M/S. Kumar Motors, Bareilly Y Vs. Commissioner of sales Tax, U.P., Lucknow
[2007] INSC 93 (2 February 2007)
S.B. Sinha & Markandey Katju
(Arising out of S.L.P.(C) No. 17280/2004) S.B. SINHA, J.
Leave granted.
Appellant herein deals in manufacture and sale of Auto Rickshaw.
For the said purpose, it purchases body of Auto Rickshaw from M/s. Apollo
Builders, a sister concern of M/s. Scooters India Ltd. and chassis thereof from
M/s. Scooters India Ltd.
The question which arises for consideration in this appeal is as to whether
mounting of the body of the Auto Rickshaw on the Chassis thereof would amount
to 'manufacture' within the meaning of Section 2 (e-1 ) of the U.P. Sales Tax
Act, 1948 ('the Act', for short).
It is not in dispute that the appellant had purchased 'Vikram three wheeler
Chassis' upon issuing III-A form from M/s. Scooters India Ltd. It did not pay
any purchase tax in respect of the purchases made from M/s.
Appolo Builders. Appellant was held to be liable to pay purchase tax on the
premise that upon mounting the body of Auto Rickshaw on the chassis and sale
having not been made on the same condition and form, purchase tax was leviable.
The contention of the appellant is that having regard to the provisions
contained in Section 3-AAAA of the Act, no purchase tax is payable as the
condition remained the same. In any event having regard to the Entry 43 B and
having regard to the fact both chassis and body of three wheelers came within
the purview of 'auto rickshaw', which find place in the same entry, no tax was
payable. Reliance, in this behalf, has been placed on the decision of
Commercial Taxes Officer, Anti Evasion-I vs. Rajesh Motors &
Anr. (1997) 107 STC 468; the decision of a Rajasthan Taxation Tribunal as
also the decision of Dy. Commisioner of Salex Tax(Law), Board of Revenue
(Taxes), Ernakulam vs. M/s. Pio Food Packers 1980 Supp. S.C.C.
174 and M/s. Sterling Foods, a Partnership firm represented by its partner Sh.
Amesh Dalpatram v. State of Karnataka & Anr. (1986) 3 SCC 469.
The Act was enacted to provide for levy on the tax of purchase of goods in
the State of U.P.
'Manufacture' has been defined in section 2(e-1) of the Act to mean :
"(e-1) 'Manufacture' means producing, making, mining, collecting,
extracting, altering, ornamenting, finishing, or otherwise processing, treating
or adapting any goods; but does not include such manufacture or manufacturing
processes as may be prescribed."
Section 3-AAAA provides for liability
to pay tax on goods under certain circumstances. It reads as under:- "1. Subject
to the provisions of section 3, every dealer who purchases any goods liable to
tax under this Act:-
-
from any registered dealer in
circumstances in which no tax is payable by such registered dealer, shall be
liable to pay tax on the purchase price of such goods at the same rate at which,
but for such circumstances, tax would have been payable on the sale of such
goods;
-
from any person other than a
registered dealer whether or not Tax is payable by such person, shall be liable
to pay tax on the purchase price of such goods at the same rate at which tax is
payable on the sale of such goods:
Provided that no tax shall be leviable on the purchase price of such goods
in the circumstances mentioned in clauses (a) and (b) if
-
Such goods purchased from a
registered dealer have already been subjected to tax or may be subjected to tax
under this Act;
-
tax has already been paid in respect
of such goods purchased from any person other than a registered dealer;
-
the purchasing dealer resells such
goods within the State or in the course of inter-State trade or commerce or
exports out of the territory of India, in the same form and condition in which
he had purchased them;
-
such goods are liable to be exempted
under Section 4-A of this Act."
It has been noticed herein before that in regard to the purchases made from
M/s. Scooters India Ltd. Form IIIA has been utilized. Similar purchases of Auto
Rickshaw body were made from Appolo Builders against issuance of Form III-A
prescribed in terms of Rule 12-A of the U.P. Sales Tax Rules, 1948, which,
inter-alia, provides for the following condition :
"2. I further certify that out said form has purchased for sale in the
same condition (description of goods) against Bill/Cash memo No, datedfrom M/s................................
Place Date.."
Entry at serial No. 43(1) contained in the Notification dated 7.9.1981 reads
as under:
43.1
"Motor vehicles
including motor cars, motor taxi cabs, motor cycles, motor cycle combinations,
motor scooters, mopeds, motorists, motor omnibuses, motor vans, motor lorries,
motor trucks, jeeps, station wagons and chassis of motor vehicles and bodies or
tankers or motor caravans built or meant for mounting on chassis of motor
vehicles, but excluding tractors whether on wheels or on tracts."
The entry states which goods would come within the purview of the the 'Motor
Vehicle' for the levy of the tax. It does not say even if tax had not been
paid, despite changes in the form, no tax would be payable. In our opinion, the
goods in terms of the aforementioned condition contained in Form III-A should,
thus, have been made for in the same condition. It is not in dispute that the
appellant sold Auto Rickshaw after the body was mounted on the chassis with the
help of nuts and bolts. The question which arises for consideration is as to
whether the end product sold by the appellant is a different commercial
commodity which came into existence only upon undertaking the 'manufacturing
process' as is defined under Section 2(e-i) of the Act. The meaning of
'manufacture' in terms of the statutory provision is of wide amplitude. It
takes within its sweep not only a new product but also alterations made in an
existing product.
'Auto Rickshaw' in ordinary commercial parlance cannot be said to be its
body or chassis. It has a definite connotation. The contention that once those
nuts and bolts are removed the chassis and the body would be restored to their
original position, in our considered opinion, is of not of much significance.
The Court is required to give a literal meaning to the expression used by
the Legislature, while interpreting the provisions of a statute. In terms of
Form III-A, a trader would be exempted from payment of purchase tax only in the
event the terms and conditions thereof are satisfied. Necessary condition for
obtaining such exemption is that the assessee must sell the commodity it
purchased in the same form and condition. The requirement of law, thus, is that
goods once sold to a registered dealer must be sold in the same form and
condition in which he had purchased. We have no doubt in our mind that the
sales made by the assessee of chassis with mounted body would be selling a
product which is in different condition from the chassis or the body, and,
thus, the same would be liable to purchase tax under sub- section (a) of
Section 3-AAAA of the Act.
The decision of the Rajasthan Taxation Tribunal in Rajesh Motors (supra) in
our opinion does not lay down the correct law. In that case the Tribunal
proceeded on a wrong premise that on removal of nuts and bolts fixed the
chassis and body would get separated and the original position would be
restored without their change in the structure, nature and identity.
It was, in our opinion, not a relevant question. Tax is payable when the
taxable event occurs. In construing a taxing statute, vis-`-vis, the taxable
event, no hypothesis ordinarily should be raised.
A commodity is identified by ordinary commercial parlance. Auto rickshaw is
an auto rickshaw. It can be sold only as a combination of chassis and the body
mounted thereupon, and not body or chassis separately.
If it is so done, consequences may be different.
Furthermore, the definition of 'manufacture' under the Rajasthan Sales Tax
Act, 1994 is different from the one under the U.P. Act, which is as under:
"Manufacture" includes every processing of goods which bring into
existence a commercially different and distinct commodity but shall not include
such processing as may be notified by the State Government."
A bare comparison of the definitions of the said term under the Rajasthan
Act and the U.P. Act categorically points out that the definition of
'manufacture' under the latter is wider. This has been so held in Sonebhadra
Fuels vs. Commissioner, Trade Tax, U.P. Lucknow [(2006) 7 SCC 322 ] in the
following terms :
"We may mention that, as noted above, decisions construing the word
"manufacture" in other statutes are not necessarily applicable when
interpreting Section 2(e-I) of the U.P. Trade Tax Act. As stated above, the
definition of "manufacture" in Section 2(e-I) of the U.P. Trade Tax
Act is very wide, which includes processing, treating or adapting any goods.
Hence, in our opinion, the expression "manufacture" covers within its
sweep not only such activities which bring into existence a new commercial
commodity different from the articles on which that activity was carried on,
but also such activities which do not necessarily result in bringing into
existence an article different from the articles on which such activity was
carried on. For example, the activity of ornamenting of goods does not result
in manufacturing any goods which are commercially different from the goods
which had been subjected to ornamentation, but yet it will amount to
manufacture within the meaning of Section 2(e-I) of the U.P. Trade Tax Act
since an artificial meaning of "manufacture" is given in Section
2(e-I). Hence, whether the commercial identity of the goods subjected to the
processing, treating or adapting changes or not, is not very material.
xxx xxx xxx xxx Learned counsel for the appellant, Shri Rakesh Dwivedi
submitted that coal briquettes are produced merely by using a binding material
such as clay or molasses along with the coal, and hence he submitted that the
identity does not change. We regret, we cannot agree with his submission.
Firstly, we do not agree that the coal briquettes are the same commercial
commodity as coal. In our opinion, coal is a raw material for making coal
briquettes. The method of manufacturing coal briquettes has been stated above,
and this certainly is processing, treating or adapting the coal. The appellant
manufactures coal briquettes by compiling the hard coke breeze mechanically
with the help of cinders, which is usually 5% of the total hard coke breeze. In
the compilation of the hard coke breeze, 95% of the hard coke breeze, which is
known as coal dust or breeze coke is taken which is compiled with the help of
clay and molasses. Hence, in our opinion, coal briquettes is a different
commercial commodity from coal. Moreover, even if it is not a different
commercial commodity, the process of making coal briquettes will amount to a
"manufacture" as it is processing, treating or adapting coal. In our
opinion, by the processing of coal to make coal briquettes, the coal dust loses
its identity. Coal briquettes and coal dust are two different commodities in
substance as well as in characteristics. The coal briquettes are altogether in
different shape, form and moisture as well as characteristics, as compared to
coal dust."
We are, however, not oblivious of the fact that a Division Bench of this
Court in State of Karnataka v. Azad Coach Builders (P) Ltd. and Others [(2006)
3 SCC 338], in view of the provisions of Section 5(3) of the Central Sales Tax Act,
1956 vis-`-vis the provisions of the Karnataka Sales Tax Act, 1957 had
referred the question of interpretation of the words 'in relation to such
exports' to a larger Bench, noticing the decisions of this Court in Mohd. Serajuddin
v. State of Orissa, [(1975) 2 SCC 47], on the one hand and Sterling Foods v.
State of Karnataka [(1986) 3 SCC 469] and Vijayalaxmi Cashew Co. v. C.T.O.
[(1996) 1 SCC 468] on the other. We, however, are not concerned with such a
question in this case.
We may also notice that the term "manufacture" has been considered
in Kores India Ltd., Chennai vs. Commissioner of Central Excise, Chennai (2005
) 1 SCC 385 by this Court stating ;
"At this juncture it is relevant to point out that the assessee had
contended before the Collector that the inputs/raw materials used have suffered
excise duty and if any duty is payable, they should be allowed MODVAT credit
and the proportionate amount on account of such credit should be deducted from
the proposed demand.
This plea was turned out as required documentary evidence to show that
entire quantity of inputs used have suffered tax was not produced. Before CEGAT
it was accepted that there was possibility that manufacturers were operating
under exemption available to SSI units and the goods would have discharged
"nil" duty. It was also accepted that since the goods were received
from the depots and not directly received from one factory, therefore, any duty
(paying documents) were not available. It is to be noted that once the jumbo
rolls are cut into smaller sizes, they completely lose their earlier identity
and cannot be used for the same purpose as was done before cutting. In a
hypothetical case, even if the smaller-sized ribbons are stitched together or
fixed together in any manner, there is no possibility of its use as jumbo
rolls. The factual findings recorded that the processing resulted in coming
into existence of a commercial product having distinct name, character, and use
are on terra firma"
New Delhi (2005) 2 SCC 555 it has been held :
"Section 2(f) contains two clauses and instead of setting out the
activities in respect of different tariff items, sub-clause (ii) simply states
that any process, which is specified in section/chapter notes of the schedule
to the Tariff Act, shall amount to "manufacture". Under sub-clause
(ii), the legislature intended to levy excise duty on activities that do not
result in any new commodity. In other words, if a process is declared as
amounting to "manufacture" in the section or chapter notes, it would
come within the definition of "manufacture" under section 2(f) and
such process would become liable to excise duty. The effect of this definition
is that excise duty can be levied on activities which do not result in the
production of a new commodity or where the raw material does not undergo such a
transformation as to lose its original identity."
The decision of this Court in M/s. Pio Food Packers (supra), is not
applicable to the facts of this case. Therein, this Court was concerned with
the provisions of Kerala General Sales Tax Act. The assessee therein used to
carry on business of manufacturing and selling of canned fruit. Having regard
to the factual matrix involved therein it was held that there was no difference
between pineapple fruit and the canned pineapple slices. M/s. Pio Food (supra)
was followed by this Court in M/s. Sterling Foods (supra).
Therein again the Court was concerned with selling of shrimps. It was held:
"Here in the present case, it was not disputed on behalf of revenue
that the purchases of raw shrimps, prawns and lobsters were made by the
appellants for the purpose of fulfilling existing contracts for export and
after making such purchases the appellants subjected raw shrimps, prawns and
lobsters purchased by them to the process of cutting of heads and tails,
peeling deveining, cleaning and freezing and exported such processed and frozen
shrimps, prawns and lobsters in fulfillment of the contracts for export. The
only argument raised on behalf of revenue was that the goods which were
exported were not the same as the goods purchased by the appellants because raw
shrimps, prawns and lobsters after processing ceased to be the same commodity
and became a new distinct commodity. But, for reasons which we have already
discussed, this argument cannot be sustained. The shrimps, prawns and lobsters
purchased by the appellants did not lose their original character and identity
when they were subjected to processing for the purpose of export. So far as
commercial parlance or popular usage is concerned, they remained the same goods
and hence the purchases of raw shrimps, prawns and lobsters by the appellants
must be held to be purchases in the course of export and hence exempt from
liability to tax under the Karnataka Sales Tax Act."
The said decision has no application to the facts of the present case.
The Tribunal also opined that by mounting auto rickshaw body on the chassis
a new product comes into being. However, it had proceeded to hold that both
chassis and auto rickshaw being under the same entry no tax would be payable.
The Tribunal was not correct in that behalf as it failed to take into
consideration the fact that if two articles were purchased by the assessee and
the articles it sold were different commodities; purchase tax would be payable therefor
as the terms and conditions laid down in Form 3-A had not been satisfied.
For the reasons aforementioned, we do not find any merit in this appeal. It
is dismissed accordingly with costs. Counsel's fee assessed at Rs.10,000/-.
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