1961 (1) TMI 60 - SC - VAT and Sales Tax

Whether the transactions of the appellant company fall within the definition of the word sale under section 2(g) of the amended Bihar Sales Tax Act? Held that - Appeal dismissed. Neither of the words production or manufacture is defined in the Bihar Sales Tax Act but according to the Oxford English Dictionary production means amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort. It is obvious that what is described in the report above quoted would fall within the dictionary meaning of the word production . It is unnecessary to decide what the word manufacture means. As what was sold was mica produced in Bihar by the appellant, the answer to the question would be in the affirmative and therefore in favour of the State.

Summary

Issues:
- Interpretation of the term "sale" under section 2(g) of the Bihar Sales Tax Act.
- Determination of whether the process undertaken by the appellant constitutes production or manufacture within the Act.

Analysis:
The case involved an appeal against the judgment of the High Court of Patna regarding the assessment of sales tax on a company engaged in mica mining operations in Bihar. The appellant contested the tax levied on its sales of mica, arguing that the Amendment Act should not apply to sales made before its enforcement on October 1, 1948. The Board of Revenue allowed the appeal, stating that the mining process did not amount to production or manufacture under the Act. The High Court considered the reference and affirmed the tax assessment. The appeal to the Supreme Court focused on whether the appellant's transactions fell within the definition of "sale" under section 2(g) of the amended Act.

The pivotal question before the Supreme Court was whether the process carried out by the appellant constituted production or manufacture in Bihar. The appellant's operations involved extracting crude mica from mines and processing it into commercial split mica. The detailed process of mica processing was outlined, involving various stages such as slab cutting, grading, sorting, and further processing into different mica products. The Court referred to the Oxford English Dictionary's definition of "production" as the result of an action or process, indicating that the activities described in the mica processing report aligned with the concept of production.

While the Act did not define "production" or "manufacture," the Court concluded that the mica processed by the appellant in Bihar qualified as a product resulting from human effort, falling within the scope of production. As the mica sold was produced in Bihar by the appellant, the Court determined that the sales were subject to taxation under the Act. Consequently, the appeal was dismissed, upholding the tax assessment on the appellant's sales of mica produced in Bihar.

In summary, the Supreme Court's judgment clarified the interpretation of the term "sale" under the Bihar Sales Tax Act and established that the appellant's mica processing activities constituted production within the Act's provisions. The decision reaffirmed the tax liability on the appellant's sales of mica and emphasized the broad definition of production encompassing the activities involved in processing mica in Bihar.