1980 (12) TMI 176 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 5(2)(a)(ii) of the Act regarding deletion of goods from certificate of registration for manufacturing purposes.

Detailed Analysis:
The case involved a question regarding the deletion of certain goods from the certificate of registration for manufacturing purposes issued to the assessee. The assessee had shifted a processing unit to another state for mixing raw rubber with china-clay and burada. The authorities contended that since part of the manufacturing process was done outside Delhi, the assessee was not entitled to retain the entry in the certificate. The Assistant Sales Tax Officer held against the assessee, leading to a series of appeals and revisions.

The Assistant Commissioner sought a remand report to ascertain the nature of raw materials transferred to the factory in another state, whether the processed compound was a salable item, and if all processed compound stocks were brought back to Delhi. The report confirmed that certain raw materials were transferred, the processed compound was not salable, and all stocks were returned to Delhi. Despite this, the Assistant Commissioner dismissed the revision petition, which was further upheld by the Financial Commissioner, relying on previous judgments interpreting section 5(2)(a)(ii) of the Act.

The main judgment cited was Fitwell Engineers v. Financial Commissioner, which emphasized that goods purchased for resale or manufacturing should be utilized within Delhi. However, the Supreme Court in Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax, ruled that manufacturing and sales were not restricted to Delhi. The court noted that these cases were not relevant to the present controversy.

The court analyzed the definition of "taxable turnover" under section 5(2)(a)(ii) post-amendment, emphasizing the territorial scope of manufacturing and sales. It considered whether sending raw materials outside Delhi for processing constituted manufacturing and concluded that the activity did not disentitle the assessee from retaining the entry in the certificate. The court distinguished between processing and manufacturing, noting that since the actual manufacturing occurred in Delhi, the assessee was entitled to maintain the entry.

Furthermore, the court highlighted that if manufacturing occurred outside Delhi, the department could only include the article in the taxable turnover of the purchasing dealer under the second proviso to section 5(2)(a)(ii). There was no provision in the Act or Rules to delete the entire entry in the certificate of registration. Consequently, the court answered the question in favor of the assessee, ruling against the department, with no order as to costs.

In conclusion, the judgment clarified the distinction between processing and manufacturing, upheld the assessee's entitlement to retain the entry in the certificate, and emphasized the limited authority of the department in cases of manufacturing outside Delhi under the relevant provisions of the Act.