COMMERCIAL TAXATION OFFICER, UDAIPUR versus RAJASTHAN TAXCHEM LTD.

Citation: [2007] 1 S.C.R. 855 · Decided: 12-01-2007 · Supreme Court of India · Bench: AR. LAKSHMANAN · Disposal: Dismissed

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Judgment (excerpt)

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COMMERCIAL TAXATION OFFICER, UDAIPUR 
A 
v. 
RAJASTHAN TAXCHEMLTD. 
JANUARY 12, 2007 
[DR. AR. LAKSHMANAN AND ALTAMAS KABIR, JJ.] 
B 
Rajasthan Sales Tax Act, 1994 : 
ss. 2(34), 8(3), 10(1), 37 and 84-Raw material-'Fuel and 
Lubricants'-'Diesel-Used for generating electricity for manufacturing 
end products i.e. yarn and fabric-Held, is raw material entitled to 
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concessional rate of 3% tax instead of normal rate of 41}/cr---Assessee was 
purchasing diesel as raw material under registration granted to him uls 
10-Registration certificate can be rectified or revised prospectively. 
Words and Phrases: 
'Include' as occurring ins. 2(34) of Rajasthan Sales Tax Act, 1994 
- Meaning of 
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Assessee-respondent for the purpose of manufacturing polyester 
yarn-generated electricity by using diesel. It claimed benefit of concessional 
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rate oftax@3% on diesel under s. 10(1) of the Rajasthan Sales Tax Act, 
1994 on the ground that diesel purchased was a raw material for manufacture 
of ultimate final product. The assessing authority held that since diesel 
was not directly used for manufacture of final product, the assessee was not 
entitled to benefit under Notification dated 29.9.1995 and was liable to pay 
tax@4%; and, accordingly, levied a differential tax@ 1 % with interest. 
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The appeal of the assessee was dismissed by the Deputy Commissioner 
(Appeals), but its further appeal was allowed by the State Tax Board and the 
revision of the Revenue was dismissed by the High Court. 
In appeal filed by the Revenue, it was contended, inter alia, that the 
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diesel was used for manufacture of intermediate product i.e. electricity, 
and, therefore, it was not entitled to benefit ofs.10 of the Act; that unless 
the fuel used was an essential requirement ofthe manufacturing process, 
the same could not be categorized as a raw material. For the respondent 
it was contended that once the commodity was recorded in the registration 
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855 
856 
SUPREME COURT REPORTS 
[2007] 1 S.C.R. 
A 
certificate as raw material, then the Revenue could not roll back from its 
stand to the detriment of the assessee as the latter did not violate any 
condition but acted on the belief of the 1·evenue. 
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c 
D 
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On the question: Whether the diesel purchased by the assessee can 
be termed as raw material for the manufacture of final products-yarn and 
fabric, 
Dismissing the appeal, the Court 
HEID. 
1.1. In view of the fact that the diesel is being used by the assessee 
for the purpose of running the generator set to generate electricity which 
is admittedly used for the purpose of manufacturing the end products, 
namely, the yarn and fabric, the diesel purchased by the assessee can only 
be termed as raw material and not otherwise. The diesel used by the 
assessee is a fuel and lubricant as defined under Section 2(34) of the Act. 
[Paras 21, 29 and 32] [866-H, 867-D-E] 
1.2. Classified list of material to be purchased under Section 8(3) as 
raw material included, interalia, "FUEL & LUBRICANTS". The definition 
of raw material under Section 2(34) of the Act specifically includes fuel 
required for the purpose of manufacture as raw material. The word 
'includes' gives a wider meaning to the words or phrases in the Statute, 
and, it must be construed as comprehending not only such things as they 
signify according to their nature and impact but also those things which 
the interpretation clause declares they shall include. There is no dispute 
in the instant case that the diesel and lubricant is used to generate 
electricity through DG sets which is admittedly used for the purpose of 
manufacturing yarn. Thus, it is seen that as diesel is specifically and 
intentionally included in the definition of raw material by the legislature, 
the question that whether it is directly or indirectly used in the process of 
manufacture is irrelevant. [Paras 22 and 23) (863-B-D, F-H, 864-A] 
2.1. The respondent purchased the diesel as raw material pursu.ant to 
the specific entry in its registration certificate by making the payment of 
tax at concessional rate of3% in accordance with the provisions of Section 
10(1) of the Act. Registration certificate was grantecl to the assessee after 
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considering all the aspects of the matter and taking a conscious decision. 
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COMMERCIAL TAXATION OFFICER, UDAIPUR "· RA! ASTHANTAXCHEM LTD. [LAKSHMANAN, J.] 
857 
The registration certification is an order. The power

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