1985 (1) TMI 298 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the polishing of stones constitutes "manufacture" under section 2(k) of the Rajasthan Sales Tax Act.
2. Whether the dealer-assessee is liable to pay sales tax at the concessional rate under section 5C of the Act.

Detailed Analysis:

Issue 1: Definition of "Manufacture"
- The primary question was whether the polishing of stones falls within the term "manufacture" as defined in section 2(k) of the Rajasthan Sales Tax Act. The Act defines "manufacture" to include any process or manner of producing, collecting, extracting, preparing, or making any goods.
- The court examined various definitions and interpretations of the term "manufacture," including those from Chambers Twentieth Century Dictionary and previous case law such as Commissioner of Sales Tax v. Harbilas Rai & Sons [1968] 21 STC 17 (SC) and Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC).
- The court noted that "manufacture" implies a transformation where a new and different article emerges with a distinctive name, character, or use. It emphasized that if the commodity retains its essential identity, it cannot be considered as manufactured.

Issue 2: Application to Polishing of Stones
- The court considered whether the process of polishing stones changes their essential identity. Referring to cases like G.R. Kulkarni v. The State [1957] 8 STC 294 and Commissioner of Sales Tax v. Hastimal Ratanlal [1972] 30 STC 484, it was argued that polishing does not result in a new commercial commodity.
- The court observed that the polished stones retain their original identity and do not transform into a different commercial article. Therefore, polishing stones does not constitute "manufacture" under section 2(k) of the Act.
- The court adopted the reasoning from Commissioner of Sales Tax v. Harbilas Rai & Sons [1968] 21 STC 17 (SC), which stated that if the goods remain essentially the same commercial article after the application of labor, it cannot be considered as manufactured.

Conclusion:
- The court concluded that the polishing of stones does not involve a process that falls within the term "manufacture" as defined in section 2(k) of the Act.
- Consequently, the dealer-assessee is not liable to pay sales tax at the concessional rate under section 5C of the Rajasthan Sales Tax Act.
- The question referred for the court's decision was answered in the negative, in favor of the dealer-assessee and against the department. The court ordered that there would be no costs associated with this reference and directed that the answer be returned to the Board under section 15(5) of the Act.