1977 (11) TMI 124 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Evidence before the Tribunal regarding marketability of goods.
2. Evidence before the Tribunal regarding the manufacture of semi-finished utensils.
3. Tribunal's error in holding contravention under section 14 read with section 11 of the Bombay Sales Tax Act, 1959.

Issue-Wise Detailed Analysis:

1. Evidence before the Tribunal regarding marketability of goods:
The Tribunal concluded that the unpolished stainless steel utensils purchased by the applicants were not marketable. However, the court found no evidence to support this conclusion. The Tribunal's presumption that no one would buy unpolished stainless steel utensils was deemed incorrect. The court noted that the applicants had purchased these utensils in large quantities, indicating a market for such goods. Thus, the court determined that there was no evidence before the Tribunal to justify the conclusion that the goods purchased by the applicants were not marketable.

2. Evidence before the Tribunal regarding the manufacture of semi-finished utensils:
The Tribunal held that the semi-finished utensils purchased by the applicants on behalf of their principals were manufactured by the applicants because they had them polished before dispatch. However, the court found that the question of whether the goods were manufactured was not significant unless the identity of the goods was altered. The court emphasized that the goods despatched must remain the same as those purchased, regardless of any process applied to them. The court also noted that the applicants' chartered accountant had conceded that the process of polishing was covered within the wide definition of "manufacture" in section 2(17) of the said Act, but this did not imply that the goods had changed their identity or had become a new commercial commodity.

3. Tribunal's error in holding contravention under section 14 read with section 11 of the Bombay Sales Tax Act, 1959:
The main issue was whether the applicants had breached the declaration in form 17 by polishing the utensils before dispatching them to their principals. The court held that the relevant provisions of section 11(2) and the declaration in form 17 required that the very goods purchased must be despatched to the outside State principals. The court found that the polishing process did not change the identity of the stainless steel utensils. Therefore, the goods despatched were the same as those purchased. The court also referenced the Supreme Court's decision in Kailash Nath v. State of U.P., which supported the view that goods subjected to some processing or finishing remain the same commercial goods. Consequently, the court concluded that the Tribunal erred in holding that there was a contravention under section 14 read with section 11 of the said Act.

Conclusion:
- Question No. (1): There was no evidence before the Tribunal to justify the conclusion that the goods purchased by the applicants were not marketable.
- Question No. (2): Does not arise.
- Question No. (3): The Tribunal erred in holding that there was contravention under section 14 read with section 11 of the said Act in the matter of their purchases worth Rs. 1,75,138.

The respondent was ordered to pay the applicants' costs of the reference, fixed at Rs. 300.