Hindustan Copper Limited Represented By Shri O.P. Chugh Hindustan Copper LTD Malajkhand vs. The Additional Commissioner

Held

The Court held that Grinding Media Balls and Rubber Liners constitute integral parts of plant and machinery and are not 'incidental goods' within the meaning of Section 2(hh) of the M.P. General Sales Tax Act, 1958. The Court reasoned that these components are essential for the Ball Mill's operation; without them, the Ball Mill is inoperable. Drawing from precedent, the Court affirmed that 'machinery' includes component parts of a complex machine. The fact that these parts undergo wear and tear and require periodic replacement does not alter their character as integral components of the machinery. The Court distinguished between goods used 'for' manufacture (plant and machinery) and goods used 'in' manufacture (incidental goods), emphasizing that these items are used 'for' the Ball Mill to perform its function. The Court also noted that the impugned order was inconsistent with a previous binding revision order that had classified these items as plant and machinery. Consequently, the levy of entry tax and the consequential penalty under Section 17(3) of the Entry Tax Act were quashed and set aside. The Court did not adjudicate on the petitioner's alternative submission regarding raw material classification.

Facts

The petitioner, Hindustan Copper Limited, challenged a Consolidated Revision Order dated 22.10.2002 by the Additional Commissioner, Commercial Tax, Jabalpur. This order upheld the levy of entry tax on Grinding Media Balls and Rubber Liners brought into the local area of Malajkhand for the account years 1985-86, 1986-87, 1988-89, and 1992-93. The taxing authorities classified these items as 'incidental goods' under Section 2(hh) of the M.P. General Sales Tax Act, 1958, attracting entry tax. The petitioner contended that these items constitute plant and machinery and are therefore outside the scope of entry tax as incidental goods. The petitioner operates a copper ore processing plant where these items are used in a Ball Mill for grinding ore.

Key Issues

1. Whether Grinding Media Balls and Rubber Liners, fitted inside the Ball Mill as its constituent parts to enable the grinding of copper ore, are 'incidental goods' within the meaning of Section 2(hh) of the M.P. General Sales Tax Act, 1958, or whether they form part of 'plant and machinery' and are thus outside the scope of entry tax levy under the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Per Kar Adhiniyam, 1976? Petitioner's arguments: The Grinding Media Balls and Rubber Liners are integral components of the Ball Mill, which is plant and machinery. They are used 'for' carrying out manufacture, not 'in' the process of manufacture, drawing a distinction established in Commissioner of Sales Tax, M.P. v. Vippy Solvex Products Pvt. Ltd. The mere fact that they undergo wear and tear and require replacement does not change their character as parts of machinery. They are essential for the Ball Mill's operation and are considered 'machinery' as per established jurisprudence, including the Privy Council decision in Corporation of Calcutta v. Cossipore and Chitpur Municipality. Revenue's arguments: The revenue contended that these items are directly used 'in' the manufacturing process and undergo deterioration, thus qualifying as 'incidental goods'.