1967 (7) TMI 100 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sale of industrial gloves to certain companies qualifies for exemption under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941.
2. Interpretation of the term "in the manufacture of goods" under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, in light of relevant Supreme Court decisions.

Detailed Analysis:

Issue 1: Exemption Qualification of Industrial Gloves
The assessee, a registered dealer, claimed deductions for the sale of industrial gloves to two companies under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act. The Commercial Tax Officer rejected the claim, stating that the purchasing dealers did not buy the gloves for manufacture or resale but for use by workers in factories. This decision was upheld by the Assistant Commissioner and the Additional Commissioner of Commercial Taxes, who noted that the gloves were not directly involved in the manufacturing process but were used by workers to handle materials safely.

The Board of Revenue also rejected the assessee's revision application, emphasizing that the gloves did not qualify as goods used "in the manufacture of goods for sale." The Board maintained that the term "in" necessitated a restricted interpretation, meaning the gloves were not part of the manufacturing process.

Issue 2: Interpretation of "In the Manufacture of Goods"
The assessee argued that the gloves were "essentially required" for handling materials during manufacturing, thus falling within the scope of section 5(2)(a)(ii). The counsel for the assessee cited two Supreme Court cases: Indian Copper Corporation Ltd. v. Commissioner, Commercial Taxes, Bihar and J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur.

In Indian Copper Corporation Ltd., the Supreme Court held that goods used in an integrated process of manufacturing, including transportation of raw materials and finished goods, qualify for exemption. Similarly, in J.K. Cotton Spinning and Weaving Mills Co. Ltd., the Supreme Court stated that any process integrally connected with the ultimate production of goods, making the manufacturing commercially expedient, should be included under "in the manufacture of goods."

The High Court noted the similarity between section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act and section 8(3)(b) of the Central Sales Tax Act, which the Supreme Court interpreted in the aforementioned cases. The Court concluded that goods facilitating the manufacturing process, even if not consumed in it, should be considered as used "in the manufacture of goods."

The Court determined that the industrial gloves were essential for the workers to handle hot and corrosive materials, making the manufacturing process commercially feasible. Therefore, the gloves met the criteria for being used "in the manufacture of goods."

Conclusion
The High Court answered the reference in the affirmative, ruling in favor of the assessee. The Court held that the industrial gloves were used in the manufacture of goods as understood by section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act. The respondent was ordered to pay the costs of the reference to the assessee.