JUDGMENT
S. Sankarasubban, J.
1. Assessee is the petitioner. The year of assessment is 1991. The question for consideration in this case is whether the nickel catalyst is used as raw material in the manufacture of soaps. The petitioner is the manufacturer of nickel catalyst. According to the petitioner, the sale of nickel catalyst was fully to M/s. Kerala Soaps and Oils Limited, Kozhikode which was a company fully owned by the Government of Kerala. The purchasing company represented to the petitioner that the nickel catalyst purchased by it is for use as raw material in the manufacture of soaps and that it will issue form 18 declaration to the petitioner so that the rate of tax is only 2 per cent under Section 5(3) of the Kerala General Sales Tax Act, 1963 read with rule 28 of the Kerala General Sales Tax Rules, 1963. Accordingly, the petitioner raised invoices on M/s. Kerala Soaps and Oils Limited, Kozhikode charging sales tax at the rate of 2 per cent and the company issued form 18 declaration to the petitioner which were produced before the assessing authority. However, the assessing authority issued notice to the petitioner stating that a catalyst cannot be called a raw material and therefore concessional rate of 2 per cent cannot be allowed on the local sales of nickel catalyst.
2. The petitioner filed an appeal, which was dismissed. Then it filed a second appeal before the Tribunal. The Tribunal also dismissed the appeal. It is against that the present revision is filed.
3. The view of the assessing authority is that even though the nickel is a catalyst, it cannot be said to be a raw material. Nickel causes some organic compounds to combine with hydrogen to form new compounds. Hydrogenation produces solid vegetable oil for cooking. The chief ingredients of soap are fats and chemicals called alkalis. Manufacturers may use animal fats or such vegetable oil as coconut oil, etc. Soap makers use sodium hydroxide often called Lye or caustic soda. It is further stated by the Tribunal as follows : “Thus by a study of soap manufacture, it can be seen that soap is made without the use of nickel catalyst. In other words nickel catalyst is not a raw material or essential constituent of soap”. Learned counsel for the petitioner submitted that this approach of the Tribunal is wrong. The question is not whether without nickel, soap can be manufactured. But the question is whether the purchase of nickel for the manufacture of soap will entail the benefit of Section 5(3) of the Kerala General Sales Tax Act, 1963.
4. The decision of the Supreme Court in Collector of Central Excise, New Delhi v. Ballarpur Industries Ltd. [1990] 77 STC 282, gives some guidelines as to what is the meaning of the word “material”. At page 289, of the above decision, the Supreme Court observed thus : “The ingredients used in the chemical technology of manufacture of any end-product might comprise, amongst others, of those which may retain their dominant individual identity and character throughout the process and also in the end-product; those which, as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end-product; those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end-products and those, as here, which might be burnt up or consumed in the chemical reactions”, According to us, the above observations show that even if chemical retains its identity, it can be said to be used as raw material.
5. In the above view of the matter, we are of the view that nickel catalyst can be treated as a raw material. We set aside the orders of the authorities and direct the assessing authority to complete the assessment as per the directions in the judgment.
Tax revision case is allowed.