1981 (8) TMI 211 - HC - VAT and Sales Tax

Summary

Issues:
Whether the extraction and collection of boulders amount to manufacture under the Madhya Pradesh General Sales Tax Act, 1958.

Analysis:
The case involved a reference under section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, regarding the justification of holding that the extraction and collection of boulders do not amount to manufacture. The assessee had a contract for supplying boulders, and the Sales Tax Officer assessed tax liability and imposed a penalty, which was upheld by the Appellate Assistant Commissioner. However, the Board of Revenue later ruled that the assessee was not liable to pay sales tax as the collection and extraction of boulders did not constitute manufacture as per the Act. This decision led to a reference being made at the instance of the Commissioner of Sales Tax.

The Tribunal correctly determined that the assessee was not a manufacturer as per the definition of "manufacture" under section 2(j) of the Act. The process of merely supplying boulders collected from hillocks did not qualify as manufacturing under the Act. The definition of "manufacture" includes various processes of producing, collecting, extracting, or making goods, but it does not encompass every process as a manufacture. The word "manufactures" in section 4(5)(b) of the Act refers to bringing into existence a new substance, as clarified in legal precedents cited in the judgment.

The judgment highlighted that while the Act defines "manufacture" broadly to cover different processes of producing goods, not every process results in a new substance capable of being sold. The essence of manufacturing involves a transformation where a new and distinct article emerges. Relying on Supreme Court decisions, the judgment emphasized that if the goods subjected to labor remain essentially the same commercial article, it does not constitute manufacturing. Therefore, the assessee in this case, by collecting and supplying boulders without transforming them into a new substance, was not considered a manufacturer under the Act.

In conclusion, the Court answered the reference question in the negative, affirming that the assessee was not liable to pay sales tax as a manufacturer. The judgment awarded costs to the assessee and specified the counsel's fee. The decision was based on the interpretation of the term "manufacture" under the Madhya Pradesh General Sales Tax Act, 1958, and the distinction between processes that constitute manufacturing and those that do not result in the creation of a new commercial article.