1987 (6) TMI 390 - HC - VAT and Sales Tax

Summary

Issues:
Assessment under the Andhra Pradesh General Sales Tax Act for the year 1978-79 and assessment under the Central Sales Tax Act.

Analysis:
The case involved two Tax Revision Cases (T.R.Cs) filed by the same assessee concerning the assessment year 1978-79 under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act. The controversy arose from the purchase of raw bones from unregistered dealers, subsequent processing, and sale of resulting products like crushed bones, bone grist, bone-meal, and sinews within and outside the State. The disagreement centered on the tax liability of the assessee on the products obtained after processing the raw bones. The authorities held that sinews and bone-meal were new commercial commodities distinct from bones, attracting different tax rates under the relevant sections of the Acts.

The key legal provision in question was section 6-A of the Andhra Pradesh General Sales Tax Act, which imposes tax liability on a dealer who purchases goods liable to tax but not taxed at the time of purchase, and subsequently consumes them in manufacturing other goods for sale. The contention of the petitioner's counsel was that no new goods were produced through the drying and crushing process of raw bones, and thus, there was no consumption of raw bones as envisaged under section 6-A. The counsel relied on various judicial precedents, including decisions of the Supreme Court and High Courts, to support this argument.

The court examined previous judgments related to similar provisions in different state Acts and the Central Sales Tax Act. These cases provided insights into the interpretation of "consumption" and "manufacture" concerning tax liability on goods purchased by dealers. The court distinguished cases where the processing of goods did not result in the production of new commodities from those where a distinct commercial product emerged. The legal principles established in these cases guided the court's determination of whether sinews and bone-meal constituted new commodities different from raw bones for tax purposes.

Ultimately, the court upheld the Tribunal's decision that the assessee's turnover from the purchase of raw bones, consumed in producing bone-meal and sinews, was subject to tax under section 6-A(ii)(a) of the Act. The court concluded that sinews and bone-meal were recognized as distinct commodities from raw bones, supported by the legislative entries in the First Schedule. Consequently, the controversy under section 8-A of the Central Sales Tax Act was deemed irrelevant based on the preceding conclusion. As a result, the Tax Revision Cases were dismissed without costs.