1992 (9) TMI 350 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of section 7-A of the Tamil Nadu General Sales Tax Act, 1959 regarding the assessment of purchase tax on the turnover of lime shell converted into poultry shell grit.
- Determination of whether the conversion of lime shell into shell grit constitutes "manufacture of other goods for sale" under section 7-A.
- Assessment of penalty under section 22(2) of the Act for collecting excess tax without authority.

Analysis:

The case involved a tax revision by the Revenue against the Tamil Nadu Sales Tax Appellate Tribunal's order deleting the assessment under section 7-A of the Tamil Nadu General Sales Tax Act, 1959 on a turnover related to the purchase of lime shell converted into poultry shell grit. The Tribunal had ruled that the conversion did not amount to the manufacture of other goods for sale, leading to the deletion of the turnover assessment.

The Tribunal found that the assessees had only powdered the lime shell to create poultry feed and that the original lime shell and the converted shell grit were not distinct commodities, thereby concluding that there was no "manufacture" of "other goods." However, the Tribunal upheld the penalty levied on the assessees for collecting excess tax without authority.

The Additional Government Pleader argued that the conversion of lime shell into shell grit constituted the manufacture of a new commodity, attracting section 7-A. Citing precedents and commercial parlance, she contended that shell grit was distinct from lime shell, emphasizing the expenses incurred in the conversion process. The Government Pleader also referenced a Division Bench decision where lime shell conversion was deemed manufacturing, further supporting her argument.

On the other hand, the assessees' counsel asserted that the process involved only grinding lime shell into powder, which did not amount to manufacture. He distinguished a previous case where lime shell underwent more significant changes, unlike the present case where only grinding occurred.

The Court sided with the Revenue, agreeing that shell grit was a different commodity from lime shell, as the former could be used as poultry feed while the latter could not. They held that the Tribunal erred in its conclusion, reinstating the turnover assessment and allowing the tax case, with no costs awarded.

In conclusion, the judgment clarified the application of section 7-A to the conversion of lime shell into shell grit, emphasizing the distinction between the two commodities and the commercial perception of the converted product as a new entity.