2019 (4) TMI 324 - HC - VAT and Sales Tax

Process amounting to manufacture or not - conversion of wet blue leather into finished leather - Held that - The issue involved in this writ petition is squarely covered by a decision of the Division Bench of this Court in the case of GOLDEN LEATHERS VERSUS SECY., TAMILNADU SALES TAX APPELLATE TRIBUNAL 2010 (4) TMI 535 - MADRAS HIGH COURT , where it was held that Conversion of wet blue leather into finished leather through several process such as splitting, shaving, neutralizing, bleaching, dyeing, fat-liquoring, stuffing, setting out, samming, drying, staking, and finishing. Wet blue leather loses its identity as wet blue leather and becomes a different commodity with a distinct identity in the market and in the industry concerned. Activity amounts to a manufacturing activity. Petition allowed.

Summary

Issues involved:
Challenge to order by Sales Tax Appellate Tribunal under Tamil Nadu General Sales Tax Act, 1959 based on the manufacturing activity of wet blue leather transforming into finished leather.

Analysis:
The judgment involves a writ petition challenging an order by the Tamil Nadu Sales Tax Appellate Tribunal regarding the manufacturing activity of wet blue leather. The petitioner, a registered dealer, contested the order dated 01.04.2008. The issue revolves around whether the transformation process of wet blue leather into finished leather constitutes a manufacturing activity under the Tamil Nadu General Sales Tax Act, 1959. The counsel for both parties referenced a Division Bench decision in the case of Golden Leathers vs. Secy., Tamil Nadu Sales Tax Appellate Tribunal to support their arguments.

The Division Bench decision emphasized the transformation process of wet blue leather into finished leather, highlighting that after undergoing 12 processes, wet blue leather loses its identity and becomes a distinct commodity in the market. The decision cited the Supreme Court's ruling in Deputy Commissioner of Sales Tax v. Coco Fibres to establish the criteria for determining a manufacturing activity. The Appellate Assistant Commissioner's findings on the various stages of transformation and industry terminology supported the conclusion that a manufacturing activity indeed occurs during this process.

The judgment acknowledged that the Tribunal failed to consider crucial factual findings in determining the manufacturing nature of the activity. The entries in Schedule II of the Act, distinguishing between raw hides and skins and dressed hides and skins, were deemed insufficient to decide the manufacturing aspect. The transformation of wet blue leather into finished leather was deemed a manufacturing activity based on the specific processes involved and the change in the commodity's identity throughout the stages.

The judgment ultimately allowed the writ petition, setting aside the impugned order, in line with the referenced decision. The court concluded that no costs were applicable. The judgment also addressed the State's potential appeal to the Supreme Court, indicating that the Department could exercise its rights according to the law following the Supreme Court's decision, without granting any further liberty in the matter.