Orissa Power Generation Corporation Limited Vs. Commissioner, Commercial Taxes and ors. - Court Judgment

I. Mahanty, J.

1. The Petitioner is Government of Orissa Undertaking incorporated under the Companies Act and is engaged, inter alia, in the business of generation of power and for such purpose, it has established Thermal Power Plants for operation and maintenance of the same within the State of Orissa.

2. The Petitioner-Company applied for registration as a dealer both under the O.S.T, Act and the C.S.T. Act to the Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar and was granted with C.S.T. registration Certificate on 17.3.1987 under Section 7(2) of the C.S.T. Act and the following endorsement was made on the registration certificate granted to the Petitioner under the C.S.T. Act and 'all machineries and equipments associated with construction operation and maintenance of large Thermal Power Station, Pumps, Compressors, earth moving Machineries, Turbine generators, Transformers, Switch gears and Laboratory equipments'.

3. After the aforesaid certificate was granted to the Petitioner, six months thereafter on 25.9.1987 the word 'Construction' was deleted by the Sales Tax Officer even though the Petitioner-company has never made any prayer for such deletion nor any opportunity of hearing was afforded to the Petitioner-company before such deletion was made effective. In this regard it is further averred that being aggrieved by deletion of the word 'Construction' from the registration certificate, the Petitioner-company filed a petition before the Commissioner of Sales Tax for permission to avail Sales Tax concession on construction materials, but the said petition has not been disposed of and is still kept pending. It is further averred by the Petitioner-Company that by a subsequent amendment dated 31.10.1988 the following items namely, 'all machineries and equipments associated with operation and maintenance of a large thermal power including Pumps, Compressors, earth moving Machines, Turbines, Generators, Transformers, Switch & Switch Gear' were also deleted. It is submitted that by the time of such deletion, construction work of the Petitioner's Thermal Power was going on at full speed, even though the deletion had not been sought for by the Petitioner. It is further averred that since the Petitioner Company was running behind the schedule in the construction of the power plant, it again filed another amendment application for seeking incorporation of long list of items in its Registration Certificate before the Commercial Tax Officer, Bhubaneswar, but by Order Dated 25.11.1988 the Commercial Tax Officer concerned refused to allow incorporation of all the items except 'Boiler and Cables'. The Petitioner-Company thereafter challenged the aforesaid order in Revision Case Nos. 396 and 397 of 1990-91 before the Commissioner of Commercial Taxes, Orissa, who by Order Dated 2.3.1991 allowed certain items to be incorporated in the registration Certificate and rejected certain others. Being aggrieved by the Order Dated 2.3.1991 passed in the aforesaid revision case refusing to incorporate certain items in the Petitioner's registration Certificate under the CST Act the Petitioner-Company filed OJC Nos. 2875 and 2876 of 1992 before this Hon'ble Court and the same came to be disposed of by Order Dated 26.10.1992 passed by this Court holding that the impugned Order Dated 2.3.1991 passed by the Commissioner, Commercial Taxes was quashed on the finding that the Commissioner has failed to apply his mind to the relevant matters and therefore the order was quashed and the matter was remanded to the Commissioner of Sales Tax, Orissa to re-examine the matter by giving opportunity of hearing to the Petitioner.

4. That as a consequence of the direction issued by this Court in the above mentioned writ applications, the Commissioner, Commercial Taxes issued notice to the Petitioner and after affording the opportunity of hearing, the Additional Commissioner of Commercial Tax as (O.P.2) passed an order on 10.6.1993 and partially allowed inclusion of certain items into the registration Certification of the Petitioner-Company and rejected most of other items which had been sought for inclusion in the registration Certificate. This Order Dated 10.6.1993 is now sought to be challenged in the present writ application.

5. On perusal of the order impugned it is evident that the Petitioner-Company has sought for inclusion of the following items in its registration Certificate and the reasons for their inclusion and is noted hereunder:

(1) Survey and drawing instruments like the For taking level for layingadulates, levels, leveling stands, chains, the foundation of themeasuring chains, measuring tapes, optional Power House Buildingsquare etc. of associated structures.(2) Building Materials like-Cement, Steel, These Materials arestructural steel, chips, sand, doors and required for constructionwindows, paints, roofing materials, Distemper, of Power House BuildingFencing materials like barbed wires, sati and other associatedpillars etc. Civil Works.(3) H.S. meters, G.I. pipes, G.I. pipes These materials arestreet light fittings, refrigerators, water required for constructioncallers, heaters, burners, cooking ranges, of Power House, Guestcookeries etc. beds, cots, chairs, House & Central roomtables, dressing tables, washing and cleaning required for operationmachines, coir mats, dressing, dinning and maintenance.and conference room materials.(4) Road materials like chips, tars, rollers, For construction ofconcrete, mixer and vibrator, manure, approach road road forgardening tools and associated materials, P.H. Colony Road etc.water treatment plants filtrations plants Water supply system.and associated materials etc. Canal materialslike gates, stones, earth moving and cuttingmachineries etc.(5) (a) I.D. Fans, Coal mills, Turbo generator These materials arewith auxiliaries, HP & LP piping, Electrostatic required for feeding coalprecipitators, store fans, etc. coal handling to the Boiler to Run theplant and equipment like primary and Turbinesecondary crossers, magnetic separators,vibrators, staker-cum-reclaimers, beltconveyor system with tripper chutes feeders,magnetic pulley, Bunkers, Dust extractionand dust suppression system, HP heatersand steel piping, magnetic pulley Bunkerlevel indicator, Bunker sealing ballet, Rack& pinion gates, flaps gates, coal samplingunit Belt weigsmetal detector, belt mechanizingmachine.(b) Hydrogen generation plant, startup boiler, These materials areTurbine oil purification system (1/unit, required to cool the1 Central) 6000 liters/hr. HP. & LP. chemical Generator of Turbinedozing (phosphate & hydrazine) pumps,Tanks, valves piping and instrumentsBoiler elevators.(c) Passenger elevators, passenger cum goods These materials areelevators (in transform tower for CHP), required in operation ofChimney elevator, Diesel generator set Power Housefor emergency power supply, Dozers, Scraper,Dumpers, Chemical laboratory, ServiceWater piping, valves, Generator.(d) Generator phase bus duct, main bus duct,Tap-off bus duct, Bends, generator neutral To evacuate Generatedbus duct, Unit auxiliary phase bus duct, Power to the switchyardbus duct, bends, seal off brushing.(e) L.T. transformer power control center, To evacuate Generated415V local distribution board, Manual Power.starter station. Unit Battery 220 V.,1400 AH, Switchyard battery 200 V, 400AH, +_24 V Battery for C & I, Unitbattery charger, Unit distribution board,Switchyard distribution board, CW pumphouse batter charger, Unit distributionboard, Switchyard distribution board,CW pump house battery charger, Unitdistribution board, Switchyard distributionboard, CW pump house distributionboard, +- 24 V system distribution board,6.6. KV cables, 1.1 KV cables = single coreand multi core, screened cables forturbovisory instrument.(f) Cables trays, condits and other accessories, Materials require forUnit control board with synchronising bracket, protection and controlstation control board, 400 KV switchyard of Boiler, Turbines andcontrol board excluding line protection Generator during220 MW and 132 KV control and relay operation for Generatingpanels, Marshalling kiosks for 132 KV, power operation of the220 MW & 400 KV bus protection, Diesel switchyard to Transmitgenerator set, switchyard equipment= power from thegenerator bay bus coupler bay, bus transfer Generating station tobay, line bay, 1 32 KV switchyard equipment, load centres of gridtransformer bay and line bay, Bus coupler sub-station.bay, 33 KV transformer bay Lighting branchboard, lighting distribution boards,distribution feeders pillars, 4 way weldingbranch board. A.C. emergency lightingdistribution board, AC/DC emergency lightingboard, 6/DC emergency lighting distributionboard, lighting fixtures with fittings, cables,Receptacles, high bay lighting towers, polesplant communication system including 100 linetelephone exchange, telex facilities,Electronic package unit, wireless sets,secondary digital clock, electronic clocks,mini equipment rack, cables, conduits/conduitfittings, coal handling plant, ash handlingsystem, F.G. facilities, auxiliary coling watersystem, fire fight-ling, grounding and lightingprotection, Electrical workshop and transmitters,recorders, controllers.(g) Electrical & phomatic, analytical instruments, Required for operationcontractors-electrical rhematic, annuciators, and maintenance oflocal gauges/switch control switch/push button, the Power House.microprocessor based P & C system, dataacquisition system. MGR System equipt.Like rails, engines, bogies, tractions andrail lines etc. cooling tower equipt. Conveyanceequipt. Like buses, cars, Jeeps etc. Pollutioncontrol equipments.

6. The Commissioner, Commercial Taxes, Orissa in effect has rejected all the claims for inclusion of items referred to in serial Nos. 1, 2, 3 & 4 as well as serial Nos. 5(f) and 5(g) and only allowed inclusion of items under serial Nos. 5(a), 5(b), 5(c), 5(d) and 5(e).

7. Mr. Das, Learned senior Counsel for the Petitioner-Company, inter alia, contended that the Petitioner-Company having been formed/constituted for the purpose of establishing, operating and maintaining the Thermal Power plant for generation and distribution of electricity is entitled under Section 8(3)(b) of the CST Act, for registration of goods of the class or classes required for use in the generation or distribution of electricity. He further submitted that on a review of all the items sought for inclusion where as most of the items claimed were justified yet in his considered view certain specific items were not directly relatable to the generation or distribution of electricity are no longer being pressed for by the Petitioner-Company for inclusion. An additional affidavit on behalf of the Petitioner-Company was sworn by the Senior Manager (Finance) on 20.12.2007, enclosing therein the statement in a tabular form indicating various items, which in their view justified inclusion in the registration Certificate granted to the Petitioner-Company under the CST Act and in the said documents the Petitioner-Company scored through those items which they no longer consider justified for the purpose of inclusion. Copy of the said statement in tabular form with the deletions thereon is indicated herein below:

Sl. Particulars of Items Purpose of Use RemarksNo.1. Survey and drawing For taking level for Not Allowedinstruments like the laying the foundationadulates, levels, of the Power Houseleveling stands, chains, Building of associatedmeasuring chains, structures.measuring tapes, optionalsquare etc.2. Building Materials like- These Materials are Not AllowedCement, Steel, structural required forsteel, chips, sand , doors construction of Powerand windows, paints, roofing House Building andmaterials, Distemper, Fencing other associatedmaterials like barbed wires, Civil Works.sati pillars etc.3. H.S. meters, G.I. pipes, These materials are Not AllowedG.I. pipes street light required forfittings. construction of PowerHouse, & Centralroom required foroperation and maintenance.4. Road materials like chips, Water supply system. Not Allowedtars, road rollers,concrete mixer and vibrator,manure, water treatmentplants, filtrations plantsand associated materialsetc. Canal materials likegates, stones, earth movingand cutting machineries etc.5. (a) I.D. Fans, Coal mills; These materials are Allowed but notTurbo generator with required for feeding incorporatedauxiliaries, HP & LP piping, coal to the BoilerElectrostatic precipitators, to Run the Turbine.store fans, etc. coalhandling plant and equipmentlike primary and secondarycrossers,magnetic separators,vibrators, staker-cum-re-claimers, belt conveyorsystem with tripper chutesfeeders, magnetic pulley,Bunkers, Dust extraction anddust suppression system, HPheaters and steel piping,magnetic pulley, Bunker levelindicator, Bunker sealingballet, Rack & pinion gates,flaps gates, coal samplingunit Belt weigsmetal detector,belt mechanizing machine.5. (b) Hydrogen generation plant, These materials are Allowed but notstartup boiler, Turbine oil required for feeding incorporatedpurification system (1/unit, coal to the Boiler1 Central) 6000 liters/hr. H.P. to run the Turbine.& L.P. chemical dozing(phosphate & hydrazine) pumps,Tanks, valves piping andinstruments Boiler elevators.5. (c) Passenger elevators, These materials are Allowed but notpassenger cum goods elevators required in operation incorporated(in transform tower for CHP), of Power House.Chimney elevator, Dieselgenerator set for emergencypower supply, Dozers, Scraper,Dumpers, Chemical laboratory,Service Water piping, valves,Generator.5. (d) Generator phase bus duct, To evacuate Allowed but notmain bus duct, Tap-off bus Generated Power toduct, Bends, generator incorporated theneutral pus duct, Unit switchyardauxiliary phase bus duct,bus duct, bends, seal offbrushing.5. (e) L.T. transformer power To evacuate Allowed but notcontrol center, 415V local Generated Power. incorporateddistribution board, Manualstarter station, UnitBattery 220V., 1400 AH,Switchyard battery 200V,400 AH, +_24 V Battery forC & I, Unit battery charger,Unit distribution board,Switchyard distribution board,CW pump house battery charger,Unit distribution board,Switchyard distributionboard, CW pump house batterycharger, Unit distributionboard, Switchyard distributionboard, CW pump housedistribution board, + _24Vsystem distribution board,6. 6. KV cables, 1.1 KVcables = single core andmulti core, screened cablesfor turbovisory instrument.5. (f) Cables trays, condits Not Allowedand other accessories,Unit control board withsynobronising bracket,station control board,400 KV switchyard controlboard excluding lineprotection 220 MW and 132KV control and relay panes,Marshalling kiosks for 132KV, 220 MW & 400 KV busprotection, Diesel generatorset, switchyard equipment=generator bay bus couplerbay, bus transfer bay, linebay, 132 KV switchyardequipment, transformer bayand line bay, Bus coupler bay,33 KV transformer bay Lightingbranch board, lightingdistribution boards,distribution feeders pillars,4 way welding branch board A.C,emergency lighting distributionboard, AC/DC emergency lightingboard, 6/DC emergency lightingdistribution board, lightingfixtures with fittings. cables,Receptacles, high bay lightingtowers, poles plantcommunication system including100 line telephone exchange,telex facilities, Electronicpackage unit, wireless sets,secondary digital clock.electronic clocks, miniequipment rack, cables,conduits/conduit fittings,coal handling plant, ashhandling system, P.O.,facilities, auxiliary colingwater system, fire fighting,grounding and lighting protectionElectrical workshop andtransmitters, recorders,controllers.5. (g) Electrical & phomatic, Required for operation Not Allowedanalytical instruments, and maintenance of thecontractors-electrical Power House means Plant.rhematic, annuciators,local gauges/switch controlswitch/push button,microprocessor based P & Csystem, data acquisitionsystem. MGR System eqpupt.Like rails, engines, bogies,tractions and rail lines etc.cooling tower equipt. Conveyanceequipt. Like buses, cars, Jeepsetc. Pollution control equipments.

8. Mr. Das, Learned Counsel for the Petitioner-Company submitted that the order impugned suffers from perversity in law, inasmuch as the Commissioner has taken an extremely narrow and pedantic view of the term plant and machinery and further has sought to rely upon certain Judgments passed under the Income Tax Act, i.e., in the case of Commissioner of Income-Tax, Lucknow-II v. Kanodia Warehousing Corporation : [1980]121ITR996(All) and in the case of Commissioner of Income Tax, Andhra Pradesh v. Taj Mahal Hotel : [1971]82ITR44(SC) , and that too by misconstruing and misapplying the said Judgment to the facts of the present case.

9. Mr. Das on the other hand relies on the Judgment of the Hon'ble Supreme Court in the case of Commercial Taxes Officer, Circle-D, Jaipur v. Rajasthan Electricity Board (1997) 104 STC 89, and contend that the Hon'ble Supreme Court has held that the Rajasthan Electricity Board, which was engaged in the business of generation and distribution of the electricity, could purchase, in the course of inter-State trade, at concessional rate of tax under Section 8(1) of the Central Sales Tax Act, 1956, trucks, trolleys, trailers and the like (but not passenger vehicles), as also there its certificate of registration was altered to include 'tools and plants,' including vehicles and other transportable goods, including their spare parts, tubes and tyres'. It is further held that purchase of soaps and paints and varnishes was permissible at confessional rate of tax only in so far as they were intended to be used for the purpose of cleaning boilers and machinery and other equipment and for the purpose of painting machinery and electrical goods. It is further held that raincoats could be purchased at concessional rate of tax so far as they were necessary for use of the linesmen working on transmission lines during the rainy season and winter and similarly battery cells to the extent they were necessary for use by linesmen for working on transmission lines during the night.

10. Mr. Das further submitted that in the facts of the present case whereas initially the Sales Tax department had granted registration Certificate under Section 7(2) of the CST Act to the Petitioner on 17.3.1987 including all machineries and equipments associated with construction, operation and maintenance of a large Thermal power Station, Pumps, Compressors, earth moving Machineries, turbine generators, Transformers, switch gears and laboratory equipments, yet without there being any application on the part of the Petitioner and without complying with the rule of natural justice, the original Certificate was amended initially by deleting the word 'Construction' on 25.9.1987 and thereafter by deleting alt other items as mentioned hereinabove by subsequent amendment by the Sales Tax Officer once again suo motu on 1.8.1988. Learned Counsel for the Petitioner-Company further submitted that while the Petitioner's revision application against the first amendment dated 25.9.1987 was challenged by way of Revision before the Commissioner of Sales Tax, the same remains pending and has not been disposed of where after the second amendment took place on 1.8.1988. Mr. Das further submitted that since the Petitioner-Company was at the relevant time in the midst of construction and establishment of its Thermal power plant it was left with no choice but circumstantially coerced to make prayer for inclusion of certain specific items, in place of general description as originally contained. This attempt made by the Petitioner-Company met with partial success and ultimately came to be considered by this Court in OJC No. 2875 & 2876 of 1992 and this Court by Order Dated 26.10.1992 was pleased to quash the said order. Mr. Das further submitted that the impugned order would indicate that once again not only the Judgments referred to in the order have been erroneously construed but the Commissioner has once again taken a pedantic and narrow view and substantially rejected the Petitioner's prayer for inclusion of these items by impugned Order Dated 10.6.1993.

11. Learned Standing Counsel for the Revenue on the other hand supports the impugned Order Dated 10.6.1993 passed by the Commissioner Commercial Taxes, Orissa and, inter alia, submits that the Petitioner should not have any grievance whatsoever since the Commissioner, Commercial Taxes has complied with the earlier direction of this Court dated 26.10.1992 in its letter and sprit by dealing with each items sought for inclusion and has given the reasons either permitting its inclusion or not. Learned Standing Counsel further submits that these findings being findings of fact ought not to be interfered with in a writ application especially since the present writ application has been filed seeking to challenge the order of the Commissioner, Commercial Taxes dated 10.6.1993 after a gap of more than four years. Learned Standing Counsel further submits that the Commissioner has not misconstrued the decision relied upon by him in the order and has correctly applied the same. He further submits the reliance placed by the Petitioner on the Judgment of the Hon'ble Supreme Court in the case of Commercial Taxes Officer, Circle-D, Jaipur (supra) is of no consequence since their Lordships of Apex Court had placed reliance on the earlier Judgment of the Hon'ble Supreme Court in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur and Anr. (1965) 16 STC 563, and the principles evolved therein have been scrupulously followed by the Revenue in effecting deletion and/or refusing inclusion of certain items in the Petitioner's registration certificate. Learned Counsel further submits that it is not a fact that the Petitioner's revision petition dated 4.11.1987 against the original order of deletion dated 25.9.1987 is any longer pending consideration. In paragraph-12 of the counter affidavit it is averred that the Revisional Authority had instructed the forum below not to incorporate in the Registration Certificate of the Petitioner the materials required for construction of Office building residential quarters and civil works etc, Accordingly the Registration Certificate under both the Acts was suitably been amended on. 2.11.1991 giving effect retrospectively, i.e. w.e.f. 1.8.1988 and therefore it cannot be construed from the claim of the dealer Petitioner that its revision petition dated 4.11.1987 has remained undisposed of by the Commissioner of Sales Tax, Orissa, regardless of the fact that there is no specific reference to this revision petition earlier stating that the revision case is disposed of. In other words, it is contended that it is to be understood that the revision petition dated 4.11.1987 no longer subsists for consideration.

12. Learned Standing Counsel further contended that in course of the revision proceeding, opportunity was given to the Petitioner prior deleting the word 'Construction' and that the said deletion is justified since the term 'Construction' is a foreign term to the stipulation contained under Section 8(3) and 8(4) of the Central Sales Tax Act.

13. Before proceeding to consider the rival contentions advanced by the Counsel for both the parties, it is essential to first to take note of the law laid down by the Hon'ble Supreme Court on the present subject.

Hon'ble Supreme Court had the occasion to deal with Section 8(3)(b) of the CST Act, in the case of J.K. Cotton Spinning & Weaving Mills Company Limited (supra). In that decision, their Lordships came to hold that Section 6 of the C.S.T. Act, imposes liability upon every dealer as may be specified by the Central Government to pay tax under the Act on sales effected by it in the course of inter-State trade or commerce during any year on and from the date so notified. Section 7 sets up the machinery for registration of dealers and Section 8 prescribes the rates of tax on sales in the course of inter-State trade or commerce. Sub-section (1) of Section 8, as it stood at the material time, provided for the rates of tax to be paid on the turnover by a dealer selling in the course of inter-State trade or commerce to registered dealer the goods of the description mentioned in Sub-section (3) Sub-section(2) prescribed the rate of tax payable by any dealer in any case not falling within Sub-section (1) in respect of the sale by him of any goods in the course of inter-State trade or commerce. The Hon'ble Supreme Court also took note of the fact that Section 13 conferred power upon the Central Government, to make rules on several matters including enumeration of goods or class of goods used in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power and in exercise of this power, Rule 13 was framed by the Central Government, which was amended, read at the material time, as follows:

The goods referred to in Clause (b) of Sub-section (3) of Section 8, which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power.

14. Hon'ble Supreme Court considering the scope of Section 8(3)(b) came to hold that:

A bare survey of the diverse uses to which the goods may be intended to be put in the manufacture or processing of goods clearly shows that the restricted interpretation placed by the High Court is not warranted. The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw material into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient goods required in that process would in our Judgment, fall within the expression 'in the manufacture of goods.' For instance, in the case of a cotton textile manufacturing concern, raw cotton undergoes various processes before cloth is finally turned out. Cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendared and pressed. All these process would be regarded as integrated process and included 'in the manufacture' of cloth. It would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth. To read the expression in the manufacture, of cloth in that restricted sense, would raise any anomalies. Raw cotton and machinery for weaving cotton and even vehicles for transporting raw and finished goods would qualify under Rule 13, but not spinning machinery, without which the business cannot be carried on. In our Judgment Rule 13 does not justify the importation of restrictions, which are not clearly expressed, nor imperatively intended. Goods used as equipment, as tools, as stores, as spare parts, or as accessories in the manufacture or processing of goods, in mining, and in the generation and distribution of power need not, to qualify for special treatment under Section 8(1), be ingredients or commodities used in the process nor must they be directly and actually needed for 'turning out or the creation of goods'.

15. In para-9 of the said Judgment it was stipulated that 'it a process or activity is so integrally related to ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment.

16. Their Lordships took into account the earlier Judgment of the Hon'ble Supreme Court the case of Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar and Ors. : AIR1965SC891 and came to hold that the vehicle used by a Company (which mined are and turned out copper in carrying on activities as a miner and as a manufacturer) that fell within Rule 13 even if the vehicles were used merely for removing ore from the mine to the factory, and finished goods from the factory to the place of storage. Spare parts and accessories required for the effective operation of those vehicles were also held to fall within Rule 13. Following the aforesaid Judgment, the Hon'ble Supreme came to hold that if the process of designing is so intimately connected with the process of manufacture of cloth, it is opposed to reason to regard the process of designing as not being a part of the process of manufacture within the meaning of Rule 13 read with Section 8(3)(b). The process of designing may be distinct from the actual process of turning out finished goods. But there is no reason for limiting the meaning of the expression 'in the manufacture of goods' to the process of production of goods only. The expression 'in the manufacture of goods' takes within its compass, all processes which are directly related to the actual production. Their Lordships further held that in order to qualify for specification under Section 8(3)(b) the goods must be intended for use of the nature mentioned in Rule 13, in the manufacture of goods. Building materials used as raw materials for construction of 'plant' cannot be said to be used as plant in the manufacture of the goods. The legislature has contemplated that the goods to qualify under Section 8(3)(b) must be intended for use as raw materials or as plant, or as equipment in the manufacture or processing of goods and it cannot be said that the building materials fall within this description.

17. The Hon'ble Supreme Court in the case of Member, Board of Revenue, West Bengal v. M/s. Phelps & Co. Pvt. Ltd. : (1972)4SCC121 , once again placed reliance on its earlier Judgment in the case of M/s. J.K. Cotton Spinning & Weaving Mills (supra) and came to hold that gloves used by workmen who were engaged in hot jobs or in handling corrosive substance in the course of manufacture cannot be denied those gloves which had to be used in the course of manufacture. It is necessary to take note of para 7 of the aforesaid Judgment that Hon'ble Supreme Court specifically negatived the contentions advanced by the Learned Counsel for the Board of Revenue to the effect that Section 5(2)(a)(ii) takes into account only such goods which are actually used in the manufacture and not those goods which are used in the course of manufacture. This contention was negatived in view of the decision of the Hon'ble Supreme Court referred to in the case of M/s. J.K. Cotton Spinning & Weaving Mills (supra) and their Lordships were bound by the ratio of the said decision.

18. In the later Judgment of the Hon'ble Supreme Court in the case of Star Paper Mills Ltd. v. Collector of Central Excise, Meerut (1990) 76 STC 312, while dealing with the term 'manufacture', their Lordships came to hold that term 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product. Having so held Hon'ble Supreme Court came to hold that use of paper cores was necessary in any process incidental or ancillary to the completion of paper as marketable goods and it would consequently be commercially inexpedient to sell paper without the use of paper core and therefore held that for use of paper core, it would be a constituent part of paper that term 'component parts' an exemption to such an extent would be available to the Appellant company. Similarly once again Hon'ble Supreme Court in the case of Central Excise, New Delhi v. Ballarpur Industries Limited (1990) 77 STC 282, came to hold that for an item to qualify as raw material, it need not necessarily and in all cases go into, and be found, in the end product. Merely because this ingredient was consumed and burnt up in the course of chemical reactions it did not ipso fact cease to be a raw material.

19. Now coming to the consideration of the Judgments relied in the impugned order, in the case of Commissioner of Income Tax, Andhra Pradesh v. Taj Mahal Hotel : [1971]82ITR44(SC) , their Lordships were dealing with the term 'Plant' and whether the sanitary and pipeline fittings installed, fell within the definition of 'Plant' and whether the Respondent, which ran a hotel, and had installed sanitary and pipelines fittings would be entitled to get 'development rebate' under the Income Tax Act, in respect thereof, since these items fell within the definition of 'Plant' the Respondent was entitled to development rebate in respect thereof and reached a conclusion that the intention of the legislature was to give the word 'Plant' a wide meaning and comes under the Indian Income Tax Act and Rules.

20. In the case of Commissioner of Income Tax, Lucknow-II v. Kanodia Warehousing Corporation (1980) 80 ITR 996, while dealing with the term 'Plant' their Lordships came to hold that in order to find out if a building or structure or part thereof constitutes 'plant', the functional test must be applied. It must be seen whether the subject matter involved, that is, the building structure or part thereof, constitutes an apparatus or a tool of the taxpayer or whether it is merely a space where the taxpayer carries on his business. If the building or structure part thereof is something by means of which the business activities are carried on, it would amount to a plant but where the structure plays no part in the carrying on of those activities but merely constitutes a place within which they are carried on, it cannot be regarded as a plant. Having come to such conclusion, their Lordships held on the facts, it could not be said that the warehouses were some thing by means of which the assessee's business activities were carried on, but that did not play any part whatsoever in the carrying on its business activity, but merely provided a place within which this business activity was carried on. In coming to such conclusion apart from referring or rendering on the decisions of the Hon'ble Supreme Court in the case of CIT v. Taj Mahal Hotel : [1971]82ITR44(SC) , Hon'ble Allahabad High Court came to rely the definition of term 'Plant' given in the case of Yarmouth v. France (1887) 19 QBD 647 where a horse was held to be a plant because it was used by a wharinger to carry on his business was accepted as correct. According to such meaning of term 'Plant' includes whatever apparatus or instruments are used by a business in carrying on his business 'not his stock-in-trade which he buys or makes for sale, but all goods and chattels, fixed or movable, live or dead, which keeps for permanent employment in his business. In the said Judgment their Lordships came to rely upon a Judgment of Jorrold (Inspect of Taxes) v. John Good & Sons Ltd. (1963) 1 WLR 214 in which movable partitions in an office accommodation were held to be plant because the nature of the business required the operator of the business to be able, rapidly and cheaply and without much interruption of business, to alter the sub-divisions of the office building. Apart from this their Lordships have also referred to the decision of Gujarat High Court in the case of CIT v. Eicon Engineering Company Limited : [1974]96ITR672(Guj) , where the question before their Lordships was whether drawings and patterns received by an assessee from a foreign company under a collaboration agreement can be said to be plant on which depreciation is allowable. Their Lordships of Allahabad High Court came to hold that in a case where the subject-matter is the building of some other kind of structure, a distinction was made with a view to find out whether the building or the. structure is something by means of which the business activities are carried on or the building or structure is such that it does not play any part in carrying on of those activities, but it is merely a place within which they are carried on. In order to decide this question, what is said to be functional test, is to be applied. If on the application of this test it is found that the subject matter of a building or apparatus or a part thereof, is employed in carrying on the activity of the business, then it shall be treated as plant, no matter that it consisted of some structure of building, which is attached to the soil. If on the other hand it is found that the structure or a building or a part thereof does not constitute a part of the apparatus employed in carrying on the activities of the business, then it cannot be regarded as a plant. The decision in the case of Kanodia Cold Storage : [1975]100ITR155(All) applied the said functional test and came to hold that the subject-matter of the case, that is, the building, had insulated walls and was being used as a freezing chamber and hence it was treated as a part of the air-conditioning plant. In other words, that building played an active role in the business of the assessee and was not merely a passive spectator. Therefore, their Lordships laid down that appropriate test in the matter of involving a building or a structure or a part thereof, constitutes an apparatus or a tool of the trade of the taxpayer or it is merely a space to carry on his business. For this purpose, the use, which is made of the subject matter under consideration, is to be kept in view. If the building, structure or part thereof is something by means of which the business activities are carried on, it would amount to a plant but where the structure plays no part in the carrying on those activities but merely constitutes a place within which they are carried on, it cannot be regarded as a plant.

21. After going through various Judgments referred to in the impugned order and the Judgments relied on by the Learned Counsel for either parties, it is now necessary to take note of the basic facts of the present case. The Petitioner-Company was established to operate a thermal power plant and therefore it is not a dealer, which seeks to purchase goods with any intent for re-selling by it nor is it a dealer, which is seeking to purchase goods for use by him in the manufacture or process of any goods for sale. The Petitioner-Company is a registered dealer, which is seeking to purchase goods for use by it 'in the generation of power and distribution of electricity'. Therefore, it is imperative to take note of the fact that when the 'functional test' is applied to a dealer such as in the case of Petitioner-Company, it has to be ascertained as to whether the goods being purchased by it are integrally related to the generation and distribution of the electricity. Even if theoretically possible, whether it would make it commercially inexpedient for the purpose of generation of power and distribution of electricity. In respect of this issue, it is clearly covered by the decision of the Hon'ble Supreme Court in the case of Commercial Taxes Officer, Circle-D, Jaipur v. Rajasthan Electricity Board (supra). In that case Hon'ble Supreme Court affirmed the view taken by the Rajasthan High Court, wherein Rajasthan High Court came to hold that the Rajasthan Electricity Board which was engaged in the business of generation and distribution of electricity to the consumers, could purchase by way of inter-State trade, at concessional rate of tax under Section 8(1) of the Central Sales Tax Act, 1956, trucks, trolleys, trailers and the like (but not passenger vehicles), as also their accessories and spare parts, tyres, and tubes and that the Board was entitled to have its certificate of registration altered to include 'tools and plants, including vehicles and other transportable goods, including other spare parts tubes and tyres.'

22. On a consideration of the various principles of law laid down by the Hon'ble Supreme Court as well as various High Courts noted hereinabove this Court finds that, the impugned order of the Commissioner, Commercial Taxes is based on a complete misunderstanding and inconsideration of the Judgment referred hereinabove.

23. It is now necessary to deal with each item sought for inclusion individually.

The Petitioner-Company has sought for inclusion of item No. 1 for the purpose of laying the foundation of the powerhouse building and the associated structure. The very term 'powerhouse building' implies that such building would be constructed to house the Thermal Power Generator. The 'Power House Building' by its clear meaning refers to a building where Thermal Power Plant will be installed for power generation. It is inconceivable even to suggest that power generation from a Thermal Power Plant can take place bereft of a Power House Plant. Therefore the findings arrived at by the Commissioner, Commercial Taxes with regard to item at serial No. 1 is erroneous. Applying the 'functional test' it would be clear that, it would be clearly practically not possible to consider establishing a Thermal Power Plant without a Power House Building and therefore, the Commissioner is clearly in error of law in coming to hold that a Power House Building is meant to be a place where the business activities were carried on.

So far as item No. 2 is concerned, the same also relates to construction of the Power House Building and associated civil structure and the reasons referred to above, it has to be accepted to constitute an integral part of the plant. Without this construction, it would not be possible on the part of the Petitioner to engage in the generation of electricity and distribution thereof and therefore, findings of the Commissioner without scrutiny of the law as laid down by the Apex Court, is also erroneous.

So far as item No. 3 is concerned, H.S. Meters, G.I.Pipes, C.I. Pipes, Street light fittings are required for the purpose of construction of Power House and Control room required for operation and maintenance of the Thermal Power Plant. At the time of hearing, Learned Counsel for the Petitioner-Company has submitted an affidavit seeking exclusion of item pertaining to Guest House and therefore the Petitioner does not want to include the same in the Registration Certificate. Therefore, since the Petitioner has now limited its claim under this item, i.e., H.S. Meters, G.I. Pipes, C.I. Pipes, Street light fittings which are required for the purpose of construction of Power House and Control room required for operation and maintenance of the Thermal Power Plant, to such an extent the claim of the Petitioner is wholly justified as these items pass the scrutiny of the functional test as laid down by the Apex Court.

24. Similarly the claim items covered under item No. 4 have been revised by the Petitioner by way of filing an affidavit on the date of closure of hearing, wherein the Petitioner sought for deletion of Gardening tools and associated materials for the purpose of construction of approach road for P.H. Colony road. Apart from the above the Petitioner is fully justified in claiming inclusion of items such as Road materials like chips, tars, road rollers, concrete mixer and vibrator, manure, water treatment plant, filtration plants and associated materials etc. Canal materials like gates, stones earth moving and cutting machineries etc.

25. In so far as item Nos. 5(a), (b), (c), (d) & (e) are concerned, they have been allowed in the impugned order and, therefore, require no consideration.

But in so far as item Nos. 5(f) and (g) are concerned, the Petitioner claims that the same are required for protection and control of Boiler, Turbines and Generator during operation for generating power operation of the Switchyard to Transmit power from the Generating station to Load centers of Grid substations and for operation of the Power House Plant. All these items clearly stand the scrutiny of the application of functional test and, therefore, clearly, the Petitioner-Company is justified in seeking inclusion of these items in its Registration Certificate issued under the Central Sales Tax Act.

26. On a consideration of the facts enumerated and the case laws referred to hereinabove, the writ application is allowed to the extent indicated above. There shall be no order as to costs.

A.K. Ganguly, C.J.

I agree.