1973 (9) TMI 93 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the disputed turnover representing sales of manure mixtures by the assessee is exempt from tax as second sales of chemical fertilizers.
2. Whether the manure mixture sold by the assessee qualifies as a second sale of chemical fertilizers under item 21 of the First Schedule.
3. Whether the manure mixture, composed of various items of chemical fertilizers, should be considered a chemical fertilizer under item 21.
4. Whether the manure mixture sold by the assessee has the same properties as its components and should be treated as the same article.

Analysis:
1. The disputed turnover in this case amounted to Rs. 1,00,29,369, representing sales of manure mixtures by the assessee. The assessee claimed exemption from tax, arguing that the sales were second sales of chemical fertilizers. The assessing authority and the Appellate Assistant Commissioner considered the turnover as first sales of "chemical fertilizers" taxable at a single point under item 21 of the First Schedule.

2. The Tribunal held that the manure mixtures sold by the assessee were second sales of chemical fertilizers and therefore not taxable. The revenue contended that the manure mixture, even if composed of components from sub-items (1) to (15) of item 21, should not be considered a second sale of chemical fertilizers. The revenue relied on a previous judgment where it was held that a mixture sold must have different characteristics and properties to be considered a different commodity for taxation purposes.

3. The court analyzed the definition of chemical fertilizers under item 21, which included mixtures of the articles mentioned in sub-items (1) to (15) and organic manures. The court held that the expression "chemical fertilizers" in item 21 was broad and encompassed any chemical fertilizers, and the manure mixture sold by the assessee should be considered a chemical fertilizer. The court rejected the argument that the manure mixture was not a chemical fertilizer because it did not fall within the specifically named articles in sub-items (1) to (15).

4. The court addressed the contention that the manure mixture sold by the assessee had the same properties as its components and should be treated as the same article. The court emphasized that each component and the manure mixture had distinct chemical properties and uses, making them different articles. The court clarified that even if the mixing process did not involve manufacturing, if the resulting product was sold as a different commercial product for a different user, it should be treated as a separate article. The court disagreed with the Tribunal's view and allowed the tax case, setting aside the Tribunal's order partially in favor of the revenue.

Overall, the court held that the manure mixture sold by the assessee constituted a chemical fertilizer under item 21 of the First Schedule and was subject to tax as a first sale, rejecting the argument that it qualified as a second sale of chemical fertilizers.