2008 (11) TMI 651 - HC - VAT and Sales Tax

Summary

Issues:
Whether the petitioner is considered a manufacturer for tax purposes under the Bihar Sales Tax Rules, 1983 based on the use of power in the manufacturing process.

Analysis:
The petitioner, a small-scale industrial unit manufacturing chaukhat and chowki, used electricity for making boards from logs and then manufacturing the products. The assessing officer and the appellate authority held the petitioner liable to pay tax as a manufacturer. The Commercial Taxes Tribunal affirmed this decision, considering the petitioner as a manufacturer. The petitioner sought a revision under the Bihar Finance Act, 1981, questioning whether using power in one integrated process makes them a manufacturer under rule 2(9) of the Bihar Sales Tax Rules, 1983.

The key question referred to the High Court was whether the petitioner, who saws timber logs using power and then manufactures furniture without power in an integrated process, should be deemed a manufacturer. The petitioner argued that since power was not used in making furniture, they should not be considered a manufacturer as per the relevant rule. However, the opposing view contended that as the process of sawing logs and manufacturing furniture was integrated, the use of power at any stage should be considered in determining manufacturing status.

The High Court rejected the petitioner's argument, emphasizing that the process of manufacturing furniture involves multiple steps, and if these steps are integrated, the absence of power usage at one stage does not exclude the entity from being classified as a manufacturer. The court held that since the petitioner used power for sawing timber logs and then manufactured furniture in a connected process, they fall within the definition of a manufacturer under rule 2(9) of the Bihar Sales Tax Rules, 1983. Consequently, the High Court answered the question in favor of considering the petitioner as a manufacturer for tax purposes.

In conclusion, the High Court's judgment affirmed the Commercial Taxes Tribunal's decision, determining that the petitioner, despite not using power in the final stage of furniture manufacturing, qualifies as a manufacturer under the Bihar Sales Tax Rules, 1983. The case was disposed of, and the opinion was forwarded to the Commercial Taxes Tribunal for further action.