2015 (1) TMI 44 - HC - VAT and Sales Tax

Classification of fountain drinks - Whether fountain drinks sold by the applicant was rightly taxed being manufactured soft drink - Held that - In Sonebhadra Fuels Versus Commissioner, Trade Tax, UP., (and other appeals) 2006 (8) TMI 304 - SUPREME COURT OF INDIA it has been held that the word manufacture in other statutes are not necessarily applicable when interpreting Section 2(e-1) of the UP Trade Tax Act - the definition of manufacture in Section 2(e-1) of the UP Trade Tax Act is very wide, which includes processing, treating or adapting any goods - the expression manufacture covers within its sweep not only such activities which bring into existence a new commercial commodity different from the articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence an article different from the articles on which such activity was carried on. In the present case there is processing, treating or adopting of the syrup and converting into soft drink after subjecting the syrup through carbon dioxide in a fountain machine - the commercial product is outcome of a process to manufacture as defined in Section 2(e-1) - whether the commercial identity of the goods subjected to processing, treating or adopting changes or not, is not very material Decided against assessee.

Summary

Issues:
Tax liability on fountain drinks sold by the applicant; Interpretation of the definition of 'manufacture' under Section 2(e-1) of the U.P. Trade Tax Act.

Analysis:
The revisions involved a common question of law and facts arising from an order by the Trade Tax Tribunal regarding tax liability on fountain drinks sold by the applicant, a dealer engaged in the business of sweetmeats and soft drinks. The assessing authority imposed tax on the liquid (soft drink) obtained from a fountain machine, considering it a different manufactured good. Both the first appellate authority and the Tribunal upheld this decision, deeming the soft drink a new commodity subject to tax.

The main issue in the present revisions was whether the fountain drinks sold by the applicant were rightly taxed as manufactured soft drinks. The applicant argued that converting the syrup into a soft drink did not create a new commodity, and the processing did not amount to 'manufacture' under Section 2(e-1) of the U.P. Trade Tax Act. The applicant relied on legal precedents to support this contention.

The definition of 'manufacture' under Section 2(e-1) of the U.P. Trade Tax Act was crucial in determining the tax liability. The Supreme Court's interpretation highlighted that the definition was broad, encompassing activities that processed, treated, or adapted goods, even if they did not result in a new commercial commodity. The Court's previous rulings on similar cases emphasized that every change did not amount to manufacturing activity unless a new commodity emerged with distinct characteristics.

After considering the arguments, the Court concluded that the decision of the Tribunal to tax the fountain drinks was lawful. The processing of the syrup into a soft drink through a fountain machine constituted a manufacturing process under Section 2(e-1), regardless of whether the commercial identity of the goods changed. Consequently, the revision was dismissed, answering the question against the assessee and in favor of the revenue.