PETITIONER: ASHIRWAD ISPAT UDYOG & ORS. Vs. RESPONDENT: STATE LEVEL COMMITTEE & ORS. DATE OF JUDGMENT: 03/11/1998 BENCH: S.P. BHARUCHA, S. RAJENDRA BABU ACT: HEADNOTE: JUDGMENT:
J U D G M E N T
BHARUCHA, J.
The principal judgment and order under appeal and
the orders following it, also under appeal, were passed by a
Division Bench of the High Court of Madhya Pradesh on writ
petitions files by the appellants.
Very briefly stated, the facts are these : The
appellants purchase iron and steel scrap from the Bhilai
Steel Plant and other parties. The scrap, in the form of
defective angles, channels, tubes and coils is of very
considerable size. The appellants cut down the scrap so
that it may be utilised by rolling mills and forging parts
manufacturers, gear and pinion manufactures and dye block
manufactures. The question is whether such cutting down,
with the help of shearing machines and glass cutting, of the
scrap of widths of 2′ to 5′ and thickness upto 2.5″ into
strips of the size of 2″ to 4″ is a process of “manufacture”
within the special definition of that word in section 2(j)
of the Madhya Pradesh General Sales Tax Act. The definition
reads thus :
“2(J’) “manufacture” includes any process
or manner of producing, collecting,
extracting, preparing or making any goods
and in respect of trees which have been
severed 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 allies or any
other articles of wood, but does not
include such manufacture or manufacturing
process as may be notified.
The State Government issued a notification on 16th
October, 1986 under Section 12 of the said Act granting
exemption to dealers, who were registered under the said Act
and had established eligible industrial units in any
district in the State and held a provisional or permanent
eligibility certificate issued by an officer authorised for
the purpose, from payment of tax to the extent stated
therein. Dealers registered with the Industries Department
of the Government of Madhya Pradesh who had set up small
scale industrial units and who had made a capital investment
in fixed assets above Rs.lO lakhs were exempted from the
whole of the tax if they had set up industries within the
areas categorised therein for the periods set out
thereagainst. The exemption was available subject to the
condition, inter alia, that it “shall be available only in
respect of the sales of the goods which the dealer is
licensed to manufacture and which are manufactured by him as
also waste and by products obtained in the course of
manufacture.”
Under the terms of the said notification the
appellants obtained eligibility certificates from the
District Level Committees established for the purpose, after
due enquiry and verification. The State Level Committees,
after the lapse of some time, issued to the appellants
notices requiring them to show cause why their eligibility
certificates insofar as they related to iron and steel scrap
processing should not be cancelled on the ground that no
manufacture of new items resulted, The State Level
Committees, ultimately did cancel the eligibility
certificates on the said ground. In the case of C.A.
Nos.l4156-14158/96, M/s. Laxmi Ispat Industries & Ors. Vs.
State of M.P. and of some others the eligibility
certificates were refused. The appellants challenged the
orders of cancellation/refusal by way of writ petitions.
The High Court, in the judgment under appeal,
dismissing the writ petitions, placed great stress on
decisions under the Excise Act and other statutes relating
to the meaning of the word “manufacture” as used therein and
concluded that the activity that was carried on by the
appellants was not “manufacture” for “simply because iron
scraps are purchased and cut in a manner required by various
customer, that will not change the basic character of iron
scrap and it is only the processing by twisting, fabricating
or giving it a particular shape required by customers. Such
type of processing will not change the identity of the
material and that will not amount to a manufacturing or
processing of the same. As the definition of ‘manufacture”
given in in the Sales Tax Act includes processing,
various shapes will not be treated to be manufacture so as
to entitle for exemption under the exemption notification”.
Learned counsel for the applicants submitted that it
was clear from the said Act that the definition of
‘manufacture’ therein was not restricted to the production
of new articles. The said notification also indicated this
when it stated that the exemption thereunder would not be
available to “pressing of iron/steel scrap into blocks”.
Reliance was placed upon a notification issued on 1st
October, 1978 under the said Act wherein it was stated that
the “slaughtering of animals and obtaining meat, hides and
skins” would not be treated as a process of manufacture for
the purpose of the definition of “manufacture” in Section
2(j). Reference was made to an order passed on 9th
February, 1993 by the Board of Revenue, Madhya Pradesh,
where the very same issue was considered in relation to some
of the appellants in the context of suo motu orders passed
by the Deputy Commissioner of Sale Tax holding that the
activity of the appellants was not covered by the said
definition of “manufacture” and, accordingly, the raw
materials specified in their registration certificates were
ordered to be deleted. The Board of Revenue, analysing the
said definition of “manufacture”, observed, “The process of
manner of collecting or preparing do not mean to include
collection or preparation of new goods, but means to prepare
the available goods to make it saleable. With this object
the legislature have amended the definition of manufacture
so as to widen the tax network. When the legislature
creates such definition with this object this Court do not
derive power to restrict the definition of manufacture for
grant of benefits to new industrial units.” In view of its
discussion, the Board of Revenue held that, inspite of the
fact that the raw materials more or less retained their
identity and no new product came into existence, the process
and manner of the appellants’ activity would amount to a
process of “manufacture” within the meaning of that word in
the said Act.
Learned counsel for the respondents relied upon
decisions to the meaning if the word “manufacture”,
particularly under the Excise Act, and contended that since,
admittedly, no new product emerged from the process employed
by the appellants, there was no manufacture and, therefore,
the High Court was right in the view that it took.
Decisions construing the meaning of the word
‘manufacture’ as used in other statutes do not apply unless
the definition of that word in the particular statute under
consideration is similar to that construed in the decisions.
The plain construction of the special of the word in a
particular Act must prevail. In the the special definition
given in section 2(j) of the said Act ‘manufacture’ has been
defined as including a process or manner of producing,
collecting, extracting preparing or making any goods. There
can be no doubt whatsoever that “collecting” goods does not
result in the production of a new article. There is,
therefore, inherent evidence in the definition itself that
the narrow meaning of the word “manufacture” was not
intended to be applied in the said Act. Again, the
definition speaks of “the process of lopping the branches
(of trees), cutting the trunks”. The lopping of branches
and the cutting of trunks of trees also, self evidently,
does not produce a new article. The clear words of the
definition, therefore, must be given due weight and cannot
be overlooked merely because in other contexts the word
“manufacture” has been judicially held to refer to the
process of manufacture of new articles.
The appellants treat iron and steel scrap of
considerable bulk by cutting it down by mechanical processes
into pieces that may be conveniently utlised in rolling
mills and foundries. Such treatment, making saleable goods,
would, in our opinion, fall within the wide definition of
“manufacture” under Section 2(J) of the said Act.
In the result, the appeals are allowed. The
judgment ‘and orders under appeal are set aside. Relief
shall now be granted to the appellants by the respondent
authorities in consonance with this judgment and order.
No order as to costs.