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TMI Blog2018 (1) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent : Mr.S.Ramanathan ORDER ( Order of this Court was made by S. Manikumar, J. ) Tax Case Revision is filed against the order in S.T.A.No.410 of 2006, dated 18.09.2010, on the file of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai. 2. Short facts leading to the Tax Case Revision are that the respondent, dealer in Tanned and finished leathers and tanning chemicals, was originally assessed on a total and taxable turnover of ₹ 31,98,22,627/- and ₹ 22,32,01,743/- respectively, as against the reported total and taxable turnover of ₹ 31,78,11,077/- and ₹ 22,11,90,188/- respectively, by the Commercial Tax Officer, Ranipet Assessment Circle vide proceedings dated 31.05.2005. On verification of the accounts, it was found that the assessee effected purchase of machinery spares, Generator spares, Hand lift for ₹ 8,42,490/- effected by issue of Form XVII declarations and for which, the concessional rate of tax, at the rate of 3% under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959 was availed by the assessee. The assessing officer rejected the concessional rate of tax by holding that, as per provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the disputed turnovers are liable for concessional rate of tax under section 3(3) by issuance of Form XVII declarations and further held that conversion of wet blue into finished leathers amounts to manufacture and dismissed the State Appeal. 5. Tax Case Revision is filed on the following substantial questions of law:- (i) Whether the Tribunal has committed a grave procedural error in having overlooked the judgments of Supreme Court in the case of A.Hajee Abdul Shukuoor and Co. Vs. State of Madras reported in 15 STC 719 and in the cse of State of Tamil Nadu Vs. Mahi Traders Others reported in 73 STC 228 admittedly cited on behalf of the Revenue in para 6 of the impugned judgment? (ii) Whether the order of Tribunal is perverse in its factual finding that process involved in the conversion of wet blue leather (also known as tanned leather or semi finished leather) into finished leather amount to manufacture by overlooking in the conversion of law hides and skins into dressed hides and skins as approved in the case of Hajee Abdul Shukuoor Vs. State of Madras reported in 15 STC 719 and in the case of State of Tamil Nadu Vs. Mahi Traders others reported in 73 STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slaughtered animals are easily putrescible, if it is not preserved, before reaching the tanneries, which would always be away from the place of procurement. Therefore, these raw skins are subjected to curing through several processes viz. salting, wet salting and drying. At this stage of drying if is called picked . It is the stage of temporary curing to prevent decay. 9. After tanning is done, the leather becomes non-putrescible and leather attains its character, nature and use and ready for use. In view of the above, he submitted that hides and skins after undergoing process including tanning become dressed hides and skins, which are also tanned, leather after undergoing refining process, according to the needs of leather industries. He submitted that the Tribunal ought to have followed the aforesaid principles of law. 10. Learned Additional Government Pleader (Taxes), submitted that the Tribunal ought to have followed the principles laid down, in the judgment of this Hon ble High Court in 73 STC 228, 15 STC 719. He further contended that the Tribunal ought to have considered that manufacture implies a change, but every change is not manufacture and yet every change in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odium acetate, sodium sulphide and soda bi carbonate are added in drum for increase in PH value for intake of chemicals for one hour. Retanning Syntans, vegetable extracts are added in drums and rotated for one hour for tightness and strenght. Dyeing The required colour is taken and dyed for colouring Drying The Water, which is already present in the leather is removed. Staking This process involves to made leather soft and flat. Trimming The process is carried on for the neat surface area and good looking purpose. Buffing/stuffing This process removes the dust in the backside of the leather and for uniformity on both sides. Dedusting Process is carried on for the purpose of smooth surface on both sides. Finishing The process is for fixing the colour in the grain surface.ss 11. We have to consider whether this activity will amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of both and tends to blur their interdependence in cases such as the present one. In State of Bihar Vs. Chrestien Mica Industries Ltd. (1956) 7 STC 626, the Patna High Court was to consider the question whether the process of mining mica is tantamount to manufacture of goods within the meaning of section 2(g) of the Bihar Sales Tax Act, 1947. It held that to manufacture must mean to bring into being something in a form in which it was capable of being sold or supplied in the course of business. The essential point to remember is that something is brought into the existence which is different from that originally existing, in the sense that the thing produced is by itself a commercial commodity and is capable as such of being sold or supplied. It is not necessary that the stuff or the material of the original article must lose its character or identity or it should become transformed in its basic and essential properties. In Commissioner of Sales Tax, U.P., Lucknow V. Harbilas Rai and Sons (1968) 21 STC 17 (SC), this Court held at page 20 that the word manufacture has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. (See Collector of Central Excise, Jaipur Vs. Rajasthan State Chemical Works, Deedwana, Rajasthan (1991) 4 SCC 473). 'Manufacture' is a transformation of an article, which is commercially different from the one, which is conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... variations and cognate expressions and held that when the jumbo rolls of photographic films are cut into small flats and rolls, the manufacturing activity takes place since, after cumulative effect of various processes, a manufactured product emerges from the raw material and each step towards such production would be a process in relation to the manufacture. 14. In the case of Commissioner of Income-tax v. N.C.Budharaja and Co. reported in (1993) 91 STC 420; (1993) 204 ITR 412, the Supreme Court again referred to the words manufacture and production wherein the relevant portions read thus : ...The words 'manufacture' and 'production' have received extensive judicial attention both under this Act as well as the Central Excises Act and the various sales tax laws. The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture. The meaning of the expression 'manufacture' was considered by this Court in Deputy Commissioner of Sales Tax V. Pio Food Packers (1980) 46 STC 63 (SC), among other decisions. In the said deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and becomes finished leather, but also the fact that each activity is known in the industry with different name. One is called the full-fledged unit, by which, the raw hides and skins get transformed into finished leather; the other is called the wet unit; and the third is called the dry unit. It is after discussing these facts the Appellate Assistant Commissioner came to the conclusion that a manufacturing activity takes place. The Tribunal appears to have been persuaded by the fact that in item 7B of Schedule II to the Act, the two categories of leather that are mentioned in the entry are 'raw hides and skins' and 'dressed hides and skins'. The entries indicate taxability and the rate. That cannot decide the issue as to whether any manufacturing activity takes place or not. Both 'wet leather' and 'finished leather' may be described as dressed hides and skins that is opposed to raw hides and skins . But we must still examine whether, when the wet blue takes through the various stages, a manufacturing activity takes place. The change or series of changes take the wet blue to a point where it can no longer be regarded as wet blue but must be reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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