2006 (3) TMI 697 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the definition of "manufacture" under the Entry Tax Act.
2. Whether refilling of LPG gas cylinders amounts to "manufacture" for the purpose of entry tax.
3. Validity of demanding advance payment of entry tax without assessment.

Analysis:
1. The petitioner challenged a notice demanding advance payment of entry tax on the sale of LPG gas cylinders. The petitioner argued that the statutory amendments made the entry of LPG taxable under the Entry Tax Act. The respondents contended that refilling LPG cylinders amounts to "manufacture" under the Commercial Tax Act, making it taxable. The definition of "manufacture" under the Commercial Tax Act includes various processes of producing goods.

2. The court analyzed the definition of "manufacture" under the Commercial Tax Act and the Entry Tax Act. Refilling LPG cylinders does not result in a new marketable commodity with altered properties, as required for a process to be considered "manufacture." The court cited precedents where similar activities were not considered manufacturing processes. Refilling LPG cylinders only involves a change of receptacles and does not meet the criteria for "manufacture" under the law.

3. The court further discussed the legality of demanding advance payment of entry tax without assessment. The petitioner had filed returns as required by law, and there was no provision for demanding tax in advance without assessment, except in specific cases mentioned in the Commercial Tax Act. The court referred to a previous decision to support the position that demanding advance tax without assessment is not permissible. Consequently, the court quashed the demand for advance payment of tax and set aside the impugned notice, allowing the respondents to make assessments in accordance with the law.

In conclusion, the court ruled in favor of the petitioner, holding that refilling LPG gas cylinders does not amount to "manufacture" for the purpose of entry tax. The court also deemed the demand for advance payment of entry tax without assessment as illegal and unsustainable. The impugned notice was set aside, allowing the respondents to make assessments and recover tax as per the law.