1990 (10) TMI 341 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether blue metal jelly obtained from the conversion of stone boulders is subject to purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act.

Detailed Analysis:

The judgment by the High Court of Madras centered around the issue of whether blue metal jelly obtained from the conversion of stone boulders is liable for purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act. The assessee was initially subjected to such a tax based on the interpretation that the process of converting bigger stone boulders into smaller stones and blue metal jelly constituted manufacturing under the Act. However, the Sales Tax Appellate Tribunal (Main Bench), Madras-1, held that this process does not amount to manufacturing blue metal jelly. The Tribunal referenced the decision in Deputy Commissioner of Sales Tax v. Pio Food Packers and other authorities to support its conclusion. The court also referred to the definition of "manufacture" from Corpus Juris Secundum to emphasize that a significant transformation is required for an activity to be considered manufacturing.

In a similar case, the court cited State of Tamil Nadu v. Subbaraj and Co. where the assessee converted raw bones into various products, and the Tribunal ruled that section 7-A of the Act did not apply. The High Court upheld this decision, emphasizing that no consumption of the purchased goods occurred in the manufacture of other goods. Section 7-A(1)(a) of the Act was specifically discussed, which pertains to the taxation of goods consumed in the manufacture of other goods for sale or otherwise. The court highlighted that for this provision to apply, there must be consumption of goods in the manufacturing process.

Ultimately, the court concluded that the blue metal jelly obtained from the crushing of stone boulders and conversion into smaller stones did not meet the criteria outlined in section 7-A of the Act. Since there was no sale of the blue metal jelly outside the State, and all the elements of section 7-A were not satisfied, the court affirmed the Tribunal's decision. The tax case was dismissed, and no costs were awarded. The judgment reiterated the Tribunal's understanding of the law regarding the taxation of blue metal jelly in such circumstances, leading to the dismissal of the petition.