1975 (1) TMI 72 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the applicant is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, for purchasing materials for studio maintenance and set-making.
2. Whether the applicant is a manufacturer within the meaning of section 2(17) of the Bombay Sales Tax Act, 1959, for making film sets.
3. Whether the applicant is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, for purchasing chemicals and processing materials for film processing.
4. Whether the applicant is a manufacturer within the meaning of section 2(17) of the Bombay Sales Tax Act, 1959, for processing films.

Detailed Analysis:

Issue 1: Dealer Status for Studio Maintenance and Set-Making
The applicants, a public limited company owning a film studio and laboratory, entered into "studio hire agreements" with film producers. The applicants purchased materials like bricks, wood, plaster, and paint for studio maintenance and set-making. The sets remained the applicants' property and were hired out to producers.

The Court referred to the definition of "dealer" under section 2(11) of the Bombay Sales Tax Act, 1959, which includes any person carrying on the business of buying or selling goods. The Court ruled that the applicants were not dealers for these purchases as these materials were either capital assets or adjuncts to their primary business activity of hiring out studio space. Thus, the applicants were not carrying on the business of buying goods in this context.

Issue 2: Manufacturer Status for Set-Making
Given the ruling on Issue 1, the question of whether the applicants were manufacturers for making film sets did not arise. The Court noted that the importance of being a manufacturer lies in the lower tax liability threshold under section 3 of the Act, but since the applicants were not dealers, this issue was moot.

Issue 3: Dealer Status for Film Processing Materials
The applicants also purchased chemicals and other materials for processing films, entering into "processing and raw stock agreements" with customers. The Court held that these materials were indispensable for the business activity of film processing and not merely adjuncts or capital assets. Thus, in purchasing these materials, the applicants were carrying on the business of buying goods and were therefore dealers under section 2(11) of the Act.

Issue 4: Manufacturer Status for Film Processing
The Court examined the definition of "manufacture" under section 2(17) of the Act, which includes processing any goods. Processing raw film into a commercially different processed film constituted "manufacture." The Court rejected the argument that manufacture must involve the processor's own goods, stating that the statutory definition did not impose such a limitation. Therefore, the applicants were manufacturers for the purposes of the Act.

Conclusion:
1. The applicants were not dealers for purchasing materials for studio maintenance and set-making (Question 1: Negative).
2. The question of whether the applicants were manufacturers for making film sets did not arise (Question 2: Not Applicable).
3. The applicants were dealers for purchasing chemicals and processing materials for film processing (Question 3: Affirmative).
4. The applicants were manufacturers for processing films (Question 4: Affirmative).

No order as to costs was made, as the applicants succeeded in part and failed in part. The reference was answered accordingly.