1995 (1) TMI 98 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of "manufacture" under Section 2(17) of the Bombay Sales Tax Act, 1959 in the context of recording songs and programmes on cassette tapes.

Detailed Analysis:

1. Background and Controversy:
The case involved an assessee dealing in cassette tapes who purchased blank cassette tapes, had songs and programs recorded on them, and sold the recorded tapes. The question arose whether the activity of recording songs on the blank tapes constituted "manufacture" under Section 2(17) of the Act.

2. Legal Interpretation of "Manufacture":
The Supreme Court's interpretation emphasized that for an activity to be considered "manufacture," there must be a transformation resulting in a new distinct commodity. The Court highlighted the distinction between "processing" and "manufacture," stating that if the commodity retains its original identity through processing, it does not amount to manufacture.

3. Precedents and Legal Principles:
Referencing past decisions, the Court clarified that mere processing for marketability does not equate to manufacture. The test for determining manufacture is whether the commodity loses its original identity and becomes a new distinct marketable commodity.

4. Application to the Case:
In the present case, the only process on the cassette tapes was recording songs and programs. The Court found that the recorded tapes did not lose their original identity as blank tapes and could easily be restored to their original state. As such, the activity did not result in a new commercial commodity, leading to the conclusion that it did not constitute "manufacture."

5. Judgment and Conclusion:
The Court upheld the Tribunal's decision, stating that recording songs on blank cassette tapes did not create a commercially different commodity from the original tapes. Therefore, the activity did not amount to "manufacture" under the Act. The question posed in the reference was answered in favor of the assessee, and the reference was disposed of with no costs awarded.