TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD. versus THE STATE OF BIHAR AND ANR.

Citation: [1994] SUPP. 4 S.C.R. 410 · Decided: 07-10-1994 · Supreme Court of India · Bench: R.M. SAHAI · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD. 
v. 
THE STATE OF BIHAR AND ANR. 
OCTOBER 7, 1994 
B 
(R.M. SAHAI AND N.P. SINGH, JJ.] 
Bihar Finance Act, 1981: 
Section 13(J)(b )--Levy of tax on concessional rate-Notification 
C regarding-Expression 'Industrial Raw Material (Inputs)'-Construction of. 
D 
E 
Manufacturer of Motor Vehicles, truck and bus chassis-Purchase of 
items such as tyres, tubes, batteries and use in vehicles-Held entitled to 
purchase goods at concessional rate of tax. 
Words and Phrases : 'Raw Material'-Meaning of. 
Section 13(l)(b) of the Bihar Finance Act, 1981 provides for special 
rate of tax on sale and purchase of goods used for manufacture or 
processing by a registered dealer in the State. In exercise of the power 
conferred by the said section, the State of Bihar issued a notification No. 
S 0-604 dated 12.4.82 directing that the sales tax on Industrial raw 
material (inputs) payable under section 13(1)(b) shall be at the rate of one 
percentum. 
The appellant-company was manufacturing motor-vehicles, trucks, 
bus chassis, excavators and other engineering products. For this purpose, 
F 
it was purchasing commodities such as tyres, tubes, batteries and various 
other items which were used in producing the vehicles. The company 
claimed that the aforesaid goods purchased by It being raw material 
having been required directly for use in manufacturing goods for sale in 
the State or in the course of inter-state trade, it was entitled to conces-
G sional rate of tax of 1% on such goods. The Deputy Commissioner, Sales 
Tax rejected the claim holding that items of inputs were in a finished state 
and were just to be fitted in the chassis without any further modification 
etc. Therefore, the purchase of such fittings was not covered by the notifica-
tion. 
H 
The appellant filed a writ petition before the High Court which was 
410 
TATAENGG.&LOCOMOTIVECO. LTD.v. STATE 
411 
dismissed by the Division B;nch holding that the words 'industrial raw 
material (inputs)' could not be given such a wide meaning as to result in 
widening the scope of concessional rate even to finished products. Against 
the order of the High Court, the appellant preferred appeal in this court. 
Allowing the appeal and setting aside the order of the High Court, 
this Court 
HELD : 1. The appellant is entitled to concessional rate of tax at 1 % 
for such items as tyres, tubes and batteries which were used in the 
manufacture of the vehicle etc., as raw- material. [415-D] 
2. The word 'raw-material' has no fixed meaning. It may vary with 
the use to which it is put. An item may be raw-material for manufacturing 
goods 'A' and the goods so prodnced may itself be raw-material for goods 
A 
B 
c 
'B'. For instance, batteries, tyres and tnbes are by themselves finished 
products. They on their own cannot be considered to be raw-material. But 
when it is used for manufacture of a vehicle then it becomes raw-material D 
for it as it is essential and necessary for producing the good in which it 
has been used. No vehicle can operate or work nor can it be said tu have 
been produced unless tyres, tubes and batteries are fixed to it. Use of these 
items is integrally connected with the ultimate production. They retain 
their identity in the end- product. But that could not exclude it from being 
treated as raw- material. The special rate of tax could be levied on any 
goods used in the manufacture. But the Government restricted it to raw 
materials. Yet the notification having been issued under Section 13(1)(b) 
the benefit would extend to every raw-material used in the manufacture of 
goods. In other words the concessional rate was available not only to 
raw-material but such raw-material as was used in the manufacture of 
goods. [ 415-E, 415-H, 416-A-C-E] 
3. Raw material has been fnrther explained by using the word 
'inputs', which dictionarily means, 'what is put in', 'enter', 'enter system'. 
E 
F 
The tyres, tubes and batteries were purchased for being put in the vehicle, 
which could not be operative without it. They were thns 'input'. The u_se of G 
this word was indicative that the benefit was intended for every item which 
was raw-material in the widest sense made wider by using the expression 
·'input'. The purpose was for broadening the meaning of raw-material by 
inclndlng in it even those item which conld be placed in the vehicle, to make 
it marketable as vehicles. The concessional rate of tax is thus applicable H 

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