1991 (7) TMI 303 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of provisions of Gujarat Sales Tax Act, 1969 regarding set-off for tax paid on plastic spools used in manufacturing adhesive plaster tapes.

Summary:
The judgment of the Gujarat High Court addressed the issue of whether a partnership firm, registered under the Gujarat Sales Tax Act, 1969, was entitled to set-off for tax paid on plastic spools used in manufacturing adhesive plaster tapes. The Assistant Commissioner of Sales Tax contended that the plastic spools were "prohibited goods" falling under a specific entry, thus the dealer was not entitled to set-off. The Tribunal upheld this decision, leading to a reference to the High Court.

The High Court analyzed whether the plastic spools were component parts of the goods or merely packing material. Referring to the Supreme Court's decision in Collector of Central Excise v. Eastend Paper Industries Ltd., it was established that items becoming part of the end-product until it is marketable are considered component parts. As the adhesive plaster tapes could only be sold after being wrapped on plastic spools, the spools were deemed component parts of the marketed goods, not packing material. The Court rejected the Revenue's argument that the spools retained their packing material character, emphasizing that the manufacturing process was incomplete until the goods were marketable.

In conclusion, the High Court answered the reference in the negative, in favor of the assessee, stating that the plastic spools were not to be considered as packing material but as component parts of the adhesive plaster tapes. The judgment clarified that the manufacturing process was not complete until the goods were marketable, emphasizing the importance of the plastic spools in making the adhesive plaster tapes marketable.