2004 (3) TMI 734 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the rejection of the petitioner's request for sales tax exemption.
2. Determination of whether homogenisation process constitutes "manufacture".
3. Validity of the assessment orders and subsequent demand notice.

Detailed Analysis:

1. Legality of the Rejection of the Petitioner's Request for Sales Tax Exemption:
The petitioner, a limited company and a registered dealer under the Karnataka Sales Tax Act, 1957, sought sales tax exemption for its cement unit in Mangalore under notifications issued by the State Government. The State Level Committee rejected this request, which led to the filing of writ petitions. The court directed reconsideration, but the rejection was upheld based on the technical committee's report, which stated that no manufacturing activity occurred at the Mangalore unit. The court found no factual or legal errors in this decision, supporting the committee's conclusion that the homogenisation process did not amount to manufacturing.

2. Determination of Whether Homogenisation Process Constitutes "Manufacture":
The core issue was whether the homogenisation process at the Mangalore plant constituted "manufacture" under the relevant notifications. The petitioner argued that homogenisation improved the quality of cement, making it marketable, and should be considered a manufacturing process. However, the court referred to several precedents, including Supreme Court judgments, which established that "manufacture" involves creating a new and distinct commercial commodity. The court concluded that homogenisation did not result in a new product but merely processed the existing cement, thus not qualifying as "manufacture". The court cited cases like Chowgule & Co. Pvt. Ltd. v. Union of India and Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Pio Food Packers to support this conclusion.

3. Validity of the Assessment Orders and Subsequent Demand Notice:
The petitioner challenged the assessment orders and the subsequent demand notice (Annexure Q) on the grounds of eligibility for sales tax exemption. The court upheld the assessment orders, noting that the petitioner did not have an eligibility certificate and that the technical committee's findings were based on substantial evidence. The court emphasized that courts should not interfere with factual findings of authorities unless a strong case is made out, which was not done by the petitioner. Consequently, the demand notice (Annexure Q) was upheld, and the petition was rejected.

Conclusion:
The court rejected the petition, affirming the State Level Committee's decision that the homogenisation process did not constitute manufacturing and upholding the assessment orders and demand notice. The court emphasized that the petitioner failed to dislodge the factual findings of the authorities and that the homogenisation process did not result in a new commercial product.