1959 (7) TMI 40 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to deduction under Section 8(a) of the Bombay Sales Tax Act, 1953.
2. Whether the mixing of different varieties of tea amounts to "processing" or "alteration".
3. Justification of the Tribunal's decision to not allow the assessees to show that a part of the goods sold was not processed or altered.

Detailed Analysis:

1. Entitlement to Deduction under Section 8(a) of the Bombay Sales Tax Act, 1953:
The primary issue was whether the assessees, who purchased tea from registered dealers, were entitled to a deduction from their turnover under Section 8(a) of the Bombay Sales Tax Act, 1953. The Sales Tax Authorities and the Tribunal denied this deduction based on the proviso that the goods should not have been processed or altered after purchase. The assessees argued that mixing different varieties of tea did not constitute processing or alteration.

2. Whether the Mixing of Different Varieties of Tea Amounts to "Processing" or "Alteration":
The Tribunal and the Additional Collector of Sales Tax held that mixing different varieties of tea to create new blends amounted to processing, as it altered the value and utility of the original tea. The Tribunal referenced several cases, including *Chotalal Raghunathji v. The State of Bombay*, where it was held that "process" has a broader connotation than "manufacture" and involves altering the original material into something commercially different. The Tribunal also cited *North Bengal Stores Ltd. v. Member, Board of Revenue, Bengal*, where mixing drugs by a chemist was considered manufacturing, and *Hiralal Jitmal v. Commissioner of Sales Tax*, which stated that any modification making a material saleable in an acceptable form constitutes manufacture. The Tribunal concluded that the mixing of tea varieties required skill and created a distinct product, thus amounting to processing and alteration under the Act.

3. Justification of the Tribunal's Decision to Not Allow the Assessees to Show that a Part of the Goods Sold was Not Processed or Altered:
The assessees attempted to argue that a part of the tea sold as "orange pekoe" was not a distinct product from the original tea purchased. The Tribunal did not allow this argument, as it was not raised before the lower authorities and involved factual determination. The Tribunal upheld its decision based on the evidence and arguments presented at earlier stages.

Judgment Analysis:
The High Court examined whether the assessees' activities constituted processing or alteration under Section 8(a) of the Act. The Court noted that "process" was not defined in the Act but generally involves subjecting a material to treatment or preparation for the market. In this case, the tea was mixed manually without mechanical or chemical processes, which the Court did not consider as processing. The Court also found no alteration in the nature or character of the tea, as the mixing did not change the fundamental properties of the tea leaves. Consequently, the Court concluded that the assessees were entitled to the deduction claimed under Section 8(a).

Conclusion:
The High Court ruled in favor of the assessees, stating that the mixing of tea varieties did not amount to processing or alteration under the Act. Therefore, the assessees were entitled to a deduction from their turnover of sales. The second question regarding the Tribunal's refusal to consider the "orange pekoe" argument was rendered moot by this conclusion. The reference was answered accordingly, and the assessees were awarded costs from the State of Bombay.