1968 (2) TMI 102 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the making of panpattis can be considered a process or manufacture for the purpose of the Bombay Sales Tax Act, 1953?

Detailed Analysis:
The case involved a respondent who dealt in panpattis, cigarettes, and bidis without maintaining proper books of account. The Sales Tax Officer estimated the respondent's turnover based on a visit to the shop, leading to a dispute regarding the classification of the activity of preparing panpattis. The core issue was whether the respondent's activity constituted manufacturing or processing goods under section 5(1)(b)(ii) of the Bombay Sales Tax Act, which determines liability for tax based on turnover exceeding Rs. 10,000. The Tribunal initially ruled that preparing pan or vidas did not amount to manufacturing or processing goods, but the department argued that the respondent was engaged in processing goods due to the nature of the preparation involved.

The Tribunal's decision was challenged based on the interpretation of the term "process" under the Act. The court referred to dictionary definitions of "process" to determine its meaning in the context of the case. It was established that the respondent's actions in preparing panpattis involved a specific method and treatment to convert raw materials into a marketable product. The court disagreed with the Tribunal's view that the respondent's activity was merely mixing ingredients, emphasizing the transformation of raw materials into a distinct article through a series of steps. The court concluded that the respondent's preparation of panpattis constituted processing goods, even though it did not amount to manufacturing.

Furthermore, the court referenced a previous case involving tea mixing to distinguish between processing and mere mixing. In the tea case, it was highlighted that the tea leaves remained unchanged despite mixing, unlike the transformation seen in the preparation of panpattis. The court emphasized that the respondent's process involved multiple steps that altered the individual ingredients into a new product, supporting the classification of the activity as processing goods. Therefore, the court held that the making of panpattis qualified as a process under the Bombay Sales Tax Act, 1953, despite not meeting the criteria for manufacturing.

The court clarified that the decision on the classification of the activity did not conclude the case, as the Tribunal still needed to assess the accuracy of the turnover calculation by the Sales Tax Authorities. The respondent was held liable for costs, and the matter was remanded to the Tribunal for further proceedings based on the clarified interpretation of processing goods under the Act.