1993 (4) TMI 299 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for tax holiday under rule 3(66a) of the Bengal Sales Tax Rules, 1941.
2. Definition of "manufacture" within the context of the Bengal Sales Tax Rules, 1941.
3. Whether the processes performed outside the applicant's unit affect eligibility for tax exemption.

Issue-wise Detailed Analysis:

1. Eligibility for Tax Holiday under Rule 3(66a) of the Bengal Sales Tax Rules, 1941:
The applicant, a manufacturer of stainless steel C.T.C. segments, sought an eligibility certificate for tax exemption under rule 3(66a). The Assistant Commissioner rejected the application on the grounds that the main manufacturing processes (forging and cutting) were done outside the unit. The Additional Commissioner upheld this decision. The applicant argued that being registered as a manufacturing dealer and a small-scale industry, the external processing should not disqualify him from being considered a manufacturer. The Tribunal had to determine whether the applicant's activities met the criteria for tax exemption under the rule.

2. Definition of "Manufacture" within the Context of the Bengal Sales Tax Rules, 1941:
The Tribunal examined whether the activities performed by the applicant constituted "manufacture" as per the Bengal Sales Tax Rules. The applicant contended that the final product, S.S. C.T.C. segments, was distinct from the S.S. forged rings procured for further processing. The Tribunal considered previous judgments, including Pranab Kumar Saha v. Assistant Commissioner of Commercial Taxes, which established that the nature of the industrial unit's activity, as indicated in the SSI certificate, should determine the manufacturing processes required to be performed in the unit.

3. Whether the Processes Performed Outside the Applicant's Unit Affect Eligibility for Tax Exemption:
The Tribunal noted that the registration certificate from the Cottage and Small Scale Industries Directorate indicated that forging could be done outside the unit. The Tribunal emphasized that the end-product, S.S. C.T.C. segments, was a distinct commercial commodity created through further processing in the applicant's factory. The Tribunal referred to the Supreme Court's definition of "manufacture," which requires a transformation resulting in a new and different article with a distinctive name, character, or use. The Tribunal found that the applicant's activities met this criterion, as the final product was distinct from the raw material and had a separate market.

Conclusion:
The Tribunal concluded that the applicant's unit was engaged in manufacturing the goods in question and met the requirements for tax exemption under rule 3(66a). The orders of the Assistant Commissioner and the Additional Commissioner were set aside. The Assistant Commissioner was directed to issue the eligibility certificate to the applicant within one month, effective from December 15, 1988, for a period of one year. The application was allowed, with no order for costs.