2001 (10) TMI 1113 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of bale boards sold by the petitioner.
2. Taxability of bale boards as general goods.

Detailed Analysis:

1. Classification of Bale Boards:
The petitioner, M/s. Allied Marketing Agencies, Guntur, a dealer in wooden packing cases and bale boards, was initially granted an exemption by the Commercial Tax Officer on sales of bale boards, treating them as "planks" under entry No. 145 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957. However, the Deputy Commissioner (CT) later withdrew this exemption, classifying bale boards as unclassified goods taxable at every point of sale. The Tribunal confirmed this reclassification, concluding that bale boards and the cheap wood used in their production are distinct commodities.

2. Taxability of Bale Boards as General Goods:
The primary issue for consideration was whether bale boards should be treated as general unclassified goods. The Tribunal, after observing the production process of bale boards, upheld the Deputy Commissioner's decision, asserting that bale boards undergo a manufacturing process that transforms them into a different commodity from the raw materials used.

Petitioner's Argument:
The petitioner argued that the production of bale boards does not constitute manufacturing and thus should not be treated as different goods. They cited several judgments, including Sudhir Ch. Mukherjee v. Additional Commissioner, Commercial Taxes, and Pio Food Packers, to support their claim that bale boards should fall under entry No. 63 or entry No. 145 of the First Schedule to the Act.

Respondent's Argument:
The Special Government Pleader for Taxes contended that the production of bale boards involves manufacturing, making them distinct from the raw materials used. They cited judgments such as Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer and Rajasthan Roller Flour Mills Association v. State of Rajasthan to argue that bale boards are different goods and should be taxed accordingly.

Court's Analysis:
The court examined the relevant entries in the First Schedule to the Act and the cited judgments. It concluded that the process of making bale boards involves significant transformation, making them distinct from the raw materials. The court noted that the production of bale boards involves joining wooden planks, adding reapers, and shaping the boards, resulting in a product with a higher utility than the raw materials.

Judgment:
The court held that bale boards are distinct commodities from the cheap wood used in their production and should be treated as unclassified goods taxable at every point of sale. The court found no grounds to interfere with the Tribunal's factual findings, which were based on acceptable legal evidence. Consequently, the Tax Revision Cases (T.R.Cs.) were dismissed, and the petition was rejected with no order as to costs.

Conclusion:
The court upheld the reclassification of bale boards as unclassified goods, confirming their taxability at every point of sale. The petitioner's arguments were rejected, and the Tribunal's decision was affirmed.