M/S B. Agrawal Stone Rpoducts LTD. vs. Commissioner Of Commercial Tax Lko.

Heard Shri Nishant Mishra, learned counsel for the applicant and Shri A.C. Tripathi, learned Standing Counsel for the respondent.

The present revision has been filed against the judgement & order dated 12.02.2015 passed by the Commercial Tax Tribunal, Varanasi in Second Appeal No. 49 of 2014 for the assessment year 2007-08, in which following questions of law have been framed:- i) Whether input tax credit on purchase of spare parts of loader and tipper under Section 13(1) (b) of the Act, 2008 can be denied on the ground that loader and tipper are 'vehicles', when both loader and tipper are ' construction equipment vehicle' and 'non-transport vehicle' under Motor Vehicle Act, 1988 read with Central Motor Vehicles Rules 1989 and the definition of 'vehicle' under Section 2(ar) of the Act covers only those vehicles which are used for transportation of goods? ii) Whether input tax credit can be denied on spare parts of loader and tipper, which are integral part of manufacturing process, without which, the manufacturing process, even if theoretically possible, is commercially inexpedient in view of the Apex Court judgement in the case of M/s J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs. STO, 2015 VIL 31 SC decided on 13th March, 2015? iii) Whether the Tribunal erred in law in ignoring the definition of 'vehicle' under the U.P. VAT Act and thereafter relying on the Apex 1988 and the definition of 'vehicle' under both the Acts are substantially different?

Learned counsel for the applicant submits that the Company is engaged in mining of boulders from the mine situated at 2 Sonbhadra. From the boulders, the applicant manufactures gitti and bhassi in the stone crushing plant situated within the mining area. For mining of boulders, rocks are blasted by controlled blasting, after which excavator is used for excavating boulders, thereafter, were shifted to the crushing plant within the mining area at a short distance of 100 – 200 meters with the help of tipper, after which boulders were loaded on the hopper of the stone crushing plant by loader. The applicant purchased loader and tipper treating the same as part of machinery covered under the head of 'capital goods'. Learned counsel for the applicant further submits that without the help of these two machineries, the manufacturing activity cannot be undertaken and the same should be treated and covered as “capital goods”. He further submits that the Tribunal in the impugned order has wrongly denied the benefit of Input Tax Credit (ITC) of the tax paid on purchase of loader and tipper, which were capital goods. He prays for allowing the revision.

Per contra, learned Standing Counsel supports the impugned order passed by the Tribunal and submits that the loader and tipper cannot be treated as plant & machinery. The Tribunal has rightly rejected the claim of the applicant. He further submits that the item cannot be treated as capital goods and the benefit of the same has rightly been denied. He prays for dismissal of the revision.

After hearing the learned counsel for the parties, the Court has perused the record.

Admittedly, the facts are not in dispute that the applicant is engaging in mining of boulders from the mine, which has been granted on lease by the State Government. From the boulders, gitti and bhassi are manufactured in the stone crushing plant situated within the mining area, for which registration has been granted. Copy of the said registration certificate has been 3 annexed along with the supplementary affidavit, where various items have been mentioned against clauses (a), (b) & (c) of the said certificate, which refers to resale for manufacture and equipment used for manufacture and sale of goods for use in the mining area. In the disputed year, the applicant had purchased loader and tipper. It is further averred that from the mining area, boulders are extracted, thereafter, shifted within the mining area to the stone crushing plant within a short distance of about 100- 200 meters. It is further averred that for shifting boulders upto the stone crushing plant, tipper is used and then loader is used for loading to the hopper of the stone crushing plant. It has further been averred that without the help of these two machines, manufacturing/processing activity cannot be done. It is further averred that these two machines, i.e., tipper and loader, are captively being used within the mining area, where the crushing plant is also situated. Therefore, these two machines should be treated as “capital goods”.

Before proceeding further, certain provisions of the U.P. VAT Act, U.P. VAT Rules and Central Motor Vehicle Rules are necessary to be looked into, which are as follows: U.P. VAT Act “Section 2(f) “capital goods” means any plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation used for manufacture or processing of any goods for sale by the dealer and includes:- (i) components, spare parts and accessories of such plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation; (ii) moulds and dies; (iii) storage tank; (iv) pollution control equipment; (v) refractory and refractory materials;

According to section 2(f)(viii) of the VAT Act, machinery, loader, equipment for lifting or moving goods within factory premises are capital goods. Further, exclusion clause (iv) of section 2(f) provides that vehicle used for transporting goods or passengers or 7 both, on which items ITC will not be available.

Section 2(f) (ar) defines "vehicle", which means any kind of mode of transportation used for carriage of goods including motor vehicle constructed or adapted for the carriage of goods, or any other motor vehicle not so constructed or adapted when used for the carriage of goods solely or in addition to passengers including every wheeled conveyance, pull or push cart including animal drawn cart, animal, trailer, trolley, bicycle, tricycle, carrier, etc. Rule 2 (ca) of the Central Motor Vehicle Rules defines "construction equipment vehicle". Perusal of the said sections would clearly show that the loader is specifically covered by the definition of “construction equipment vehicle” and tipper, being designed off-highway operations in mining, industrial undertaking, irrigation and general construction but modified and manufactured with "on or off" or "on and off" highway capabilities.

The facts are not in dispute that tipper and loader are said to be used captively within the mining area. After mining/extraction, the boulders are shifted to the stone crushing plant with the help of tipper and after which the boulders are loaded on the hopper of the stone crushing plant by the loader.

The goods purchased by the applicant are mentioned in the registration certificate as well for use in the mining. The learned counsel for the revisionist has submitted that without the help of these two machines, crushing of stone, for which registration has been granted, cannot be undertaken.

The Hon'ble Supreme Court in the case of Chowgule & Company Private Limited & Another Vs. Union of India & Others reported in (1981) 1 SCC 653, in paragraph nos. 8 & 9, held as under:-

The question which then arises is as to whether items of 8 goods purchased by the assessee for use in carrying the ore from mining site to the river side and from the river side to the Marmagoa harbour could be said to be goods purchased for use in mining or in processing of ore for sale. Now there can be no doubt, and indeed this could not be seriously disputed that the process of mining comes to an end when ore is extracted from the mines, washed, screened and dressed in the dressing plant and stacked at the mining site and the goods purchased by the assessee for use in the subsequent operations could not therefore be regarded as goods purchased for use 'in mining'. The requirement of sec. 8(3) (b) and Rule 13 is that the goods must be purchased for use 'in mining' and not use 'in the business of mining'. It is only the items of goods purchased by the assessee for use in the actual mining operation which are eligible for inclusion in the certificate of registration under this head and these would not include goods purchased by the assessee for use in the operations subsequent to the stacking of the ore at the mining site. This view finds support from the decision of this Court in Indian Copper Corporation Limited v. The Commissioner of Commercial Taxes.

But the claim of the assessee for including in the Certificate of Registration items of goods purchased for use in carrying ore from mining site to the river side and from river side to the Marmagoa harbour was not based solely on the ground that these items of goods are purchased for use `in mining'. The alternative contention of the assessee was that these items of goods are purchased for use in processing of ore for sale. The assessee submitted that mining of ore and processing it for the purpose of sale by carrying out blending through the Mechanical Ore Handling Plant constitute one integrated process and carrying the ore from the mining site to the river side and from the river side to the Marmagoa harbour where the processing is being done, is part of this integrated process and hence the items of goods purchased for use in this latter operation are eligible for inclusion in the Certificate of Registration. We think there is great force in this submission of the assessee. Where a dealer is engaged both in mining operation as also in processing the mined ore for sale, the two processes being interdependent, it would be essential for carrying on the operation of processing that the ore should be carried from the mining site mined ore for sale, the two processes being inter-dependent, it would be essential for carrying on the operation of processing that the ore should be carried from the mining site where the mining operation comes to end to the place where the processing is carried on and that would clearly be an integral part of the operation of processing and if any 9 machinery, vehicles, barges and other items of goods are used for carrying the ore from the mining site to the place of processing, they would clearly be goods used in processing of ore for sale. It is obvious that, in the present case, the mining of ore is done by the assessee with a view to processing the mined ore through the Mechanical Ore Handling Plant at the Marmagoa harbour and the entire operation of mining ore and processing the mined ore is one integrated process of which transportation of the mined ore from the mining site to the Marmagoa harbour is an essential part and, in the circumstances, it is difficult to see how the machinery, vehicles, barges and other items of goods used for transporting the mined ore from the mining site to the Marmagoa harbour can be excluded from consideration on the ground that they are not goods used in processing of ore for sale. The decision of this Court in Indian Copper Corporation case (supra) is directly in point and completely supports this conclusion which we are inclined to reach on principle. The assessee in that case was a company which mined copper and iron ore from its own mines, transported the ore to its factory and manufactured finished products from the ore for sale. There were several questions which arose for consideration, before the Court in regard to the assessees' claim for inclusion of certain items of goods in its certificate of registration and one of them was whether the locomotives and motor vehicles used for removing ore from the place where the mining operations were concluded to the factory where the manufacturing process was going on, could be said to be goods intended for use in the manufacture or processing of goods for sale within the meaning of sec. 8(3) (b) and Rule 13. This Court held that they were goods falling within this description so as to be entitled to inclusion in the Certificate of Registration of the assessee and Shah, J. speaking on behalf of the Court gave the following reasons for taking this view: "We are also of the opinion that in a case where a dealer is engaged both in mining operations and in the manufacturing process-the two processes being inter- dependent-it would be impossible to exclude vehicles which are used forremoving from the place where the mining operations are concluded to the factory where the manufacturing process starts. It appears that the process of mining ore and manufacture with the aid of ore copper goods is an integrated process and there would be no ground for exclusion from the vehicles those which are used for removing goods to the factory after the mining operations are concluded. Nor is there any ground for excluding locomotives and motor-vehicles used in carrying finished products from the factory. The 10 expression "goods intended for use in the manufacturing or processing of goods for sale" may ordinarily include such vehicles as are intended to be used for removal of processed goods from the factory to the place of storage. If this be the correct view, the restrictions imposed by the High Court in respect of the vehicles and also the spare parts, tyres and tubes would not be justifiable."

In the aforesaid judgement, the Hon'ble Supreme Court has held that if any machinery or vehicle is used for carrying from mining site to the place of processing, which covers for inclusion in the registration certificate, as without which the entire operation of mining and processing work cannot be done and is to be treated as one integral process.

Further, this Court in the case of CCT Vs. M/s Anand Tyres, Jhansi reported in 2015 SCC OnLine All 8698, while considering the issue as to whether hydraulic excavator is machinery or a motor vehicle, in paragraph no. 29 has held as under:- “29. It thus cannot be doubted that "Hydraulic Excavator" would satisfy the meaning of term "machinery" in wider sense and, therefore, it would be a machinery by all means. However, if the entry would have been only about a machinery, the situation would have been different but if the legislature in its wi om has used or classified some more items which though in wider sense, are within the ambit of term "machinery" but have been mentioned separately then it is to be seen, whether a particular item, even if machinery, if is governed by the separate narrower entry, then that specific separate entry shall prevail. ”

This Court, in the said judgement, after detailed discussion, has held that hydraulic excavator will come within the purview of “machinery”.

The case in hand has to be examined in the light of above two orders/judgements of Hon'ble Supreme Court and this Court, but before that, the judgement/order of Hon'ble Supreme Court in the case of Bose Abraham Vs. State of Kerala & Another reported in (2001) 3 SCC 157 also requires to be examined.

The Hon'ble Supreme Court in the case of Bose Abraham Vs. State of Kerala & Another (supra) has treated excavators and roadrollers as motor vehicles required registration for the purpose of Motor Vehicle Act, liable for levy of entry tax. Relevant paragraph no. 7 of the said judgement is quoted below:- “7. We hold that the excavators and road rollers are motor vehicles for the purpose of the Motor Vehicles Act and they are registered under that Act. The High Court has noticed the admission of the appellants that the excavators and road rollers are suitable for use on roads. However, the contention put forth now is that they are intended for use in the enclosed premises. Merely because a motor vehicle is put to a specific use such as being confined to an enclosed premises, will not render the same to be a different kind of vehicle. Hence, in our view, the High Court has correctly decided the matter and the impugned order does not call for any interference by us. However, the question whether any motor vehicle has entered into a local area to attract tax under the Entry Tax Act or any concession given under the local ales Tax Act

The Hon'ble Apex Court in the said judgement dealt with the issue with regard to levy of entry tax or not on excavators and road rollers. On the said background, the Hon'ble Court was pleased to hold that merely because of motor vehicle is put to a specific use, such as, being confined to enclose premises, will not render the same to be a different kind of vehicle as they are registered under the Motor Vehicle Act and liable for payment of entry tax.

The issue in hand is entirely different. The issue in hand is not the levy of tax, but the issue is as to whether purchase of loader and tipper can be considered as “capital goods” within the meaning of section 2(f) of the VAT Act or not. The levy of tax is not in dispute in the case in hand and therefore, the judgement in the case of Bose Abraham (supra) will not be of any help to the Revenue and the same is distinguishable on the facts & circumstances of the present case.

At this juncture, learned Standing Counsel has submitted that once the Hon'ble Supreme Court has held that the item cannot be treated differently than motor vehicle, even though specifically used, such as, being confined to enclose premises, will not render the same as a different kind of vehicle. The argument of the learned Standing Counsel appears to be attractive, but on close scrutiny of the facts in hand, it is otherwise.

The tipper and loader are captively used for shifting boulders from mine area to the crushing plant and thereafter, loaded on the hopper for the process of crushing. The said operations are inter- dependent. In other words, shifting of boulders with the help of tipper upto the crushing plant and then loading on hopper with the help of loader are integral part of operation of processing/manufacturing of gitti and bhassi.

Section 2(f)(viii) of the VAT Act specifically provides machinery, loader, equipment for lifting or moving goods within factory premises, but excludes vehicle used for transporting the goods or passengers or both. The words used in the section have to be looked into harmoniously as well as with the intention of the Legislature, The intention of the Legislature is very clear to give benefit to the industry/registered dealers of Input Tax Credit on capital goods with some conditions and restrictions. Once the words machinery, loader and equipment for lifting the goods are covered by the aforesaid definition of caital goods, the benefit of loader and tipper cannot be denied merely because in the exclusion clause the word “vehicle for use for transporting goods or passengers both” have been mentioned. Boulders were shifted with the help of tipper from mining area to the crushing plant and thereafter, loaded on the hopper of the crushing plant with the help of loader captively. The said operation cannot be said to be as use of machinery for transporting the goods. The said activity of the applicant is being undertaken within the mining area,

The Revenue has failed to bring on record any material that the tipper was used beyond the shifting of boulders from the mining area upto the point of crushing plant or loader was not used for loading boulders on hopper of crushing plant. Therefore, it was captively being used as inter-dependent or integral part of the processing operation. It is not the case of the Revenue that the applicant is selling boulders. It only sales gitti and bhassi after crushing the boulders, which could be said to be the final product of the applicant. Prior to coming into existence of gitti, boulders cannot, by any stretch of imagination, be said to be goods so far as the applicant is concerned as its raw material. Therefore, the exclusion clause will not be applicable in the case in hand.

In view of the aforesaid discussions, the tipper and loader are captively used for manufacturing activity within the mining area where the stone crushing plant is situated, are covered under the definition of “capital goods”, is entitled for Input Tax Credit under section 13(1)(b) of the U.P. VAT Act,

If the mining and crushing are not captively done, so that they constitute one integral part of the process, i.e., mining and boulders crushing, within the mine area, then not is covered under the head “capital goods”. Further, if the mining is not captive mining, but the boulders are supplied or sold to other person or persons, then the benefit of Input Tax Credit on tipper and loader cannot be accorded to the applicant.

In view of the aforesaid facts & circumstances of the case, in order to get the clear finding on the issue, matter is remanded to the Tribunal for its decision only on the above point.

The revision is, accordingly, disposed of. The question of law is answered accordingly.

It is expected that since the matter is very old, the Tribunal may take all possible effort to decide the same within a period of three months from the date of receipt of a copy of this order.

The applicant undertakes to serve the copy of this order within three weeks from today. In the event of failure on the part of the applicant, the benefit of this order shall not be accorded to the applicant. Order Date :-20/04/2022 Amit Mishra MISHRA Date: 2022.04.21 16:38:09 IST Reason: Location: High Court of Judicature at Allahabad