COMMISSIONER OF SALES TAX Vs. SAMAJ PAPER MART
HIGH COURT OF MADHYA PRADESH
COMMISSIONER OF SALES TAX
SAMAJ PAPER MART
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(1.) AT the instance of the Commissioner of Sales Tax, the Sales Tax Tribunal (Board of Revenue, M. P.) has referred the following question for our decision : Is the paper used in wrapping bidis, agarbattis and fire-works a raw material under Clause (1) of Section 2 of the Madhya Pradesh General Sales Tax Act, 1958 ?
(2.) THE non-applicant is a dealer in paper. It sold paper to the manufacturers of bidis, agarbattis and fire-works, having registration certificates, after obtaining declarations from them in Form XII-A of the Madhya Pradesh General Sales Tax Rules, 1959, and it claimed to be taxed at the reduced rate of one pet cent, under Sub-section (1) of Section 8 of the Act. It was not disputed at any stage of the proceedings that paper was shown as one of the items required for the manufacture of either bidis or agarbattis or fire-works in the registration certificates of the purchasing (manufacturing) dealers. The claim for reduced rate of one per cent. was. however, rejected by the Sales Tax Authorities on the ground that the paper sold to these manufacturers was not "raw material" as defined in Clause (1) of Section 2 of the Act and that the paper was only used as packing material, and not as raw material, in the manufacture of those articles. The Sales Tax Tribunal, however, held that bidis are always sold in bundles wrapped in paper. If the bundle was considered as a unit, it would follow that paper was consumed in the process of manufacturing bidis. It was pointed out that if the argument of the Sales Tax Authorities was accepted, without any limitation, it would lead one to absurd results, such as, in the case of liquid medicines it would be argued that glass was not one of the ingredients used in making the medicines. On similar considerations, with respect to agarbattis and fire-works, it was held that paper was used as an ingredient in the manufacture of those articles and that it was "raw material" as defined in Clause (1) of Section 2 of the Act. The Sales Tax Tribunal also found in paragraph 4 of its order that as the appellant had produced the necessary declarations in Form XII-A of the Rules, it was entitled to get the benefit of the reduced taxation under Sub-section (1) of Section 8 of the Act. As interpretation of the provisions of the Act was involved, the Sales Tax Tribunal referred the above question for our decision.
(3.) THE answer to the question depends on the consideration of the following provisions : Section 2. (1) 'raw material' means an article used as an ingredient in any manufactured goods or an article consumed in the process of manufacture and includes fuel and lubricants required for the process of manufacture, but does not include bullion and specie ; Sections. (1) Notwithstanding anything contained in Section 6 or 7 but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce shall be one per cent, of the sale or purchase price of such raw material. (2) Where any raw material purchased by a registered dealer under Sub-section (1) is utilised by him for any purpose other than a purpose specified in the said sub-section, such dealer shall be liable to pay as penalty an amount not less than the difference between the amount of tax on the sale of such raw material at the full, rate mentioned in column (3) of Schedule II and the amount of tax payable under Sub-section (1), and not exceeding one and one-quarter times the amount of tax at such full rate as the Commissioner may determine having regard to the circumstances in which such use was made. Rule 20. (4) No registered dealer shall be entitled to pay tax at the reduced rate of 1 per cent, in respect of sale or purchase of raw material for the purposes specified under Sub-section (1) of Section 8 unless (i) such raw materials are specified in the registration certificate of the purchasing dealer as being required by him for the manufacture of other goods for sale in the State of Madhya Pradesh or for sale in the course of inter-State trade or commerce ; and (ii) where the claim is by a selling dealer, the sale has been made to a registered dealer on a declaration in Form XII-A duly signed by the purchasing dealer. At this stage, it may also be mentioned that under Rule 7 framed under the M. P. General Sales Tax Act a dealer is required to apply for registration in Form III wherein the applicant is required to furnish information to the following effect: The following goods or classes of goods are ordinarily purchased by us for (i) use as raw materials in the manufacture of other goods for sale in the State of Madhya Pradesh or for sale in the course of inter-State trade or commerce ; We manufacture and/or produce for sale the following classes of goods : Rule 8 then provides that the Sales Tax Officer, after making such enquiry as he may think necessary, if satisfied that the applicant has given all the requisite information, shall grant the registration certificate in Form IV. In Form IV there is a provision for indicating the articles that are required by the dealer as raw material for use by him in manufacture. ;
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