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TMI Blog1977 (11) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ip named "Jalapratap" along with its boats and appurtenances from the Scindia Steam Navigation Co. Ltd. This purchase was made by the respondents for the purpose of breaking and scrapping the said ship. On 19th September, 1968, the respondents made an application under section 52 of the said Act to the Deputy Commissioner of Sales Tax for determination of the question as to whether any tax was payable on the purchase of the said ship and if so, to determine the rate of that tax. In this application the respondents stated that they had purchased the said ship under the said instrument of sale and that the said ship was purchased for "breaking and scrapping purposes" as mentioned in the bill of entry. The Deputy Commissioner of Sales Tax held that purchase tax was payable on this transaction under entry 22 of Schedule E to the said Act. The Deputy Commissioner rejected the contention urged on behalf of the respondents that the provisions of section 13 of the said Act were not applicable as it could not be said that the said ship was used by the respondents in the manufacture of goods. The respondents then preferred an appeal before the Sales Tax Tribunal. Before the Tribunal the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts by the Tribunal. Before coming to the arguments advanced before us, it would be useful to refer to certain relevant provisions of the said Act. The relevant portion of section 13 of the said Act reads as follows: "Where a dealer who is liable to pay tax under this Act purchases any goods specified in Schedule B, C, D or E, from a person or a Government who or which is not a registered dealer, and(a) uses them within the State in the manufacture of goods, or in the packing of goods (whether manufactured by him or not), or...... then, there shall be levied, subject to the provisions of sub-section (3) of section 7, a purchase tax on the turnover of such purchases at the rate set out against each of such goods in the aforesaid schedules." Clause (17) of section 2 of the said Act, which gives an extended definition to the term "manufacture" reads as follows: "manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed." It may be pointed out at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work or the hull or body proper of the ship out of which iron and steel scrap, etc., were obtained and that no purchase tax would be payable by the respondents on that part of the price attributable to the other goods like boilers, fans, propellers, lifeboats and so on, which we have already referred to earlier. It appears to us that there is considerable force in this submission. The term "manufacture" has been given an extended definition in clause (17) of section 2 of the said Act which we have already set out. In our judgment in Commissioner of Sales Tax v. Dunken Coffee Manufacturing Company[1975] 35 S.T.C. 493., we have held that the definition of the term "manufacture" in section 2(17) of the said Act is very wide and includes within its scope certain activities which, in ordinary parlance, may not be considered as manufacture. But even under the very definition, the various activities set out therein must result in a different commercial commodity in order that such activities may amount to manufacture of goods. Now, in the present case, it is not disputed by Mr. Sheth, the learned Advocate for the respondents, that the process of dismantling the ship so as to obtain from i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have stated is that they have purchased a ship and not that they have purchased iron and steel scrap, although it has been stated that the ship was purchased for breaking and scrapping purposes. It has not been urged anywhere by the respondents, either before the Deputy Commissioner of Sales Tax or before the Tribunal, that what they had purchased was scrap and not a ship at all. The mere fact that the respondents had purchased the said ship for the purpose of breaking up and scrapping the same would, in our opinion, not convert the ship into scrap. There is nothing on the record to show that the said ship had become unserviceable or had been condemned. As we are of the view that there is nothing on the record to show that the said ship was purchased as scrap or had become unserviceable and, on the other hand, the evidence brought on the record shows that it was purchased as a ship, we need not consider the arguments of Mr. Sheth based on the assumption that the said ship was purchased as scrap. It was next submitted by Mr. Sheth that we should discharge the question referred to us and send the matter back to the Tribunal, as the Tribunal had not taken evidence regarding the writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondents on the ship might amount to manufacture, it could not be said that the said ship which was purchased by the respondents was used by the respondents in the manufacture of goods. It was urged by him that only three categories of goods could be said to be used in the manufacture of other goods. The first category is of goods which are reflected in the manufactured goods. The second category is of goods which are consumed in the process of manufacture like fuel and lubricants and the third category consists of goods which are not consumed in the manufacture but are necessary for converting goods into other kinds of goods, for example, machinery. It is urged by him that any goods other than such goods as fall within these three categories cannot be considered to be goods used in the manufacture of goods. In support of this contention, Mr. Sheth relied on the unreported decision of a Division Bench of the Gujarat High Court in Commissioner of Sales Tax v. Ajay Printery (Pvt.) Ltd. [S.T.R. No. 9 of 1962 decided by J.M. Shelat, C.J. (as he then was), and P.N. Bhagwati, J. (as he then was), on 20th November, 1963, the judgment having been delivered by Bhagwati, J.]. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat raw materials used in the manufacture of finished products must be regarded as goods used in the manufacture of finished goods. It must be remembered that in the present case, the ship which was purchased by the respondents could well be regarded as the raw material and the scrap iron and steel obtained from the ship by dismantling and breaking up the same could be regarded as finished products. Apart from this, as we have already pointed out in the case of Commissioner of Sales Tax v. Dunken Coffee Manufacturing Company[1975] 35 S.T.C. 493. , what is essential for an activity to amount to manufacture is that it must result in a different commercial article or commodity. In our view, the scrap iron and steel which were obtained by the respondents by dismantling and breaking up of the said ship must be regarded as a different commercial commodity from the ship itself, and hence the activity would amount to manufacture. The goods manufactured would be the scrap iron and steel obtained or manufactured by the dismantling and breaking up of the ship and the goods used in the manufacture of this scrap iron and steel would be the ship itself. The case is, therefore, clearly covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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