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2014 (5) TMI 1016 - HC - VAT and Sales TaxWhether any manufacturing activity of Horlicks is undertaken in Tamil Nadu Concessional Levy of Tax Interpretation of statute - Manufacturing activity - Under the proviso to Section 3(3) of the Tamil Nadu General Sales Tax Act - Whether the Horlicks by itself without packing is marketable or not - Whether Section 23 can be invoked in this case or not Levy of Penalty - Held That - There is no definition to as to the scope of the expression manufacture in the Section - Hence, one can get assistance from the definition of manufacture as defined under Rule 3(h) of the Rules Relying upon THE TAMIL NADU CO-OPERATIVE MILK PRODUCERS FEDERATION LIMITED v. DEPUTY COMMISSIONER OF CENTRAL DIVISION 2014 (4) TMI 595 - MADRAS HIGH COURT - The said decision was in the context of purchase of polythene films for being used in packing milk and milk products - There, assessee purchased fresh milk; after pasteurising it, sold it as a pasteurised milk - In the context of such process done to the milk purchased, the question arose as to whether the assessee would be entitled to concessional levy on the purchase of polythene sheets - Referring to ASPINWALL AND CO. LTD v. COMMISSIONER OF INCOME TAX 2001 (9) TMI 3 - SUPREME Court as well as to the definition of manufacturer as contained in Rule 3(h), this Court held that the preparation or process of making goods for the purpose of trade would also be included within the meaning of manufacture to qualify for concessional levy u/s 3(3) of the Act subject to condition in Section 3(3) of the Act. Thus, when the goods purchased is for the purpose of use in the preparation or a process of the goods for the purpose of trade, such preparation or process or making of the goods for the purpose of trade would also come within the meaning of manufacture There is no hesitation in holding that when the Horlicks at intermediate stage is brought from Rajahmundry to Chengalpattu Branch of the assessee Unit in Tamil Nadu, and subjected to several processes to make it a marketable commodity, the assessee can legally claim its activities in Tamil Nadu, as coming within the meaning of the term manufacture - Given the nature of the product and the requirements to comply with the provisions of the Weights and Measurements Act with its name and the product code and other details with labels affixed on the bottle, the entire manufacturing process gets completed only when the goods are brought to such a marketable stage. Whether purchase of bottle caps and seals can be considered as component parts of Horlicks powder Held That - The purchase of labels and caps are integral to the manufacturing activity and for the purpose of trade Relying upon HMM LIMITED v. COLLECTOR OF CENTRAL EXCISE 1994 (9) TMI 71 - SUPREME COURT OF INDIA - Screw cap shall be deemed to be a component part of Horlicks and hence, the assessee is entitled to the concessional excise levy, Revisions are allowed and so too the writ petitions - The order of the Tribunal levying penalty is set aside and the differential duty collected by reason of Section 3(3) of the Act is also deleted - The writ petitions are allowed. Whether Section 3(3) is available prior to the amendment of Section 3(3) for the packing materials or not Concessional levy of Tax - Held That - As far as Section 3(3), as it stood during the material point of time relating to assessment years 1990-91 to 1992-93, is concerned, when a dealer purchases any goods, other than consumables for use in the manufacture of any goods for sale inside the State, the tax payable by a dealer in respect of such goods, other than the excluded items, would be 4% - Proviso to Section 3(3) enjoins on the assessee to produce a certificate in Form XVII to claim concessional levy - Based on this alone, the assessee would be entitled to claim concessional levy under Section 3(3). Concessional levy of Tax - Held That - As far as the assessment year 1999-2000 is concerned, in contra distinction to the provisions of Section 3(3), which related to sale of any goods other than the consumables, the amended provisions referred to sale of any goods including the consumables, packing materials and labels other than capital goods, for the grant of concessional levy - As in the earlier provisions, the only requirement is that raw materials must be used in the manufacture and assembling and packing materials or packing or labelling in connection with the manufacture of goods, as mentioned in the First schedule for sale inside the State - Thus, going by the provisions, it is evident that the tax payable in respect of any goods including consumables, packing materials and labels, would qualify for concessional levy, so long as they are for the purpose and use in the manufacture of goods falling under the First Schedule and that the manufactured goods are to be available for sale inside the State. Bar of Limitation - For assessment order relating to the assessment year 1998-99, since the reassessment proceedings are time barred, no question arises before this Court for any consideration - Decided in favour of Assessee.
Issues Involved:
1. Whether any manufacturing activity is undertaken in Tamil Nadu. 2. Whether the purchase of bottle caps and seals can be considered as component parts of Horlicks powder. 3. Whether Horlicks by itself without packing is marketable or not. 4. Whether the addition of caps makes Horlicks powder a new commodity. 5. Whether Section 3(3) is applicable for packing materials prior to its amendment. 6. Whether Section 23 can be invoked for penalty in this case. Issue-wise Detailed Analysis: 1. Manufacturing Activity in Tamil Nadu: The Tribunal concluded that there was no manufacturing activity conducted by the assessee in Tamil Nadu to avail the benefit of Section 3(3) of the Tamil Nadu General Sales Tax Act. The assessee argued that the manufacturing activity culminates only when the goods are packed and ready for sale, thus entitling them to the concessional levy. The court, however, found that the activities performed at the Chettipunyam factory, such as ensuring proper aroma, uniform bulk density, and removing iron contamination, constituted a series of processes making the product marketable. Therefore, these activities fell within the definition of 'manufacture' under Rule 3(h) of the Tamil Nadu General Sales Tax Rules. 2. Bottle Caps and Seals as Component Parts: The Tribunal viewed that bottle caps and seals could be considered at best as components of the bottle, which is a container, and not as component parts of the manufactured goods (Horlicks powder). However, the court held that the purchase of caps and labels is integral to the manufacturing activity and for the purpose of trade. The Supreme Court had previously held in the assessee's own case that screw caps are component parts of Horlicks bottles, thus entitling the assessee to the concessional excise levy. 3. Marketability of Horlicks Without Packing: The Tribunal rejected the contention that Horlicks, by itself, without packing, would be marketable. It held that Horlicks need not be sold in bottles. The court, however, emphasized that the entire manufacturing process, including packing and labeling, is necessary to bring the product to a marketable stage, thus qualifying for the concessional levy under Section 3(3) of the Act. 4. New Commodity Through Caps: The Tribunal questioned whether the addition of caps makes Horlicks powder a new commodity. The court did not directly address this issue but implied that the addition of caps and labels is part of the manufacturing process that makes the product marketable. 5. Applicability of Section 3(3) for Packing Materials: The Tribunal upheld the assessment on the differential levy but canceled the penalty under Section 16(2) and 12(3)(b) of the Act for the assessment years 1994-95 to 1997-98 and 1999-2000. The court noted that the amended Section 3(3) included consumables, packing materials, and labels for the grant of concessional levy, effective from 12.3.1993. The court found that the assessee's activities met the conditions for the concessional levy under both the pre-amendment and post-amendment provisions of Section 3(3). 6. Invocation of Section 23 for Penalty: The Tribunal levied a penalty under Section 23(2) of the Act, viewing that there was a violation of the declaration given under Section 3(3) of the Act. The court, however, held that the assessee was entitled to the benefit of concessional levy and that there was no question of levy of penalty under Section 23 of the Act, as the assessee had not committed any violation of terms under Form XVII. Conclusion: The court allowed the Tax Case Revisions and writ petitions, setting aside the order of the Tribunal levying penalty and deleting the differential duty collected by reason of Section 3(3) of the Act. The court held that the purchase of labels and caps are integral to the manufacturing activity and for the purpose of trade, thus entitling the assessee to the concessional levy.
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