2010 (7) TMI 891 - HC - VAT and Sales Tax

Whether, on facts and circumstances of the case and on a true and correct interpretation of Schedule A, entry 36 appended to the Bombay Sales Tax Act, 1959, the Tribunal was legally justified in holding that the bouquet of fresh flowers is not covered by the said Schedule A, entry 36 pertaining to natural flowers but it is covered by the residuary Schedule C, Part II, entry 152 and hence liable to tax at 13 per cent? Whether, on facts and circumstances of the case and on a true and correct interpretation of section 2(17) of the Bombay Sales Tax Act, 1959, the Tribunal was legally justified in holding that the activity of preparing bouquets from the natural flowers brings into existence commercially a different product and hence is a manufacture ? Held that - If the flower bouquet as submitted by the learned advocate for the respondent is an arrangement of cut flowers, such arrangement of cut flowers by itself would not convert the said flowers into a different commercial commodity nor will it amount to an activity which would have an impact on the nature of the goods and will therefore not fall within the definition of the word manufacture . Since bouquet of fresh flowers prepared using golden grass, earthen pot or basket, silver foil, chamki, ribbons and other decorative material, not being a subject-matter of dispute involved herein, we do not propose to go into the question whether such change or transformation in substance qua the fresh flowers would fall within the definition of the term manufacture . Each product will have to be examined on its own facts and determined for the purpose of its taxability. In the instant case the invoice submitted by the applicant and on the basis of which, the decision has been given by the Tribunal shows description of the goods as fresh flowers bouquet . We, considering the simple arrangement of fresh flowers, answer both the questions set out in paragraph 2 of this judgment in the negative, i.e., in favour of the applicant and against the Revenue.

Summary

Issues:
1. Interpretation of Schedule A, entry 36 of the Bombay Sales Tax Act, 1959 regarding tax liability on "bouquet of fresh flowers."
2. Determination of whether preparing bouquets from natural flowers constitutes "manufacture" under section 2(17) of the BST Act.

Interpretation of Schedule A, entry 36:
The case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, seeking clarification on the tax liability of a "bouquet of fresh flowers." The Tribunal held that such bouquets fall under the residuary Schedule C, Part II, entry 152 and are liable to tax at 13%. The applicant, M/s. In Bloom, contended that the bouquet should be exempt under Schedule A, entry 36. The applicant argued that bouquets are simply a bunch of flowers tied together and should not be subject to tax. The applicant relied on a Calcutta High Court decision stating that preparing bouquets is not a manufacturing activity. However, the respondent argued that preparing bouquets does constitute a manufacturing activity under the BST Act's definition. The Tribunal upheld the tax liability, prompting the applicant to seek a reference to the High Court.

Manufacture under section 2(17) of the BST Act:
The applicant argued that preparing bouquets does not amount to "manufacture" as defined under section 2(17) of the BST Act. The respondent contended that the preparation of bouquets does qualify as a manufacturing activity. The respondent highlighted that the Tribunal correctly identified the materials used in making bouquets and emphasized that bouquets are distinct commercial commodities from fresh flowers. The respondent argued that the common man perceives bouquets differently from fresh flowers, indicating a manufacturing process. The High Court analyzed the definition of "flower bouquet" and Schedule A, entry 36. The Court concluded that the simple arrangement of fresh flowers in a bouquet does not transform them into a different commercial commodity or constitute a manufacturing activity. Therefore, the Court ruled in favor of the applicant, holding that the bouquet of fresh flowers should be exempt from tax under Schedule A, entry 36.

In conclusion, the High Court decided in favor of the applicant, ruling that the bouquet of fresh flowers should be exempt from tax under Schedule A, entry 36 of the Bombay Sales Tax Act, 1959. The Court found that the simple arrangement of fresh flowers in a bouquet does not amount to a manufacturing activity as defined under the BST Act. Each product's taxability must be determined based on its individual characteristics, and in this case, the Court held that the bouquet of fresh flowers should not be taxed.