1 Neutral Citation No. - 2025:AHC:83294 Court No. - 10 Case :- SALES/TRADE TAX REVISION No. - 558 of 2017 Revisionist :- M/S Ambey Processors Thru Its Director Opposite Party :- The Commissioner Commercial Tax U.P. Lucknow Counsel for Revisionist :- Aloke Kumar Counsel for Opposite Party :- C.S.C. HON'BLE PIYUSH AGRAWAL,J. 1. Heard Shri Aloke Kumar, learned counsel for the revisionist and Mr. B.K. Pandey, learned ACSC for the State – respondent. 2. The present revision has been filed against the order dated 27.7.2017 passed by the Commercial Tax Tribunal Gorakhpur Bench, Gorakhpur in Second Appeal No. 679 of 2015 (A.Y. 2006-07) under Section 4 B (5) of UP Trade Tax Act (herein after referred to as the ‘Act’). 3. The instant revision was admitted vide order dated 5.1.2018 on the following questions of law:- "(C) Whether the allegation of otherwise use of the goods purchased on concessional rate of tax can be leveled without bringing any adverse material of record? (D) Whether in absence of any positive evidence penalty under Section 4 B (5) of the Act can be imposed?" 4. Learned counsel for the applicant-revisionist submits that the revisionist is a registered proprietorship concern and is engaged in the business of processing and dyeing of cloths and in terms of Section 4 B of the UP Trade Tax Act and Rule 25 B of UP Trade Tax Rules, the revisionist is entitled to purchase its raw material, processing material, consumable, packing material etc. on concessional rate of tax against Form III B issued by the 2 department. He further submits that in the normal course of business, the revisionist has purchased dying materials, colors and diesel oil from two registered dealers of UP against Form III B issued by the Assessing Authority duly filling the columns prescribed therein. The assessing authority has initiated the proceeding under Section 4 B (5) of the Act and a show cause notice has been issued on two grounds that purchase of diesel oil cannot be treated to be used for processing of dying of cloth and the other ground was that the work has been done under the job work and sale has not been made by the revisionist itself. The revisionist replied the notice but being not satisfied with the same, the order dated 7.12.2011 has been passed by which a demand of Rs. 3,23,269/- has been made against which the revisionist has filed first appeal, which has been dismissed vide order dated 20.3.2015. The revisionist has challenged the said order in second appeal, which has also been dismissed vide order dated 27.7.2017. Hence the present revision. 5. Learned counsel for the revisionist submits that the issue involved in the present revision is squarely covered with the decision of this Court passed in M/s Shree Bhawani Paper Mills Ltd. Vs. State of UP and another reported in 2(2015) UPTC page 1057). 6. Per contra, learned ACSC supports the impugned order but does not dispute that the issue involved in the present revision is squarely covered with the decision of this Court passed in M/s Shree Bhawani Paper Mills Ltd (supra) . 7. After hearing learned counsel for the parties, the Court has perused the records. 8. Admittedly, the proceedings has been initiated only on the basis of purchase of diesel oil and chemicals against Form III B on the ground that diesel oil used in the generator for generating the electricity which cannot be said to be directly used in the process 3 of manufacture and sale of the product and similarly chemicals have not been used directly. 9. The controversy raised in the present revision is squarely covered with the decision of this Court in M/s Shree Bhawani Paper Mills Ltd (supra). The relevant paras of the said judgement are quoted hereunder: 27. It is undisputed that petitioners were granted a Recognition Certificate under Section 4-B of the Act read with Rule 25-A of the U.P. Trade Tax Rules 1948 (hereinafter referred to as the Rules) in which under the heading "fuel and lubricants" the commodity "high speed diesel oil" is mentioned. It is also undisputed that in the Recognition Certificate several goods including diesel oil has been mentioned as the goods required in the manufacture of the final product by the petitioners. It is also undisputed that some of the petitioners as mentioned above do not have any power connection and use diesel oil in their generator set installed in the factory premises to run their plant and machinery so as to manufacture their final product. The other petitioners who have power connection but their industry is a continuous process industry and, therefore, so as to ensure to run plant and machinery continuously even in the event of power cut or power breakdown, generators have been installed in the factory in which diesel oil has been used to run the plant and machinery. 28. Thus, there is no dispute that in order to run plant and machinery, the generators are essential, and for that purpose, diesel oil has been used in the generators. There is no denial of the fact that the entire process of manufacture carried on by the petitioners for converting raw material into finished goods essentially require generators in which diesel oil has been used. Thus the generation of power by generators by use of diesel oil so as to run plant and machinery is integrally connected with the manufacture of the notified goods i.e. the final product of the petitioners. Thus the manufacture of the notified goods itself is dependent upon the use of diesel oils in the generator sets directly. 29. Even if it is assumed that the use of diesel oil is indirectly connected with the manufacture of the notified goods yet there is no denial of the fact by the Assessing Authority that the use of diesel oil in generator sets was 4 essential for manufacture of the notified goods of the petitioners and the manufacturing itself is dependent on such use of diesel oil. 30. The only ground taken by Assessing Authority in the impugned orders to delete the entry of "diesel oil" from the Recognition Certificate is that diesel oil is not a raw material for manufacture of the notified final products of the petitioners rather it is raw material to produce electricity. While doing so, the assessing authority completely lost sight of the Explanation (a) to Section 4-B(2) of the Act which defines the expression "goods required for use in the manufacture" to mean not only raw materials but also processing materials, machinery, plant, equipment, consumable stores, spare parts, accessories, components, sub- assemblies, fuels or lubricants. Thus the goods which qualify for concessional rate of tax on purchases under Section 4- B(2) of the Act are not only raw material but also other classes of goods including Fuels which includes diesel oil. …. 32. Recognition Certificate has been granted to the petitioners under Section 4-B(2) of the Act for concessional rate of tax on purchase of goods required by the petitioners for use in the manufacture by them in the State of any notified goods. Thus the entire controversy is dependent upon the interpretion of the expression "for use in the manufacture of any notified goods" ... 34. Thus the law laid down by Hon'ble Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. (supra) leaves no manner of doubt that 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. The power supply through generators by use of diesel, is so integrally connected with the ultimate production of notified that without it manufacture of the notified goods would be commercially inexpedient. The use of diesel oil to operate generators so as to run plant and machinery by the petitioners is so integrally related to the manufacture of their final products that without that process or activity manufacture shall not be possible. Therefore, diesel oil required to run generators would necessarily fall within the expression "for use in the manufacture of notified goods" 5 35. In the case of Collector of Central Excise, New Delhi Vs. M/s. Ballarppur Industries Ltd. (1989) 4 SCC 566 Hon'ble Supreme Court considered the controversy "whether Sodium Sulphate could be said to be used as raw material in the manufacture of paper which was used in the chemical recovery cycle of Sodium Sulphate". The credit of duty was denied to the manufacturer by the Superintendent of Central Excise on the ground that Sodium Sulphate was burnt up in the process of manufacture and was not retained in the paper and, therefore, it could not be considered as raw material in the manufacture of paper. Following the law laid down in M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. (supra), Hon'ble Supreme Court held that Sodium Sulphate was used in the manufacture of paper as raw material. …. 44. From the above discussion and the law laid down by Hon'ble Supreme Court in the decisions noted above, we find the expression "for use in the manufacture of notified goods" which finds mentioned in Section 4-B(2) of the Act, would take within its sweep the "diesel oil" used by the petitioners in the generators installed in the factory premises to produce electricity to run their plant and machinery so as to manufacture their final product i.e. notified goods. 45. In view of the above discussions, all the writ petition deserves to be allowed. Consequently, the impugned orders passed by the Assessing Authorities also deserve to be set aside. 10. In view of facts as well as law laid down by this Court as referred herein above, the impugned order dated 27.7.2017 cannot be sustained in the eyes of law and same is hereby set aside. 11. Accordingly, the revision is allowed. 12. The questions of law are answered in favour of the revisionist and against the revenue. Order Date :-19.5.2025 Rahul Dwivedi Digitally signed by :- RAHUL DWIVEDI High Court of Judicature at Allahabad