9911796707
TMI Blog2006 (12) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... 1995-96. Since the main order of the Tribunal is produced in T.R.C. No. 419 of 2000 the facts referred to in the said T.R.C. are considered by us for our decision. In fact all the subsequent orders of the Tribunal are based on their order produced in T.R.C. No. 419 of 2000. The assessees were admittedly engaged in massive purchase of red oil from unregistered dealers who have not collected or remitted any sales tax on their sales to the assessees. Red oil is manufactured out of sandalwood, source of which is only forest in Kerala and Karnataka. In fact the assessing officer rightly pointed out that layman from whom assessees claimed to have purchased red oil cannot produce and sell the same because red oil can be extracted from sandalwood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is manufacture of product is the payment of excise duty by the assessees. The contention of the assessees before the Tribunal was that there was no chemical use in the manufacture and all what is achieved in the process engaged in the factory is removal of impurities and water from red oil. The assessees relied on several decisions including that of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827. The Tribunal accepted the contentions of the assessees and held that there was no manufacture of a new product as the process involved did not involve use of any chemical and all what the assessees have done is removal of impurities and water from red oil. We have heard Special Government Plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is substantial value difference between the raw material and the final product which is evident from the purchase value accounted by the assessees for raw material and the value of the final product received by them on sale. Even though assessees contention that manufacture under the Excise Act is not the same as manufacture under section 5A of the Act, which found acceptance with the Tribunal, we are unable to uphold the claim of the assessees upheld by the Tribunal, because assessees have not made any claim that excise duty is paid by them without any dispute by virtue of any special provision in the Excise Act providing for duty in respect of any other activity other than manufacturing in this case. Even though counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 (SC); Deputy Commissioner of Sales Tax v. Kunhalavi & Co. [1987] 66 STC 100 (Ker); Deputy Commissioner of Sales Tax v. Mohan Jewellery [1988] 71 STC 256 (Ker) and Anwarkhan Mahboob Co. v. State of Bombay [1960] 11 STC 698 (SC); AIR 1961 SC 213, we do not find any decision directly applicable to the facts of this case. In fact Supreme Court has, though in the context of the Income-tax Act in Aspinwall and Co. Ltd. v. Commissioner of Income-tax case [2002] 125 STC 101 (SC), held that just removal of husk/covering from coffee berry to separate coffee beans is a manufacturing activity. Apart from this decision, in large number of decisions, the Supreme Court has held that the process of making goods commercially different from raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act, in circumstances in which no tax is payable under subsections (1), (3), (4) or (5) of section 5 and either,-- (a) consumes such goods in the manufacture of other goods for sale or otherwise; or (b) uses or disposes of such goods in any manner other than by way of sale in the State; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce; shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in section 5. (2) Notwithstanding anything contained in sub-section (1), a dealer (other than a casual trader or agent of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any tax and after red oil is used by them in the production of sandalwood oil, it ceases to exist. Therefore, if purchase tax is not levied at the hands of the assessees, the same will frustrate and defeat the purpose of section 5A of the Act.
We do not know on what basis the Tribunal has assumed that in order to attract liability under section 5A manufacture of a product should be done with the use of chemicals. We are constrained to observe that the finding of the Tribunal is patently absurd and perverse. We therefore allow the tax revision cases, reversing the orders of the Tribunal, upholding levy of tax under section 5A of the Act on the purchase turnover of red oil by respondents-assessees for all the years. X X X X Extracts X X X X X X X X Extracts X X X X
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