2003 (12) TMI 615 - HC - VAT and Sales Tax

Summary

Issues:
1. Claim for sales tax exemption on sterilised needles.
2. Interpretation of the term "manufacture" under tax laws.
3. Criteria for granting sales tax exemption based on pricing differences.
4. Verification of processing plant existence for claiming exemption.

Analysis:
1. Claim for sales tax exemption on sterilised needles:
The petitioner, a public limited company engaged in the manufacture of surgical and medical instruments, sought exemption from sales tax on sterilised needles under relevant tax laws. The State Level Committee (S.L.C.) initially rejected the claim, leading to an appeal by the petitioner.

2. Interpretation of the term "manufacture" under tax laws:
The appellate authority, citing a Supreme Court decision, recognized the sterilisation process of needles as a form of manufacture, thereby entitling the petitioner to claim exemption. The court emphasized that the process of sterilisation constitutes manufacturing activity, and the State authorities were directed to verify this through a spot inspection.

3. Criteria for granting sales tax exemption based on pricing differences:
The S.L.C. later declined the exemption, citing minimal pricing differences between raw and sterilised needles as a reason. However, the court held that pricing should not be the sole criterion for granting exemption, as commercial factors can vary among manufacturers. The presence of a processing plant and undertaking of sterilisation process were deemed crucial for exemption eligibility.

4. Verification of processing plant existence for claiming exemption:
The court emphasized that the key factor for exemption eligibility was the existence of a processing plant and the actual undertaking of the sterilisation process. The court noted that the inspection confirmed the presence of the processing unit, leading to the conclusion that the petitioner was entitled to the sales tax exemption on sterilised needles.

In conclusion, the court allowed the writ petition, quashed the impugned order of the S.L.C., and directed the issuance of a sales tax exemption certificate to the petitioner. The judgment highlighted the importance of meeting the requirements of exemption notifications and ensuring that the benefit of exemption is extended to eligible entrepreneurs.