S.P 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 filed by the appellants.
2. 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, flats, channels, tubes and coils is of a 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 manufacturers and dye block manufacturers. The question is whether such cutting down, with the help of shearing machines and glass cutting machines, of the scrap of widths of 2″ to 5″ and thickness up to 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, 1959. 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 ballies or any other articles of wood, but does not include such manufacture or manufacturing process as may be prescribed;”
3. The State Government issued a notification on 16-10-1986 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-scale industrial units and who had made a capital investment in fixed assets above Rs 10 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”.
4. 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 Laxmi Ispat Industries v. State of M.P CAs Nos. 14156-14158 of 1996 and of some others the eligibility certificates were refused. The appellants challenged the orders of cancellation/refusal by way of writ petitions.
5. 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 customers, 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 the Sales Tax Act includes processing, therefore, such transformation of basic iron material into various shapes will not be treated to be manufacture so as to entitle it for exemption under the exemption notification”.
6. Learned counsel for the appellants 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 for “pressing of iron/steel scrap into blocks”. Reliance was placed upon a notification issued on 1-10-1978 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 9-2-1993 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 Sales 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 it means to prepare the available goods to make it saleable. With this object 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 does not derive powers 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 in spite 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.
7. Learned counsel for the respondents relied upon decisions pertaining to the meaning of 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.
8. 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 definition of the word in a particular Act must prevail. In 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.
9. The appellants treat iron and steel scrap of considerable bulk by cutting it down by mechanical processes into pieces that may be conveniently utilised 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.
10. 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.
11. No order as to costs.