2005 (2) TMI 805 - HC - VAT and Sales Tax

Summary

Issues:
1. Taxability of frozen semen under U.P. Trade Tax Act, 1948.
2. Classification of frozen semen as a dairy product.
3. Whether preservation of semen in liquid nitrogen amounts to manufacturing.
4. Applicability of Notification exempting live stock from tax.

Analysis:
1. The dispute in the present revision revolves around the taxability of frozen semen under the U.P. Trade Tax Act, 1948 for the assessment year 1989-90. The Tribunal had initially held the turnover of frozen semen as non-taxable, considering it a dairy product. The key contention was whether frozen semen qualifies as a dairy product exempted from tax under the Act.

2. The first issue raised was whether frozen semen could be classified as a dairy product and thus fall under the exemption proviso of section 2(c) of the Act. The Standing Counsel argued against this classification, emphasizing that dairy products are commonly understood as milk products. However, the dealer contended that any product obtained from an animal, such as semen from a bull, should be considered a dairy product. The court analyzed various dictionary definitions of "dairy" and "product" to determine the scope of the term. Ultimately, the court did not agree with the Tribunal's view that frozen semen qualifies as a dairy product.

3. Another crucial aspect was whether the preservation of semen in liquid nitrogen amounted to manufacturing, thereby making the dealer liable to tax as a manufacturer. The Standing Counsel argued that the extraction and preservation process constituted manufacturing, citing relevant case law. In contrast, the dealer maintained that the preservation process did not alter the semen's nature and thus did not amount to manufacturing. The court agreed with the dealer, emphasizing that mere preservation without altering the product does not constitute manufacturing. The court distinguished previous judgments where a change in the goods occurred through processing, which was not the case with frozen semen.

4. Lastly, the court addressed the applicability of a notification exempting live stock from tax to frozen semen. The court reasoned that semen, being a live cell with the potential to produce an animal upon fertilization, falls under the category of live stock. Therefore, the court concluded that frozen semen is exempt from tax under the relevant notification. Consequently, the court dismissed the revision, upholding the Tribunal's decision regarding the taxability of frozen semen.