2010 (5) TMI 762 - HC - VAT and Sales Tax

Whether raw mustard oil and the mustard oil obtained therefrom were both entitled to exemption from payment of sales tax? Held that - While every manufacture can be characterized as production, every production need not amount to manufacture. The word production or produce , when used in juxtaposition with the word manufacture takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products which emerge in the course of manufacture of goods. . Filtration of raw mustard oil into mustard oil undertaken by the petitioner, therefore, cannot be understood to amount to production of goods in view of the above. Appeal has to be dismissed

Issues Involved:
1. Eligibility for sales tax exemption under the Assam Industries (Sales Tax Concession) Scheme, 1997.
2. Definition and interpretation of "manufacture" under section 2(22) of the Assam General Sales Tax Act, 1993.
3. Applicability of the exemption to raw mustard oil and the processed mustard oil.
4. Delay in filing the writ petition.

Detailed Analysis:

1. Eligibility for Sales Tax Exemption:
The appellant, a sole proprietor of M/s. Tirupati Food Products, claimed eligibility for sales tax exemption under the Assam Industries (Sales Tax Concession) Scheme, 1997. The scheme, framed under section 9(4) of the Assam General Sales Tax Act, 1993, provided sales tax exemption on the sale of finished products and purchase of raw materials for industrial units established after April 1, 1997. The appellant's unit, which commenced commercial production in 2003, was initially granted an eligibility certificate for sales tax exemption on mustard seeds, raw mustard oil, and the finished product, mustard oil.

However, the District Level Committee later decided that the process of filtering raw mustard oil and packing it did not constitute "manufacture," thus amending the eligibility certificate to exclude raw mustard oil from the exemption.

2. Definition and Interpretation of "Manufacture":
The core issue revolved around whether the process employed by the appellant's unit-filtering raw mustard oil to produce pure mustard oil-constituted "manufacture" under section 2(22) of the Act. The definition of "manufacture" in section 2(22) includes producing, making, extracting, altering, ornamenting, blending, finishing, processing, treating, or adapting any goods.

The appellant argued that the wide definition should include the filtration process, citing Supreme Court judgments in *Ashirwad Ispat Udyog v. State Level Committee* and *Sonebhadra Fuels v. Commissioner, Trade Tax, U.P., Lucknow*, which interpreted similar definitions to include processes that did not necessarily create a new product.

3. Applicability of the Exemption:
The learned single judge concluded that the appellant's process did not meet the criteria of "manufacture" as defined in section 2(22) because the end product (mustard oil) was not substantially different from the raw material (raw mustard oil). The appellant's unit was deemed not to satisfy the requirements of section 9(4) of the Act, which emphasizes "producing such goods" for exemption eligibility.

The court further analyzed the term "production" and concluded that it implies bringing something new into existence, which did not apply to the appellant's filtration process. The court cited the Supreme Court's interpretation in *Commissioner of Income-tax v. N. C. Budharaja and Co.*, which distinguished "production" from "manufacture."

4. Delay in Filing the Writ Petition:
The learned single judge also noted the writ petition's inordinate delay. The appellant provided explanations for the delay, but the court decided not to dismiss the petition solely on this ground. The court emphasized that the merits of the case had been thoroughly considered.

Conclusion:
The court affirmed the decision of the learned single judge, holding that the appellant's unit did not qualify for sales tax exemption under the Assam Industries (Sales Tax Concession) Scheme, 1997. The process of filtering raw mustard oil did not constitute "manufacture" or "production" as required by the relevant provisions of the Assam General Sales Tax Act, 1993. The writ appeal was dismissed, and the order of the learned single judge was upheld.

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