2000 JTR(SC) 574
2000 AIR(SC) 1161 ; 2000 AIR(SCW) 939 ; 2000 AllLJ 868 ; 2000 117 ELT 279 ; 2000 3 JT 204 ; 2000 2 Scale 363 ; 2000 3 SCC 525 ; 2000 2 SCR 276 ; 2000 118 STC 287 ; 2000 KHC 1067 ; 2000 2 Supreme 369
2000(2) Supreme 369
SUPREME COURT OF INDIA
(From Allahabad High Court)
S. Rajendra Babu & S.N. Phukan, JJ.
Commissioner of Sales Tax, U.P. -Appellant
versus
M/s. Lal Kunwa Stone Crusher (P) Ltd. etc. -Respondents
Civil Appeal No. 5654 of 1998
With
(SLP (C) No. 5638 of 1999)
Decided on 14-3-2000
Counsel for the Parties :
For the Appellant : Ms. Niti Dikshit, Pradeep Misra, Kavin Gulati, (Adarsh Kumar Goel) Additional Advocate General, S.N. Bhatt, Advocates.
For the Respondents : Dhruv Agrawal, Praveen Kumar, Advocates.
IMPORTANT POINT
Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing, they may remain commercially the same goods which cannot be taxed again, in a series of sales, as long as they retain their identity as goods of a particular type.
Act Referred :UTTAR PRADESH SALES TAX ACT : S.2(e)(1)
(A) The notification dated 7.9.81 brought certain items, including stone and articles of stone such as gitti, stone chips, and stone-ballast, within the scope of sales tax at the point of sale to the consumer. Read with Section 2(e)(1) of the U.P. Sales Tax Act, 1948, the term 'manufacture' encompasses producing, making, extracting, processing, treating, or otherwise altering goods. This case examines whether the conversion of stone boulders into these items constitutes manufacture that would render the resulting goods taxable at the point of sale under the notified entry.
(B) Key legal principles include that once separate commercial commodities emerge or come into existence, they become individually taxable goods. However, where goods are merely subjected to processing or finishing without changing their essential commercial identity, they remain the same goods for sales tax purposes and cannot be taxed again in a series of sales. The broad definition of 'stone' is held to include various forms such as gitti, kankar, and stone-ballast.
Facts of the case:
The respondent purchased stone boulders and crushed them into stone chips, gitti, and dust for further sale. The assessing authority and the Tribunal majority held that these items fall within Entry 40 of the notification and are taxable, considering them to be stone in different forms. The Department challenged the view that no further tax was payable after the initial purchase.
Findings of Court:
The court held that stone, gitti, stone chips, and similar items are commercially the same goods as they continue to be identifiable as stone in different forms. The process adopted did not create new commercial goods with a different identity, and thus tax could not be imposed again on their sale. The majority view, supported by the High Court, was upheld.
Issues:
Whether gitti, stone chips, and dust continue to be stone or, upon crushing stone boulders into these forms, different commercial goods emerge that would attract sales tax on sale.
Ratio Decidendi:
Where the goods remain commercially identical and are only processed or finished without altering their essential identity, they do not become separate taxable items. Entry 40 of the notification includes various forms of stone, and tax is not levied again on subsequent sales of the same commercial goods.
Result:
The appeal and special leave petition are dismissed, and no orders as to costs are made.
(A) The notification dated 7.9.81 brought certain items, including stone and articles of stone such as gitti, stone chips, and stone-ballast, within the scope of sales tax at the point of sale to the consumer. Read with Section 2(e)(1) of the U.P. Sales Tax Act, 1948, the term 'manufacture' encompasses producing, making, extracting, processing, treating, or otherwise altering goods. This case examines whether the conversion of stone boulders into these items constitutes manufacture that would render the resulting goods taxable at the point of sale under the notified entry.
(B) Key legal principles include that once separate commercial commodities emerge or come into existence, they become individually taxable goods. However, where goods are merely subjected to processing or finishing without changing their essential commercial identity, they remain the same goods for sales tax purposes and cannot be taxed again in a series of sales. The broad definition of 'stone' is held to include various forms such as gitti, kankar, and stone-ballast.
Facts of the case:
The respondent purchased stone boulders and crushed them into stone chips, gitti, and dust for further sale. The assessing authority and the Tribunal majority held that these items fall within Entry 40 of the notification and are taxable, considering them to be stone in different forms. The Department challenged the view that no further tax was payable after the initial purchase.
Findings of Court:
The court held that stone, gitti, stone chips, and similar items are commercially the same goods as they continue to be identifiable as stone in different forms. The process adopted did not create new commercial goods with a different identity, and thus tax could not be imposed again on their sale. The majority view, supported by the High Court, was upheld.
Issues:
Whether gitti, stone chips, and dust continue to be stone or, upon crushing stone boulders into these forms, different commercial goods emerge that would attract sales tax on sale.
Ratio Decidendi:
Where the goods remain commercially identical and are only processed or finished without altering their essential identity, they do not become separate taxable items. Entry 40 of the notification includes various forms of stone, and tax is not levied again on subsequent sales of the same commercial goods.
Result:
The appeal and special leave petition are dismissed, and no orders as to costs are made.
JUDGMENT
Rajendra Babu, J.-We are concerned in this case with the notification dated 7.9.81 bringing to sales tax the following items at the point of sale to the consumer :
"Ramraj, geru, surkhi, sand, lime, bajri, marble-chips, moram, gitti, kankar, stone-ballast, stone and articles of stone except of glazed stone."
2. The respondent is a dealer engaged in purchasing of stone boulders and crushing them into stone chips, gitti and dust for the purpose of further sale. The contention put forth by the dealer is that at the time of purchase of boulders, sales tax has been paid and hence goods emerging out of the same as small stones, dust, etc. are not liable to be taxed again. The process adopted by him in conversion of boulders to the aforesaid goods may be manufacture, still tax cannot be imposed as what has been produced by him is physically and chemically not different from the original goods. The assessing authority rejected the contention of the dealer. On appeal, the Assistant Commissioner of Sales Tax noticed that the trader had neither manufactured gitti nor has sold it having crushed boulders into small stones and dust. He is of the view that tax was not attracted on both transactions. On second appeal, the Tribunal, by majority, upheld the view of the Assistant Commissioner of Sales Tax. The Department carried the matter further in revision to the High Court and the High Court in a very cryptic order dismissed the petition. The Department is in appeal before us.
3. The question raised before us is whether gitti, stone chips and dust continue to be stone or on crushing stone boulders into gitti, stone chips and dust different commercial goods emerge so as to attract tax on their sale. On behalf of the Department, it was contended that the process adopted by the dealer would amount to manufacture as per the definition of manufacture under Section 2(e-1) of the U.P. Sales Tax Act, 1948. Under the said provision, manufacture has been defined to mean producing, making, mining, collecting, extracting, altering, ornamenting, finishing or otherwise processing, treating or adopting any goods. Thus it was submitted that the definition used for the purpose of manufacture in the Act makes it very clear that every activity in relation to goods not only altering the same but also processing of the same has also been included.
4. Here in the present case, the goods that are brought into taxation are enumerated in Entry 40 of the notification dated September 7, 1981 to which we have adverted to earlier. Each one of the items enumerates various goods, which could be brought to tax. The purpose of sales tax is to levy tax on sale of goods of each variety and not the sale of the substance out of which they may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing, they may remain commercially the same goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. We are fortified in this view by the decision in State of Tamil Nadu v. Pyare Lal Malhotra1. What is to be seen in the present case is whether stone gitti, chips, etc. continue to be identifiable with the stone boulders, which have been bought by the dealer.
5. The view taken by the Tribunal as affirmed by the High Court is that the goods continue to be stone and they are not commercially different goods to be identified differently for the purposes of sales tax. The decision relied on by minority view in the Tribunal in Reliance Rocks Builders & Suppliers v. State of Karnataka1, turned on the concept of consumption of goods for the purpose of bringing into existence new goods. In that case the Court was not concerned with an entry of the nature with which we are concerned in the present case. Where the dealer had brought into existence new commercial goods by consuming the boulders to bring out small pieces of stone, it was held that such activity attracted purchase tax. In the present case, however, stone, as such, and gitti and articles of stones are all of similar nature though by size they may be different. Even if gitti, kankar, stone-ballast, etc. may all be looked upon as separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that Entry 40 of the notification is intended to describe the same as not stone at all. In fact the term stone is wide enough to include the various forms such as gitti, kankar, stone ballast. In that view of the matter, we think that the view taken by the majority of the Tribunal and affirmed by the High Court stands to reason. We are, therefore, not inclined to interfere with the same.
6. In the result, the appeal and the special leave petition are dismissed. In the circumstances of the case, there shall be no orders as to costs.
Appeal and SLP dismissed.
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