2003 (8) TMI 509 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether chemically treated rubber wood is a commercially different product from raw rubber wood.
2. Whether the production of chemically treated rubber wood qualifies as a manufacturing activity under Notification S.R.O. No. 1729 of 1993.
3. Whether the amendment by S.R.O. No. 295 of 1998 is clarificatory or prospective in nature.
4. Whether the appellant is entitled to sales tax exemption under Notification S.R.O. No. 1729 of 1993.

Issue-wise Detailed Analysis:

1. Commercial Difference Between Chemically Treated Rubber Wood and Raw Rubber Wood:
The court examined whether chemically treated rubber wood is a commercially different product from raw rubber wood. It was established that raw rubber wood before treatment could only be used as firewood due to its lack of durability and hardness. The chemical treatment process transforms it into a durable material suitable for making furniture, thus changing its utility and character. The resultant chemically treated rubber wood is recognized by the trade as a new and distinct commodity, significantly increasing its value and usability.

2. Manufacturing Activity Under Notification S.R.O. No. 1729 of 1993:
The court analyzed the definition of "manufacture" as per Notification S.R.O. No. 1729 of 1993, which requires the production of goods commercially different from the raw materials used. The detailed chemical process applied to raw rubber wood, involving prophylactic treatment, quarter sawing, impregnation with CCA solution, and controlled drying, results in a new product with distinct commercial attributes. The court referenced multiple Supreme Court decisions, including Union of India v. Delhi Cloth and General Mills Co. Ltd., to support the view that the transformation of raw rubber wood into chemically treated rubber wood constitutes "manufacture."

3. Nature of Amendment by S.R.O. No. 295 of 1998:
The court considered whether the amendment by S.R.O. No. 295 of 1998, which deemed chemical treatment of rubber wood as "manufacture," was clarificatory or prospective. The court concluded that the amendment was clarificatory in nature, intended to provide incentives to industries engaged in chemical treatment of rubber wood, and not to introduce a new provision. This conclusion was supported by the fact that several industrial units were already granted benefits under the original notification for similar activities.

4. Entitlement to Sales Tax Exemption:
The appellant argued that they should be entitled to sales tax exemption under Notification S.R.O. No. 1729 of 1993, as their production process met the criteria for "manufacture." The court noted that the State Level Committee for sales tax exemption had previously recognized the chemical treatment of rubber wood as a manufacturing activity. Given the consistent treatment of similar units and the clarificatory nature of the amendment, the court held that the appellant was entitled to the benefits of the notification. The Commissioner's order denying the exemption was set aside, and the appellant was granted the sales tax exemption.

Conclusion:
The court concluded that the process of chemically treating rubber wood constitutes a manufacturing activity, resulting in a commercially different product. The amendment by S.R.O. No. 295 of 1998 was deemed clarificatory, and the appellant was entitled to sales tax exemption under Notification S.R.O. No. 1729 of 1993. The appeal was partly allowed, granting the appellant the requested benefits.