1980 (7) TMI 255 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of tax liability u/s 6 of Karnataka Sales Tax Act on purchase turnover of boulders converted into jelly.

Summary:
The judgment by Karnataka High Court dealt with the question of tax liability u/s 6 of the Karnataka Sales Tax Act on the purchase turnover of boulders converted into jelly by the assessee. The assessee purchased boulders from unregistered dealers and produced jelly out of them. Initially, the assessing authority did not levy tax on the turnover, but later rectified the assessment to include the turnovers under section 6 of the Act. The Deputy Commissioner set aside the rectification orders, leading to further proceedings initiated by the Commissioner u/s 22-A of the Act. The Commissioner held that the conversion of boulders into jelly amounted to a manufacturing process, thus attracting tax liability u/s 6 of the Act.

The assessee contended that the process of converting boulders into jelly did not constitute a manufacturing process and therefore should not be taxed u/s 6 of the Act. The High Court, in analyzing the issue, referred to previous decisions and interpretations. The revenue argued that even if the process did not amount to manufacturing, the assessee consumed boulders to produce jelly, a different commercial article for sale, thus falling under the purview of section 6 of the Act. The revenue relied on the Supreme Court's decision in Ganesh Prasad Dixit v. Sales Tax Commissioner, M.P. to support their argument.

On the other hand, the assessee relied on the Supreme Court's decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers to argue that the conversion process did not amount to manufacturing and therefore did not attract tax liability u/s 6 of the Act. The High Court, after considering the arguments and precedents, allowed the appeals and restored the orders of the Deputy Commissioner and assessing authority for the respective assessment years, holding that the process of breaking boulders into jelly did not qualify as a manufacturing process under section 6 of the Act.