2017 (12) TMI 621 - HC - VAT and Sales Tax

Concessional rate of duty - Assessing Officer was of the view that there was no manufacturing activity involved in conversion of wet blue hides into finished leather and hence, the dealers were not eligible to purchase chemical against Form XVII at concessional rate - Held that - Issue in the present case is covered by a decision of this Court in Golden Leathers v. Secretary, TNSTAT, 2010 (4) TMI 535 - MADRAS HIGH COURT , wherein, a Hon ble Division Bench has categorically held that the process of transformation of blue leather into finished leather amounts to manufacturing activity. In the case on hand, wet blue (semi-finished) leather has been converted into finished leather. Golden Leathers case squarely applies to the case on hand - the process of conversion of wet blue (semi-finished) leather into finished leather, amounts to an manufacturing activity. Tax revision dismissed.

Issues Involved:
1. Whether the conversion of wet blue leather into finished leather amounts to a manufacturing activity.
2. Whether the Tribunal overlooked relevant Supreme Court judgments.
3. Whether the Tribunal's factual findings were perverse.
4. Whether the processes involved alter the essential characteristics of the leather.
5. Whether the Tribunal correctly applied the principles laid down by the Supreme Court.
6. Whether the Tribunal erred in following the Division Bench judgment without independent findings.

Detailed Analysis:

1. Manufacturing Activity:
The primary issue was whether the conversion of wet blue leather into finished leather constitutes a manufacturing activity. The Tribunal, relying on the judgment in Golden Leathers v. Secretary, TNSTAT, held that the transformation of wet blue leather into finished leather involves a series of changes that result in a new and distinct commodity. The Tribunal noted that the finished leather loses its identity as wet blue leather and becomes a different commodity with a distinct identity in the market and industry. Therefore, it was concluded that the process satisfies the criteria for manufacturing.

2. Overlooking Supreme Court Judgments:
The petitioner argued that the Tribunal overlooked the Supreme Court judgments in A. Hajee Abdul Shukoor and Compounding Order v. State of Madras and State of Tamil Nadu v. Mahi Traders & Others. However, the Tribunal focused on the specific facts and processes involved in the conversion of wet blue leather to finished leather, which were discussed in the Golden Leathers case. The Tribunal's decision was based on the factual findings and the manufacturing nature of the process, as established in the cited case.

3. Factual Findings:
The petitioner contended that the Tribunal's factual findings were perverse, arguing that the conversion process does not alter the essential characteristics of the leather. The Tribunal, however, relied on the Appellate Assistant Commissioner's detailed analysis of the various stages the leather undergoes, which indicated that a manufacturing activity takes place. The Tribunal found that the transformation from wet blue to finished leather involves significant changes, justifying the classification as manufacturing.

4. Alteration of Essential Characteristics:
The petitioner argued that the processes involved in converting wet blue leather do not alter its essential characteristics. The Tribunal, referencing the Golden Leathers case, found that the series of changes during the conversion process result in a product that can no longer be regarded as wet blue leather but must be recognized as finished leather. This transformation was deemed sufficient to constitute manufacturing.

5. Application of Supreme Court Principles:
The Tribunal applied the principles laid down by the Supreme Court, considering whether the process results in a new and distinct commodity. The Tribunal concluded that the conversion of wet blue leather into finished leather meets the criteria for manufacturing, as the end product is distinct and has a different market identity.

6. Independent Findings:
The petitioner criticized the Tribunal for following the Division Bench judgment without making independent findings. The Tribunal, however, reviewed the records and passed orders on merits, affirming the Appellate Assistant Commissioner's conclusion that the conversion process constitutes manufacturing. The Tribunal's decision was based on a thorough analysis of the facts and applicable legal principles.

Conclusion:
The High Court dismissed the Tax Case Revision, affirming the Tribunal's decision that the conversion of wet blue leather into finished leather amounts to a manufacturing activity. The Court found no substantial question of law for consideration, upholding the Tribunal's reliance on the Golden Leathers case and the detailed factual analysis provided by the Appellate Assistant Commissioner. The petitioner's arguments regarding the overlooking of Supreme Court judgments, perverse findings, and the essential characteristics of the leather were not accepted, as the Tribunal's decision was well-founded on established legal principles and factual determinations.

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