1990 (1) TMI 289 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Rule 3 of the Bombay Sales Tax Rules, 1959, regarding the process of converting raw hides into finished tanned goods and its qualification as "manufacture."
2. Entitlement to set-off under Rule 41-A of the Bombay Sales Tax Rules, 1959, for tanning materials used in the process.
3. Whether tanning materials used in converting raw hides into tanned hides and skins can be considered resold under Rules 42 and 43 of the Bombay Sales Tax Rules, 1959.
4. Jurisdiction of the Sales Tax Officer to rectify the order under Section 62 of the Bombay Sales Tax Act, 1959.

Issue-wise Detailed Analysis:

1. Interpretation of Rule 3 of the Bombay Sales Tax Rules, 1959:
The primary issue was whether the process of converting raw hides into finished tanned goods amounts to "manufacture" under Rule 3 of the Bombay Sales Tax Rules, 1959. The Court noted that the definition of "manufacture" under Section 2(17) of the Bombay Sales Tax Act, 1959, is broad enough to include treating or adapting any goods. However, Rule 3(xviii) specifies that "manufacture" does not include processes that do not change the description of goods in Schedule B. Since hides and skins are listed in Schedule B as "hides and skins whether in a raw or dressed state," the Court held that converting raw hides into dressed hides does not constitute "manufacture." Consequently, the assessee is not considered a manufacturer under Rule 3(xviii) and Section 2(17) of the Act.

2. Entitlement to Set-off under Rule 41-A:
Given the conclusion that the assessee is not a manufacturer, the Court determined that the assessee is not entitled to set-off under Rule 41-A, which is available only to registered dealers who manufacture taxable goods for sale or export. The first common question was thus answered in the negative and in favor of the Revenue.

3. Resale of Tanning Materials under Rules 42 and 43:
The second issue was whether the tanning materials used in the process of converting raw hides into tanned hides and skins could be considered resold under Rules 42 and 43. The Court referred to the definitions of "resale" and "sale" in Sections 2(26) and 2(28) of the Act, which require that goods resold must be in the same form as purchased. Since the tanning materials are used in the process and not resold in their original form, the Court held that the assessee is not entitled to relief under Rules 42 and 43. The second common question was also answered in the negative and in favor of the Revenue.

4. Jurisdiction to Rectify under Section 62:
The additional issue in Sales Tax Reference No. 21 of 1986 concerned whether the Sales Tax Officer had jurisdiction to rectify the order under Section 62 of the Act. The Court noted that Section 62 allows for rectification of orders with mistakes apparent from the record, which means obvious or glaring mistakes. Given the long-standing dispute and the detailed consideration required to determine whether the assessee is a manufacturer, the Court concluded that the error was not apparent from the record and could not be rectified under Section 62. The Court also rejected the alternative argument that the rectification should be treated as reassessment under Section 35, as the procedural requirements for reassessment were not met. The additional question was answered in the negative and in favor of the assessee.

Conclusion:
The references were answered in the negative, with no order as to costs. The Court ruled in favor of the Revenue on the common questions of law and in favor of the assessee on the additional question regarding rectification jurisdiction.