2001 (2) TMI 893 - SC - VAT and Sales Tax

Whether tanned leather can be subjected to Uttar Pradesh mandi fee payable under the provisions of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964? Whether the term hides and skins includes tanned leather ? Held that - Appeal dismissed. In our view, it is very clear, from what has been set out by the appellants themselves in their affidavit that for hide and skin to be converted into leather or tanned leather all that is required is a process. It is a process of cleaning, curing and adding preservatives. As the finished product, i.e., tanned leather , even though it may have changed in physical appearance or chemical combination and even though it may commercially be a different item, still remains a hide or a skin . For this reason we are of the opinion that there is no illegality or infirmity in the judgment of the High Court.

Issues Involved:
1. Whether "tanned leather" can be subjected to Uttar Pradesh mandi fee under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964.
2. Whether "tanned leather" is considered "hides and skins" under the said Act.
3. The distinction between "manufacture" and "processing" in the context of tanned leather.

Issue-wise Detailed Analysis:

1. Whether "tanned leather" can be subjected to Uttar Pradesh mandi fee under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964:
The primary question in the appeal was whether "tanned leather" falls within the ambit of "agricultural produce" under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, and thus subject to mandi fee. Section 2(a) of the said Act defines "agricultural produce" as items of produce from various sources, including animal husbandry, specified in the Schedule, and includes processed forms of these items. The Schedule G of the said Act includes "hides and skins" under "Animal husbandry". The court emphasized that the definition of "agricultural produce" in Section 2(a) is inclusive and not exhaustive, meaning it covers items specified in the Schedule, their admixtures, and processed forms.

2. Whether "tanned leather" is considered "hides and skins" under the said Act:
The appellants argued that "tanned leather" is a manufactured commodity distinct from "hides and skins" and should not be included under the said Act. They relied on several judgments, including A. Hajee Abdul Shukoor and Company v. State of Madras, which distinguished between raw and tanned hides and skins for tax purposes. However, the court found that these cases were under different statutes and not relevant for interpreting the U.P. Krishi Utpadan Mandi Adhiniyam, 1964. The court noted that the term "hides and skins" in the said Act should be interpreted broadly to include processed forms like tanned leather. The Hindi version of the Act uses the term "Chamra", which means leather, indicating that tanned leather was intended to be included.

3. The distinction between "manufacture" and "processing" in the context of tanned leather:
The court addressed the distinction between "manufacture" and "processing" by examining various precedents. In the case of Saraswati Sugar Mills v. Haryana State Board, the court distinguished between the two, stating that "processing" implies a change in form while "manufacture" results in a new and distinct article. However, the court concluded that for the purposes of the said Act, this distinction was not crucial. The process of converting hides and skins into tanned leather involves cleaning, curing, and adding preservatives, which is considered processing. The court held that even though tanned leather might be a different commodity commercially, it remains a processed form of "hides and skins" and thus falls within the definition of "agricultural produce" under the said Act.

Conclusion:
The Supreme Court upheld the judgment of the Allahabad High Court, concluding that "tanned leather" is indeed subject to the Uttar Pradesh mandi fee under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964. The court affirmed that "tanned leather" is a processed form of "hides and skins" and falls within the definition of "agricultural produce" as per Section 2(a) of the said Act. The appeal was dismissed with no order as to costs.

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