1998 (9) TMI 507 - SC - VAT and Sales Tax

Whether appellant liable to pay tax on the sale of refined oil as they had already paid tax for purchase of the crude oil and, if so, what would be the rate thereof? Held that - Appeal dismissed. The quoted cases does not come in aid of the appellant firstly, because it considered the definition of manufacture (which, of course, is identical with its definition under the Act) in the context of resale of goods as defined in that Act and secondly, because of the nature and extent of the process which the crude oil undergoes to radically change itself to marketable refined oil. The other contention raised by Mr. Swarup was that they had purchased the crude oil after payment of tax and hence they cannot be made liable to pay tax again for its sale. This contention has to be stated only to be rejected for the Act expressly provides imposition of multistage taxation under clauses (ii) and (iii) of section 3(3)(b) of the Act.

Summary

Issues:
1. Liability to pay tax on sale of refined oil after purchasing crude oil.
2. Interpretation of the term "manufacture" under the U.P. Trade Tax Act, 1948.
3. Application of relevant case laws to determine tax liability on processed goods.
4. Imposition of multistage taxation under the Act.

Issue 1: Liability to pay tax on sale of refined oil after purchasing crude oil

The appellant, engaged in the manufacture and sale of oils, sought clarification on their tax liability for the sale of refined oil after already paying tax on the purchase of crude oil. The Commissioner of Sales Tax held that the appellant was liable to pay sales tax on the refined oil, leading to an appeal by the appellant. The Sales Tax Tribunal and Allahabad High Court upheld the decision, prompting the appellant to appeal to the Supreme Court.

Issue 2: Interpretation of the term "manufacture" under the U.P. Trade Tax Act, 1948

The appellant contended that they should not be taxed on the sale of refined oil as it retains its basic character as oil even after refinement, which does not amount to manufacturing new goods. The respondent argued that any processing, as defined under the Act, makes the dealer liable for tax on the resulting goods. The Act defines "manufacture" to include processing, treating, or adapting goods, indicating tax liability on goods processed by the dealer.

Issue 3: Application of relevant case laws to determine tax liability on processed goods

The appellant cited various judgments to support their argument that refining crude oil does not constitute manufacturing new goods. However, the Supreme Court found these cases inapplicable to the present scenario, as they dealt with different commodities and processes. The Court emphasized that the nature and extent of processing, as per previous interpretations, determine whether the operation constitutes manufacturing, making the appellant liable for tax on the sale of refined oil.

Issue 4: Imposition of multistage taxation under the Act

The appellant also argued that having paid tax on the purchase of crude oil, they should not be taxed again on its sale. However, the Act allows for multistage taxation under specific clauses, making the appellant liable for tax on the sale of goods they manufactured by processing the purchased goods. The Supreme Court dismissed the appeal, upholding the tax liability on the sale of refined oil by the appellant.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal interpretations, and the final decision of the Supreme Court regarding the tax liability on the sale of refined oil under the U.P. Trade Tax Act, 1948.