1970 (8) TMI 75 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the definition of "manufacture" under section 2(j) of the Madhya Pradesh General Sales Tax Act, 1958 in relation to dehusking paddy and converting grains into dal for tax assessment.

Analysis:
The case involved two references under section 44(1) of the M.P. General Sales Tax Act, 1958, where the assessee was assessed to tax based on the process of dehusking paddy into rice and converting other grains into dal. The primary issues referred were whether paddy and other grains before dehusking are considered raw material, and whether dehusking into rice or converting grains into dal amounts to "manufacture" under section 2(j) of the Act.

The definition of "manufacture" under section 2(j) includes any process of producing or preparing goods, encompassing making goods marketable. The court emphasized that transforming paddy into rice and grains into dal results in entirely different articles suitable for human consumption, thus meeting the criteria of "manufacture." The court rejected the argument that for a process to be considered manufacture, the original goods must become entirely different articles for sale after consumption. It held that paddy loses its original identity when dehusked into rice, and grains similarly transform into dal, satisfying the definition of manufacture.

The court's interpretation led to the following conclusions: (i) Paddy and other grains before dehusking are classified as raw material under section 2(1) of the Act. (ii) Dehusking paddy into rice and converting grains into dal constitute "manufacture" under section 2(j) of the Act. (iii) The levy of tax under section 7 read with section 8(1) of the Act was deemed legal based on the facts and circumstances of the case. The court ruled in favor of the tax department, stating that the processes involved in dehusking and conversion met the criteria of manufacture, thereby upholding the tax assessment.

In conclusion, the court's judgment clarified the interpretation of the term "manufacture" under the sales tax act concerning the transformation of paddy and grains, ultimately affirming the legality of the tax levy in the case.