1951 (9) TMI 33 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability to pay sales tax on processed goods.
2. Interpretation of the term "process" under Section 5(1)(b) of the Bombay Sales Tax Act.
3. Whether turnover from processed goods can be combined with general turnover to determine liability under Section 5(1)(b).

Analysis:
The case involved an application in revision against the order of the Collector of Sales Tax modifying the assessment passed by the Sales Tax Officer. The applicant, a dealer in ghee and butter, boiled unsold butter to prevent deterioration. The Sales Tax Officer held the applicant liable as a processor under Section 5(1)(b) due to the ghee produced from unsold butter, leading to an appeal to the Assistant Commissioner and subsequently to the Collector. The main contention was the liability to pay sales tax on the processed goods.

The first issue addressed was whether boiling butter into ghee constitutes a "process" under Section 5(1)(b) of the Act. The court analyzed the term "process" using dictionary definitions and common understanding. It concluded that the mere act of boiling without adding anything did not qualify as a process, likening it to a method of clarification rather than manufacturing. Therefore, the court held that boiling butter into ghee did not amount to a process for sales tax liability.

The second issue focused on whether turnover from processed goods could be combined with general turnover to determine liability under Section 5(1)(b). The court interpreted the statute and emphasized that the word "gross" turnover in Section 5(1) referred to the entire turnover without deductions. It noted the absence of legislative intent to combine turnover as a processor with general turnover for lower liability. Referring to a similar case in Nagpur, the court held that turnovers must meet specific thresholds independently before liability arises.

In conclusion, the court allowed the application, setting aside the assessment made against the applicant. It emphasized the need for clear language in tax laws and rejected the approach of combining turnovers to determine liability. The applicant was granted costs before the Tribunal, and the judgment highlighted the importance of distinct turnovers for sales tax liability determination.