1976 (3) TMI 67 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the activity of battery charging, namely, adding electrolyte and passing electric current through it in the battery supplied by the manufacturer, constitutes a process of 'manufacture' within the meaning of s. 2(17) of the Bombay Sales Tax Act, 1959.

Issue-wise Detailed Analysis:

1. Activity of Battery Charging as Manufacture:

The appellants, authorized dealers of Exide and Standard batteries, charged the batteries before selling them. The lower authorities disallowed claims for deductions on these sales, holding that the charging process constituted manufacture under s. 2(17) of the Bombay Sales Tax Act, 1959, making the sales taxable under Sch. C-Entry 58.

2. Technical Aspects of the Charging Process:

A witness explained the technical aspects of the charging process before the Assistant Commissioner. The batteries were received dry without electrolyte. The manufacturers initially charged the plates in an electrolyte solution, a process known as Formation charge. This process converted the plates into lead peroxide and spongy lead.

3. Initial Charge by Dealers:

The dealers added electrolyte and passed electric current through the batteries, a process called Initial charge, ensuring the batteries could give rated capacity and satisfactory performance. This process did not alter the physical or chemical composition of the plates but restored the charge lost during storage.

4. Legal Interpretation of 'Manufacture':

The Supreme Court in various cases (e.g., The State of Madras vs. Swastik Tobacco Factory, CST, U.P., Lucknow vs. Harbilas Rai and Sons) held that for an activity to constitute manufacture, it must result in a commercially different commodity. The Bombay High Court in Commissioner of Sales Tax vs. Dunken Coffee Manufacturing Co. reiterated that an activity must produce a commercially different article to be considered manufacture.

5. Application of Legal Principles:

Applying these principles, the Tribunal found that the dry battery, after the initial charge, did not become a different commercial commodity. The essential nature of the battery, a contrivance for the formulation and storage of electricity, remained unchanged. The Tribunal thus concluded that the activity did not constitute manufacture.

6. Marketability and Commercial Identity:

The Tribunal rejected the argument that marketability, demand, or different prices for dry and charged batteries indicated different commercial commodities. The crucial test was whether the essential nature or character of the article changed, which it did not in this case.

7. Previous Tribunal Judgment:

The Tribunal reviewed its previous judgment in Chandrakant & Co., where it was held that charging a dead battery constituted manufacture. However, the facts in that case were not clear, and the Tribunal found that the essential character of the battery had not been properly considered.

Conclusion:

The Tribunal concluded that the activity of battery charging by the appellants did not constitute manufacture within the meaning of s. 2(17) of the Bombay Sales Tax Act, 1959. The question referred to the Special Bench was answered in the affirmative, and the second appeals were to be placed before the concerned Bench for disposal.