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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

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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

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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.