Diesel is raw material: SC

New Delhi, Jan 21 (UNI) The Supreme Court has held that the diesel is to be treated as a raw material if used in the manufacturing of polyester yarn.

A bench comprising Justices A R Lakshmanan and Altamas Kabir while dismissing the appeal of Commercial Taxation Officer, Udaipur, Rajasthan, ruled that sales tax is payable at concessional rates for the diesel purchased for running generator- sets for producing electricity which is essential for manufacturing yarn.

The assessing authority had levied a differential tax of 1 per cent along with interest holding that the respondent M/s Rajathan Taxchem Ltd. ought to have paid sales tax at 4 per cent and not at 3 per cent. The order dated September 29,1995 passed by the assessing authority said since diesel can not be treated as raw material hence the assessee was not entitled to tax concession under section 10(1) of the Rajsthan Sales Tax Act,1994.

The apex court in its 20 page judgment on January 12 said, "the respondent assessee used diesel as raw material for manufacuring the end product , namely, yarn and fabric. The diesel used by the assessee is a fuel and lubricant as defined under section 2 (34) of the Sales Tax Act." The Supreme Court upheld the order of the state Tax Board as upheld by the Rajasthan high court and quashed the order of the assessing authority.

The appellant state had however contended that tax concession was available only for the purchase of the raw material used in the manufacture of the final product and the assessee was using diesel for an intermediate product- electricity and hence the respondent was not entitled to the benefit under the said section.

UNI