1984 (1) TMI 277 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the definition of "manufacture" under the U.P. Sales Tax Act in relation to the sale of brass scrap by an assessee.

Analysis:
The judgment by the Allahabad High Court dealt with the interpretation of the term "manufacture" under the U.P. Sales Tax Act in the context of sales of brass scrap by an assessee. The case involved two revisions filed by the Commissioner, Sales Tax, U.P., against the order of the Sales Tax Tribunal. The assessing authority had treated the assessee as a manufacturer after a specific date and held the sales of scrap liable to tax. The appellate authority upheld this decision, leading the assessee to appeal to the Sales Tax Tribunal, which partially allowed the appeals by reducing the tax demands.

The key question in the revisions was whether the assessee fell under the definition of "manufacture" as per the Act. The Commissioner argued that the act of collecting old and condemned utensils by the assessee constituted manufacturing under the broad definition of the term. The definition of "manufacture" under the Act included various activities like producing, making, mining, collecting, etc. The Commissioner contended that the activities of the assessee, including collecting old utensils and selling them as scrap, should be considered manufacturing.

The court analyzed the definition of "manufacture" provided in the Act and compared it to similar definitions in other statutes. It referred to a case from the Bombay High Court that emphasized the need for a new commercial commodity to emerge for an activity to be considered manufacturing. The court also cited a previous judgment involving mineral sales to highlight the requirement of producing a new commodity for an activity to qualify as manufacturing.

The court concluded that the term "collecting" in the definition of "manufacture" should be viewed as part of a process to produce a new commercial commodity. Since the assessee merely collected old utensils and sold them without transforming them into a new product, it did not meet the criteria for manufacturing. Additionally, the court noted that the assessee received old utensils as part of transactions involving new utensils, which did not constitute independent collecting for profit.

In light of these considerations, the court held that the assessee did not fall under the definition of "manufacture" and its activities regarding brass scrap were not taxable. Consequently, the revisions filed by the Commissioner were dismissed, and costs were imposed on the Commissioner.