1977 (11) TMI 123 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether purchase tax is payable u/s 13 of the Bombay Sales Tax Act, 1959 on the purchase of the ship 'Jalapratap' for dismantling.
2. Whether the process of dismantling the ship constitutes "manufacture" u/s 2(17) of the said Act.
3. Whether the ship was purchased as scrap or as a ship.
4. Whether the ship was used in the manufacture of goods as per the provisions of the said Act.

Summary:

1. Purchase Tax Liability u/s 13:
The Tribunal initially held that no purchase tax was payable on the purchase of the ship 'Jalapratap' by the respondents for dismantling purposes. The Deputy Commissioner of Sales Tax had earlier determined that purchase tax was applicable under entry 22 of Schedule E to the said Act, but this was contested by the respondents.

2. Definition of "Manufacture" u/s 2(17):
The respondents did not dispute that dismantling falls within the definition of "manufacture" as per clause (17) of section 2 of the said Act. The Tribunal accepted the respondents' contention that the ship was not used in the manufacture of goods, thus exempting them from purchase tax. However, the High Court found that the process of dismantling the ship to obtain scrap iron, steel plates, etc., constitutes "manufacture" as it results in new commercial commodities.

3. Nature of Purchase - Ship vs. Scrap:
The respondents argued that the ship was purchased as scrap. However, the High Court found no evidence supporting this claim. The instrument of sale and other records indicated that the respondents purchased a ship, not scrap. The ship was purchased for breaking and scrapping, but this did not convert it into scrap at the time of purchase.

4. Use in Manufacture:
The High Court rejected the argument that the ship was not used in the manufacture of goods. It was held that the ship could be regarded as raw material, and the scrap iron and steel obtained from dismantling were new commercial commodities. Thus, the ship was used in the manufacture of goods, attracting the provisions of section 13(a) of the said Act.

Conclusion:
The High Court answered the question in the negative regarding the purchase of the frame or hull or body proper of the ship 'Jalapratap', holding that purchase tax is payable. The respondents were ordered to pay the costs of the reference fixed at Rs. 300.