2009 (1) TMI 831 - HC - VAT and Sales Tax

Bottling of LPG - Held that - There is no case that what is marketed is a product different from LPG - not able to find out as to what are the raw materials from which this LPG is made. In other words, LPG is transferred from bulk quantity into smaller cylinders. There is no raw materials as such from which a product is made which can be said to be commercially different. Apparently, the makers of the notification intended to promote manufacturing activity within the State. It has expressed its clear intention not to extend the benefit to activities like packaging as the definition shows. As already noted, there is no production of a commercially different article from a different raw material and LPG remains as LPG after the entire process is over. In such circumstances, no merit in the writ petition and it is dismissed.

Issues:
Challenge to exhibits P5 and P10, direction to pass fresh orders on exhibit P1, consideration of all grounds raised in exhibit P1 appeal, petitioner's appeal for exemption from sales tax, rejection of application by fifth respondent, appeal to State Level Committee, rejection of appeal, definition of "manufacture" in SRO No. 1729/93, process of bottling LPG, whether bottling LPG involves manufacturing, interpretation of the definition of "manufacture," criteria for "manufacture," commercial differentiation of the product, comparison with other states' treatment of bottling LPG, legal precedents on manufacturing processes.

Analysis:

The petitioner challenged exhibits P5 and P10 and sought fresh orders on exhibit P1 appeal after considering all grounds raised. The petitioner, a small-scale industry, applied for sales tax exemption under SRO No. 1729/1993. The fifth respondent rejected the application, leading to an appeal to the State Level Committee. The appeal was allowed, but upon remittance, the fifth respondent rejected it again. The petitioner's subsequent appeal (exhibit P1) was rejected by exhibit P10. The petitioner contended that the bottling of LPG involved a manufacturing process, meeting the criteria under the definition of "manufacture" in SRO No. 1729/93.

The definition of "manufacture" in the notification was a crucial aspect of the case. The petitioner argued that the process of bottling LPG was not mere packing but involved significant complexities, such as purging oxygen and filling LPG under strict controls. The petitioner emphasized that the process resulted in a commercially different product, citing legal provisions and precedents to support their claim. However, the Government Pleader contended that no manufacturing occurred as LPG remained unchanged post-process, equating it to packaging rather than creating a new product.

The court analyzed the definition of "manufacture" and the process undertaken by the petitioner. It concluded that the bottling process did not meet the criteria for manufacturing as there was no production of a commercially different article. Despite the complexities involved in bottling LPG, the court found that the end product remained LPG, without any chemical alteration. The court dismissed the petitioner's arguments, highlighting the absence of raw materials leading to a commercially distinct product, as required by the definition of "manufacture."

In reaching its decision, the court referenced legal precedents, including a Supreme Court case on manufacturing processes involving distinct commercial commodities. The court differentiated the present case, emphasizing the lack of evidence supporting the emergence of a new product post-bottling. Ultimately, the court upheld the rejection of the petitioner's appeal, stating that the process did not align with the intended promotion of manufacturing activities under the notification.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, the court's interpretation of the definition of "manufacture," and the ultimate decision reached by the court.

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