2004 (4) TMI 537 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the definition of 'manufacture' under the U.P. Sales Tax Act, 1948.
2. Whether cutting glass sheets into strips and other items constitutes 'manufacture' for tax purposes.

Detailed Analysis:
The judgment by the High Court of Allahabad pertains to a Commissioner's revision under section 11(1) of the U.P. Sales Tax Act, 1948, focusing on the interpretation of the term 'manufacture.' The primary question of law raised was whether the Sales Tax Tribunal was justified in ruling that glass strips and other items cut from a glass sheet do not qualify as 'manufacture,' despite the provision in section 2(e-1) of the Act indicating otherwise. The dispute arose from the assessment year 1984-85 when the dealer contested tax liability on the sale of looking glass. The assessing authority considered the dealer a manufacturer of looking glass, leading to tax imposition on self-manufactured looking glass and other items. However, the first appellate authority and the Tribunal overturned this decision, stating that cutting looking glass from a glass sheet did not amount to manufacturing.

The learned standing counsel cited the definition of 'manufacture' under section 2(e-1) of the Act, which includes various processes like producing, altering, or processing goods. Referring to a previous judgment, the counsel argued that the dealer's activity fell within this definition. However, the Court distinguished a relevant case where the conversion of mirror sheets into toilet looking glass was considered manufacturing. In the present case, the dealer purchased glass sheets and, after processing, sold them in different sizes without creating a new commercial commodity. The Tribunal found that cutting glass into various sizes did not constitute manufacturing. The Court also highlighted a Supreme Court judgment emphasizing that not every variation or finishing of goods amounts to manufacture unless it results in a new commercial commodity's emergence, referencing a case related to crushing boulders into different sizes known as gitti.

Ultimately, the Court dismissed the revision, stating that the dealer's activity of cutting glass sheets into strips and various sizes did not meet the threshold of 'manufacture' as per the U.P. Sales Tax Act. The judgment underscores the importance of creating a new commercial commodity through manufacturing processes to qualify for tax implications, as established in relevant legal precedents.