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1980 (9) TMI 253 - HC - VAT and Sales Tax
Issues involved: Liability to tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959.
Judgment Summary: The judgment of the Madras High Court addressed three cases concerning the liability to tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959. The cases involved dealers who purchased raw bones and converted them into various by-products. The court analyzed whether the purchases fell under section 7-A(1)(a) based on the consumption of goods in the manufacture of other goods for sale or otherwise. In a previous case, the court had ruled that for section 7-A to apply, the goods purchased must be consumed in the manufacturing process, not merely used or utilized. This distinction was crucial in determining tax liability under the Act. Subsequent cases involving the purchase and processing of turmeric, wood, and pineapple slices further clarified the interpretation of section 7-A. The courts emphasized that the goods purchased must undergo a transformation where their original identity is lost to be considered consumed in the manufacturing process. The Kerala High Court and the Supreme Court affirmed that the term "consumes" in section 7-A(1)(a) signifies a complete loss of identity of the purchased goods during the manufacturing process. If the original identity is retained, the goods are not deemed consumed, and section 7-A(1)(a) does not apply. Applying these principles to the cases at hand, the Madras High Court concluded that the raw bones purchased by the dealers were not consumed in the production of end-products like crushed bone, bone grist, etc. Therefore, section 7-A(1)(a) was not attracted, and the Tribunal's decision was upheld. In conclusion, the court dismissed all three tax revision cases, affirming that section 7-A(1)(a) did not apply to the transactions in question. No costs were awarded in these matters. This judgment provides valuable insights into the interpretation of section 7-A of the Tamil Nadu General Sales Tax Act, emphasizing the significance of the term "consumes" in determining tax liability for goods purchased and used in manufacturing processes.
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