Commissioner of Sales Tax, U.P. Vs. M/s Lal Kunwa Stone Crusher (P) Ltd.
EmailAppeal: Civil Appeal No. 5654 of 1998
(From the Judgment and Order dated 7.11.97 of the Allahabad High Court in S.T.R.No. 656 of 1993)
(With SLP(C) No.5638/99)
(From the Judgment and Order dated 7.11.97 of the Allahabad High Court in S.T.R.No. 656 of 1993)
(With SLP(C) No.5638/99)
Petitioner: Commissioner of Sales Tax, U.P.
Respondent: M/s Lal Kunwa Stone Crusher (P) Ltd.
Apeal: Civil Appeal No. 5654 of 1998
(From the Judgment and Order dated 7.11.97 of the Allahabad High Court in S.T.R.No. 656 of 1993)
(With SLP(C) No.5638/99)
(From the Judgment and Order dated 7.11.97 of the Allahabad High Court in S.T.R.No. 656 of 1993)
(With SLP(C) No.5638/99)
Judges: S. RAJENDRA BABU & S.N. PHUKAN, JJ.
Date of Judgment: Mar 14, 2000
Appearances:
Ms. Niti Dikshit, Mr. Pradeep Misra, Mr. Kavin Gulati, (Mr. Adarsh Kumar Goel) Additional Advocate General, Mr. S.N. Bhatt, Advocates for the Appellant.
Mr. Dhruv Agrawal, Mr. Praveen Kumar, Advocates for the Respond-ents.
Head Note:
SALES TAX LAW
U.P.Sales Tax Act, 1948
Section 2(e-1) – ” Manufacturing” – Crushing of stone boulder in to stone chip, gitti, stone-ballast or articles of stone – If different commodity and a manufacturing process, exigible to tax on further sale. Held that even if commercially it is different, Entry 40 of the notification does not intend it to describe as not stone.
U.P.Sales Tax Act, 1948
Section 2(e-1) – ” Manufacturing” – Crushing of stone boulder in to stone chip, gitti, stone-ballast or articles of stone – If different commodity and a manufacturing process, exigible to tax on further sale. Held that even if commercially it is different, Entry 40 of the notification does not intend it to describe as not stone.
Held:
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. (Para 4)
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 bould-ers 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 bal-last. (Para 5)
Cases Reffered:
1. Reliance Rocks Builders & Suppliers v. State of Karnataka, (1983) 49 STC 110
2. State of Tamil Nadu v. Pyare Lal Malhotra, 1978(2) SCC 552
2. State of Tamil Nadu v. Pyare Lal Malhotra, 1978(2) SCC 552
JUDGEMENT:
RAJENDRA BABU, J.
1. 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 conten-tion 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 Malhotra, 1978(2) SCC 552. 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 commer-cially 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 Karnataka, (1983) 49 STC 110, turned on the concept of con-sumption 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 bould-ers 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 bal-last. 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.
1. 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 conten-tion 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 Malhotra, 1978(2) SCC 552. 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 commer-cially 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 Karnataka, (1983) 49 STC 110, turned on the concept of con-sumption 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 bould-ers 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 bal-last. 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.
