1957 (1) TMI 28 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the term "manufacturer" under the Madhya Bharat Sales Tax Act, 1950 in the context of a printer and dyer of textile cloth. Assessment of liability for sales tax on printed and dyed textiles sold by the assessee.

Analysis:

1. The reference under section 13(1) of the Madhya Bharat Sales Tax Act, 1950 involved a dispute regarding the liability of a printer and dyer of textile cloth to pay sales tax on the printed and dyed textiles sold by him. The key questions of law referred to the High Court included whether the assessee should be considered a manufacturer, the impact of sales tax recovery by manufacturing mills on the assessee's liability, and whether the printing and coloring of cloth by the dealer created a new marketable commodity attracting the Sales Tax Act.

2. The petitioner's argument centered on distinguishing between a manufacturer and a processor, contending that the assessee was a processor and not liable for sales tax as per the notification under section 5. On the other hand, the respondent argued that the term "manufacturer" encompassed producing goods capable of being sold, which the assessee did by printing and dyeing textiles. Legal precedents were cited to support both positions.

3. The Court acknowledged the distinction between a manufacturer and a processor under the Act but focused on determining whether the assessee qualified as a manufacturer. The definition of "manufacturer" was crucial, and various dictionary interpretations were considered. The Court emphasized that the Act aimed to levy sales tax on goods produced by the manufacturer for sale in the course of business, without requiring a complete transformation of materials for the manufactured article to be commercially distinct.

4. Relying on legal interpretations and precedents, the Court concluded that the assessee, engaged in printing and dyeing textiles for sale, fell within the definition of a manufacturer under section 2(k) of the Act. The Court held that the printing and dyeing activities resulted in the creation of a commercial commodity capable of being sold, aligning with the essence of manufacturing. Therefore, the Sales Tax Authorities were justified in holding the assessee liable for sales tax on the printed and dyed textiles sold.

5. The judgment, delivered by the Judges Dixit and Samvatsar, affirmed the liability of the assessee to pay sales tax on the sale transactions of printed and dyed textiles. The Court answered the questions posed in the negative and affirmative as per the analysis provided. No costs were awarded in the case, and the reference was resolved accordingly.