JUDGMENT Mumtaz am, member (technical).- This appeal ha:- been filed against Order-in-Appeal No.51/93 dated 26.12.1993 passed by the Collector of Central Excise and Sales Tax (Appeals), Northern Region, Lahore. The facts leading to this appeal are that M/S ICI PAK. Limited, manufacture Soda Ash in their factory at Khewra on which Sales Tax is leviable. One of the raw- materials used in the manufacture of Soda Ash is Coke on which the appellant has been paying Sales Tax. Coke is mixed with calcium carbonate and then burnt to heat the latter for obtaining therefrom Co2 gas and lime which are then used in a continuous chemical process for ultimate production of Soda Ash. The appellant, in the belief that Coke is an input for Soda Ash, claimed deduction of input tax under Section 27(1) of the Sales Tax Act, 1951 for the period from 1.7.1988 to 31.10.1990 in respect of the tax paid on Coke. This deduction was subsequently questioned by the Department and, after issuing a Show Cause Notice to the appellant and giving an opportunity of defence to him, the learned Assistant Collector of Sales Tax Rawalpindi passed his Order-in-Original No. 13 of 1992 holding that Coke is merely a fuel and not an input of Soda Ash and therefore, tax paid on Coke is not admissible for adjustment under section 27(1) of the said Act against tax payable on Soda Ash.
This order was assailed in appeal before the Collector of Sales Tax, (Appeals) Lahore who rejected it. The appellant then filed the present appeal to this Tribunal.
2. Mr. Shahid Hamid, Advocate, appeared on behalf of the appellant while Mr. Karamat Hussain Deputy Superintendent, represented the Collectorate of Sales Tax Rawalpindi. The learned Counsel questioned the validity and legality of the impugned order both on grounds of fact and law. On facts he submitted that Coke burns within the heating chamber of the Kiln in the factory along with lime stone and the gases released io this hurtling and heating process are not wasted but kept in harness in the chamber and channelled to other chambers/towers to help in chemical reactions.
He stated that from limestone about 31% of Co2 gas is obtained whereas for manufacture of Soda Ash, presence of 41 to 42% Co2 gas in the process is necessary and this level of gas concentration is achieved by burning Coke with limestone, the additional 10 to 12% Co2 gas being obtained by chemical reaction of Coke with oxygen. As such he submitted that Coke is an input for the manufacture of Soda Ash.
3. On the legal plane the learned Counsel has asserted that under Section 27(1) read with section 2(12) of the Sales Tax Act, 1950 deduction of input tax is admissible on all inputs. As such the learned COLLECTOR of Sales Tax (Appeals) as well as the learned Assistant COLLECTOR could not deny to the appellant the admissibility of deduction of input tax in respect of Coke. The departmental representative on the other hand urged that Section 27(1) refers only to inputs and Coke, not being an input, but merely a fuel, does not come under the purview of this Section.
4. We have examined the submission of the Learned Counsel for the appellant and the departmental representative. As regards he issue that Coke is an input, it is necessary to have a close look at the views of the contemporary authorities on the subject. The first on which reliance has been placed is R. Norris Shrive's "Chemical Process Industries". The author in the beginning mentions salt, lime and ammonia as the principal faw- material but on page 290 he describes the principal chemical reaction for producing carbon dioxide as not only Ca Co3 = Cao + Co2 but also C + 02 = Co2. Further, at page 293 he writes "Carbon dioxide is obtained along with calcium oxide by calcining limestone mixed with coke". At page 292, he indicates the optimum concentration of carbon dioxide as 41 to 43% for efficient chemical reaction. Similarly in his book "Manufacture of Soda Ash" G.P. Liptrot on page 431 has mentioned the raw- material for Soda Ash. On pages 443- 444 the author emphasises that a precise ratio of 1:14 is nomial for mixing coke with limestone within the kiln and at pages 87-89, the author describes the type of kiln required for the most efficient burning of coke and limestone to ensure carbon dioxide concentration of 41 to 43 %.G.F.
Liptrot in the same book has also stated that the raw- materials for the manufacture of Soda Ash in the Solvey process are sodium chloride (Salt), Calcium Carbonate(imestone), a fuel (Coke) and ammonia. The adjudicating officer has interpreted this to mean that coke is used as a fuel and not as a raw material. The appellant contention is that like ammonia and lime stone, coke is deemed a raw material by the author or he would not have so clearly listed it in the midst of the other raw materials.
5. A glance through the relevant portion of these books leads one to the clear conclusion that the chemical process in which inputs arc converted in to a series of new chemical compounds of which, in the final stage, Soda Ash emerges as the principal output, coke is being imputed along with limertone and the Co2 gas being obtained from both is harnesed and channelised togather as an inspearable lot. It is also evident that coke functions as fuel and as a source of Co2 gas to enhance the concentration of this gas in the kiln from 31 to 43 %.This being so, in our view Coke is a raw-material or input for Soda Ash as some ingredients of Coke make an integral part of the chemical compound(Co2) which eventually results in the manufacture of Soda Ash. Conversely if the coke which is basic ingredient for the production of Soda Ash is eliminated from the process as submitted by the Departmental Representative, the entire superstructure of the production of Soda Ash will collapse. The claim of the appellant on this ground is thus valid.
6. As regards the legal admissibility of the claim, the departmental representative has not pointed out any other legal infirmity in the claim of the appellant except that the provision of Section 27(1) of the Sales Tax Act, 1951 is not attracted because coke is not a partially manufactured good used in manufacture of Soda Ash. Since in the preceding para we have held this position of the learned Assistant Collector as untenable and declared coke as an input of Soda Ash this contention of the respondent loses validity, In sum we are of the considered view that the appellant had validly claimed deduction of input tax in respect of Coke used in manufacture of Soda Ash from 1.7.1988 to 31.10.1990. The appeal thus succeeds and is accepted.