1976 (3) TMI 204 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the activity of frying and spicing of the cashew-nuts amounted to "manufacture" u/s 2(17) of the Bombay Sales Tax Act, 1959.
2. Whether the fried and salted cashew-nuts sold to Air-India were covered by entry 6 of Schedule E or entry 5 of Schedule D to the Bombay Sales Tax Act, 1959.

Summary:

Issue 1: Manufacture u/s 2(17)
The assessees, registered under the Bombay Sales Tax Act, 1959, applied to the Commissioner of Sales Tax to determine if frying and spicing cashew-nuts constituted "manufacture" u/s 2(17) of the said Act. The Commissioner concluded that the process did amount to "manufacture" as it resulted in a distinct commercial commodity. However, the Tribunal reversed this decision, stating that the activity did not produce a new commercial commodity. The High Court upheld the Tribunal's view, emphasizing that the fried and salted cashew-nuts were not commercially distinct from plain cashew-nuts. The Court referenced its prior decision in Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co., asserting that for an activity to be considered "manufacture," it must result in a commercially different commodity.

Issue 2: Classification under Schedule D or E
The second issue was whether the sales of fried and salted cashew-nuts to Air-India fell under entry 6 of Schedule E or entry 5 of Schedule D. The Tribunal found that the cashew-nuts were sold in plastic bags, not sealed containers, thus falling under entry 5 of Schedule D. The High Court supported this conclusion, referencing the Supreme Court's definition of "sealed container" in Commissioner of Sales Tax v. G.G. Industries and Martand Dairy & Farm v. Union of India. Despite doubts about the factual correctness of the Tribunal's findings regarding the packaging, the High Court was bound by these findings and upheld the Tribunal's decision.

Conclusion:
The High Court answered both questions in the affirmative, confirming that the activity of frying and spicing cashew-nuts did not amount to "manufacture" and that the sales were covered by entry 5 of Schedule D, not entry 6 of Schedule E. The applicant was ordered to pay the costs of the reference, fixed at Rs. 250.