2014 (6) TMI 882 - HC - VAT and Sales Tax

Manufacturing activity or not - Held that - It is clear that the processes of producing, making, extracting, alternating, ornamenting, finishing or otherwise processing, treating or adapting of any goods fall within the meaning of the term manufacture . But it may be pointed out that every type of variation of the goods or finishing of goods would not amount to manufacture unless it results in emergence of new commercial commodity. In the instant case, the very nature of the activity does not result in manufacture because no new commercial commodity comes into existence. - Both the issues referred to this Court is held against the applicant and it is held that the learned Tribunal has not committed any error in concluding that the activity of the applicant resulted in production of different commercial commodities or commodities known differently in common parlance and as learned Tribunal has not committed any in holding that as a result of the amendment made in the definition of manufacture in Section 2(16) of the Act on 1.4.1989, activity of the applicant of preparing smaller size of the rough stone from larger size of the rough stone without any polishing, by hammering and cutting would amount to manufacturing activity under the provisions of the Act as is stood after the amendment. - Reference is disposed of.

Summary

Issues:
1. Interpretation of the definition of "manufacture" under Section 2(16) of the Act.
2. Whether the activity of hammering and cutting stones amounts to "manufacture" under the amended definition.

Analysis:
1. The case involved a reference made by the Gujarat Sales Tax Tribunal to the High Court regarding the interpretation of the term "manufacture" under Section 2(16) of the Act. The Tribunal sought the Court's opinion on whether the activity of the applicant, involving the production of different commercial commodities by hammering and cutting stones, could be considered as "manufacture" under the amended definition introduced in 1989.

2. The applicant, a registered dealer engaged in producing stones of various sizes through hammering, argued that their activity did not constitute "manufacture" as there was no polishing involved, and no new product was created. They relied on a Supreme Court decision to support their contention.

3. On the other hand, the respondent contended that the amended definition of "manufacture" under Section 2(16) of the Act clearly included activities like hammering, cutting, sizing, or polishing in relation to marble and stone as manufacturing processes. They argued that the Tribunal correctly held the applicant's activity as falling under the definition of "manufacture."

4. The High Court analyzed the definition of "manufacture" under the amended Section 2(16) which encompassed activities like hammering, cutting, sizing, or polishing in relation to marble and stone. The Court held that any activity involving these processes could be considered as "manufacture," resulting in the creation of a new commercial product.

5. The Court distinguished a previous Supreme Court decision based on a different definition of "manufacture" under the Bombay Sales Tax Act, noting that the specific activities and outcomes in the present case aligned with the definition under consideration.

6. Ultimately, the High Court upheld the Tribunal's decision, ruling that the applicant's activity indeed resulted in the production of different commercial commodities and fell within the scope of "manufacture" under the amended definition introduced in 1989.

7. Consequently, the Court held both issues against the applicant, affirming that the Tribunal did not err in concluding that the applicant's activity constituted manufacturing under the amended provisions of the Act. The reference was disposed of accordingly.