed, therefore, it was exempt as provided in the notification and the assessee was entitled to exemption. The tyres, tubes and batteries were purchased for being put in the vehicle, which could not be operative without it. They were thus input. The use of this word was indicative that the benefit was intended for every item which was raw material in the widest sense made wider by using the expression, input. The purpose was for broadening the meaning of raw material by including in it even those items which could be placed in the vehicle, to make it marketable as vehicles.