1971 (9) TMI 158 - SC - VAT and Sales Tax

Whether the assessee- company is entitled to the exemption under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, read with rule 27A of the Bengal Sales Tax Rules, 1941 asked for by it? Held that - Appeal dismissed. In the present case the assessee-company has sold the goods in question to certain manufacturers who were manufacturing iron and steel materials. It is also clear from question No. (i) that those gloves were to be used by workmen who were engaged in hot jobs or in handling corrosive substances in the course of manufacture. That being so, it cannot be denied that those gloves had to be used in the course of manufacture.

Summary

Issues:
1. Interpretation of section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941.
2. Exemption claim by the assessee-company for sales of gloves used in manufacturing processes.
3. Scope of the expression "for use by him in the manufacture of goods for sale."
4. Applicability of the decision in J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur [1965] 16 S.T.C. 563 (S.C.); [1965] 1 S.C.R. 900.
5. Dispute over whether goods used in the course of manufacture qualify for exemption.

Analysis:
The judgment by Supreme Court of India, delivered by Hegde J., pertains to an appeal arising from a reference made under section 21(3) of the Bengal Finance (Sales Tax) Act, 1941. The High Court of Calcutta had answered questions in favor of the assessee-company, leading to an appeal by the Board of Revenue. The dispute centered around the exemption claim made by the assessee-company for sales of gloves used in manufacturing processes.

The assessee-company, engaged in the business of tailors, drapers, out-fitters, and industrial "gloves" manufacturers, sought exemption under section 5(2)(a)(ii) of the Act for specific transactions. The Commercial Tax Officer disallowed the claim, stating that the gloves were not required for manufacturing goods for sale. This decision was upheld by the Assistant Commissioner of Commercial Taxes and the Board of Revenue, leading the assessee to seek a reference to the High Court.

The High Court was asked to determine whether gloves used by workmen in manufacturing processes could be considered as used in the manufacture of goods for sale. The Court referred to a previous decision to interpret the expression "for use by him in the manufacture of goods for sale," emphasizing that goods used in processes integral to production qualify for exemption.

The Board of Revenue argued that only goods actually used in manufacturing, not those used in the course of manufacture, should be exempt. However, the Court, bound by precedent, upheld the High Court's decision in favor of the assessee-company. Consequently, the appeal was dismissed, affirming the correctness of the High Court's ruling.

In conclusion, the judgment clarifies the interpretation of the relevant tax provision and affirms that goods used in manufacturing processes, even if not the final product, can qualify for exemption under the Act.