1993 (1) TMI 279 - HC - VAT and Sales Tax

Summary

Issues:
Whether the process of transferring and filling liquid petroleum gas into smaller tins constitutes 'manufacture' under the Gujarat Sales Tax Act, 1969.

Detailed Analysis:
The case involved a small-scale industry engaged in refilling liquid petroleum gas (LPG) into smaller packings for sale. The industry applied a mechanism of pump drawing to refill gas without modifying it into smaller packings of various sizes. The Deputy Commissioner initially determined that this activity amounted to 'manufacture' based on factors such as creating a distinct identity, using special processes, and noting price differences. The Deputy Commissioner concluded that a new commercial commodity had been created.

The opponent-firm challenged this determination, leading to an appeal before the Gujarat Sales Tax Tribunal. The Tribunal disagreed with the Deputy Commissioner, emphasizing that despite using special devices like adaptors for transfer, the substance of the gas remained unchanged. The Tribunal also disregarded price differences between standard cylinders and smaller containers, focusing on the lack of transformation in the original substance. The Tribunal referenced Supreme Court decisions and overturned the Deputy Commissioner's order, allowing the appeal.

Subsequently, the Revenue referred the case to the High Court, where both parties agreed that a prior judgment involving a similar scenario was applicable. The High Court referred to the case of Kosan Gas Company, where the Tribunal had ruled in favor of the dealer, stating that the process of transferring gas into smaller cylinders did not constitute manufacture. The High Court upheld the Tribunal's decision, citing Supreme Court precedents that emphasized the lack of substantial changes in goods subjected to processing. The Court highlighted cases involving pig bristles, tea leaves, and milk powder to illustrate the principle that if goods retain their essential character after processing, they do not undergo manufacturing.

Based on the established legal principles and precedents, the High Court answered the reference question in favor of the opponent-firm, concluding that the activity of refilling LPG into smaller packings did not amount to 'manufacture' under the Gujarat Sales Tax Act. The Court's decision aligned with the interpretation that for an activity to be classified as manufacturing, the commodity must undergo vital changes that alter its character significantly, which was not the case in the scenario presented.