AR.Lakshmanan, J. - (1.) LEAVE granted.
(2.) THE above appeal filed by the Commercial Taxation Officer Circle-B, Udaipur raises a very interesting question of law of general public importance, as to the parameters for the test for the determination of raw materials and in addition to whether the use of articles or commodities not generally used in the manufacturing process can still be categorized as raw materials for the purpose of concession in the levy of taxes, for consideration by this Court. In other words; "Whether diesel can be called raw material in the manufacture of polyester yarn. In the present case, the respondent is engaged in the business of manufacture of polyester yarn and for the said purpose, it purchased diesel and used it for manufacturing electricity by D.G.-sets. The respondent has claimed a benefit under Section 10(1) of Rajasthan Sales Tax Act, 1994 (hereinafter referred to as 'the Act') claiming that diesel purchased is a raw material for the manufacture of the ultimate final product - Polyester Yarn. Under the notification issued under Section 10(1) of the Act, purchase of raw material for manufacture of final product is entitled to a concessional rate of tax @ 3% instead of the normal tax of 4%. The appellant submits that diesel is not a raw material for the manufacture of polyester yarn and, therefore, exigible to tax @ 4%. The said Section 10(1) of the Act and the notification issued thereunder are reproduced hereinbelow: "Sec. 10- Levy of Tax on raw material and processing articles (1) Notwithstanding anything contained in section 4, 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 in the State of goods for sale by him within the state or in the course of inter-state trade or commerce or in the course of export outside the territory of India shall be at such concessional rate as may be notified by the State Government." "NOTIFICATION In exercise of the power conferred by section.10(1), RST Act, 1994, The State Govt. hereby notifies that the rate of tax payable on sale to or purchase by a registered dealer of any raw material, for the manufacture in the state of goods (other than exempted goods), for sale by him within the state or in the course of inter state trade or concessional rate of 3% on the condition that the buying dealer issues a declaration from ST 17 to the selling dealer."
(3.) IT is also beneficial to reproduce the definition of raw material which reads as under:- "Section 2(34)- Raw Material- means Goods used as an ingredient in the manufacture of other goods and includes preservatives, fuel and lubricant required for the process of manufacture." In this case, the Officers of the Department inspected the firm/office of the respondent and also examined the account-books and documents of the respondent. It was found that the respondent has purchased diesel in the year 1997-98 by paying 3% sales-tax whereas 4% sales-tax is leviable on purchase of diesel (according to the Department). The assessment for the year 1996-97 was completed by the Assessing Authority and it was found that the respondent had paid a lesser rate of tax on the purchase of diesel contending that the same was a raw material used in the manufacture of final product. The Assessing Authority held that since diesel was not directly used for the manufacture of final product, the respondent was not entitled to the benefit under the notification dated 29.09.1995 and it ought to have paid the tax @ 4%. The Assessing Authority, therefore, levied a differential tax @ 1% along with interest in total amounting to Rs.15,02,224/-.;