TMI Blog1979 (3) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... xable goods under the Act in view of the definition of the word "goods" contained in section 2(1)(m) of the Act, which reads as follows: "2. (1)(m) 'goods' means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes livestock, all materials, commodities, and articles (including those to be used in the fitting out, improvement or repair of movable property) and all growing crops, grass or things attached to, or forming part of, the land which are agreed to be severed before sale or under the contract of sale;" (underlining by me) The tax payable at the relevant point of time was 3 per cent on the sale price under section 5(1) of the Act. But under sub-section (5) of section 5 a dealer whose total turnover in any year is less than Rs. 25,000 is not liable to pay tax during that year under sub-section (1) of section 5 of the Act. It is common ground that the appellants, during the relevant years, have purchased sheep and goats from dealers, who are exempted from paying tax on sale price under sub-section (5) of section 5 of the Act, i.e., in a circumstance under which no tax is leviable under section 5(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to pay tax on the purchase price under section 6 of the Act in the following circumstances: (i) The purchase of taxable goods by a dealer (a) in the course of his business; and (b) under circumstances when no tax is leviable under section 5; (ii) If such dealer- (a) consumes such goods in the manufacture of other goods for sale or otherwise; or (b) disposes of in any manner other than by sale in the State; or (c) despatches them to a place outside the State except as a result of sale or purchase in the course of inter-State trade or commerce. In these cases, the first condition is satisfied as the appellants admittedly are dealers in taxable goods, namely, sheep and goats, and they have purchased such goods in the course of their business as also under circumstances when no tax is leviable under section 5 of the Act as they purchased them from dealers who are exempted from paying tax under sub-section (5) of section 5 of the Act. As regards the existence of the second condition, which is also necessary to incur the liability to pay tax, the case of the appellants is that they have not done any one of the activities referred to above, which alone brings their purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the State. In support of this submission, he relied on the decision of the Supreme Court in Goli Eswariah v. Commissioner of Gift-tax[1970] 76 I.T.R. 675 at 680 (S.C.); A.I.R. 1970 S.C. 1722 at 1726, para 12. In the said decision, while rejecting a contention that the word "disposition" used in section 2(xxiv) of the Gift-tax Act also includes an unilateral act which diminishes the property, held that the word "disposition" used in that Act means bilateral or multilateral acts such as conveyance, assignment, settlement, delivery, etc., and cannot be understood to mean "dispose of", which would mean that even if a man destroys or abandons his property, it would become a gift. We do not think that the said decision can be taken as an authority for having held conclusively that the words "disposed of" always mean destruction also. When a word or words carry more than one meaning and they have not been defined in the relevant law, the meaning which is most appropriate in the context should be given. In the Raghurama Shetty's case(1), this Court, after setting out the meaning of the words "disposed of", as given in Corpus Juris Secundum, which includes "to finish with", came to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oats, to secure mutton, hides and skins after they purchased these sheep and goats in the course of their business, does not fall under items (i), (iii) and (iv) aforesaid. However, the question that arises for consideration is, whether or not, by that act, the appellants can be said to have consumed the goods otherwise than in the process of manufacture, falling under item (ii) mentioned above. 8.. In order to answer the above question, it is useful to ascertain in the first instance the meaning of the word "consumption" used in section 6 of the Act. Even, on the wording of section 6, the activity of bringing into existence other goods by the process of manufacture, out of the goods purchased, amounts to consumption and attracts the tax liability. Therefore, the conversion of the purchased goods into any other commercial commodity, though not by the process of manufacture, also does result in the consumption of the goods purchased and production of different goods. This is also clear from the decision of the Supreme Court in Anwarkhan Mehboob Co. v. State of Bombay[1960] 11 S.T.C. 698 (S.C.); A.I.R. 1961 S.C. 213. In the said case, the question that arose for consideration was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each commodity what may be considered ordinarily to be the final act of consumption, should not make us forget that in reaching the stage at which this final act of consumption takes place the commodity may pass through different stages of production and, for such different stages, there would exist one or more intermediate acts of consumption. (10).......This conversion of a commodity into a different commercial commodity by subjecting it to some processing is consumption within the meaning of the explanation to article 286 no less than the final act of user when no distinct commodity is being brought into existence but what was brought into existence is being used up............ (11) It must therefore be held on the facts of this case that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, viz., bidi patti, the delivery was for the purpose of consumption. The purchases in this case therefore fall within the meaning of explanation to article 286(1)(a) and must be held to have taken place inside the State of Bombay." In our opinion, the word "consumption" used in section 6 of the Act also means not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner has held that the process of slaughtering of sheep and goats and securing mutton, hides and skins is not a manufacturing process. (ii) In our opinion, on the wording of section 6, the liability to pay tax arises on the part of a dealer if he either consumed such goods in the manufacture of other goods for sale or if such goods are consumed otherwise than in manufacture of other goods by him, which necessarily includes the production of different commercial articles. This is only the reasonable way of construing the wording of section 6 of the Act. Therefore, in our opinion, the clear meaning of the relevant part of section 6 is as follows: (i) If the goods purchased in the course of the business of a dealer are consumed in producing other goods by way of manufacture for sale; or (ii) If the goods purchased in the course of the business of a dealer are consumed otherwise, i.e., otherwise than in the process of manufacture, to wit by producing other goods; the liability to pay tax arises. Therefore, if it is established that the taxable goods were purchased by a dealer in the course of his business and in circumstances under which no tax was leviable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have consumed the materials otherwise than in the manufacture of goods for sale and for a profit-motive. On the plain words of section 7, the purchase price is taxable. 8.. Mr. Chagla for the appellants urged that the expression 'or otherwise' is intended to denote a conjunctive introducing a specific alternative to the words 'for sale' immediately preceding. The clause in which it occurs means, says Mr. Chagla, that by section 7, the price paid for buying goods consumed in the manufacture of other goods, intended to be sold or otherwise disposed of, alone is taxable. We do not think that that is a reasonable interpretation of the expression 'either consumes such goods in the manufacture of other goods for sale or otherwise'. It is intended by the legislature that consumption of goods renders the price paid for their purchase taxable, if the goods are used in the manufacture of other goods for sale or if the goods are consumed otherwise." (underlining by me) It may be seen from para 8 aforesaid, a contention similar to the one raised in this case which was raised in regard to the interpretation of section 7 of the Madhya Pradesh Act was negatived and it was held that if the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1957?" Similarly, the question of law as set out in question No. (1), in S.T.A. Nos. 15 and 16 of 1976, as arising for consideration in these appeals, reads as follows: "(1) Whether, on the facts and in the circumstances of the case, the Commissioner of Commercial Taxes is justified in holding that the purchase turnover of Rs. 1,40,300 relating to sheep and goats is liable to be taxed under the provisions of section 6 of the Karnataka Sales Tax Act, 1957?" Therefore, the upholding or annulment of the levy must depend on the interpretation of section 6 of the Act. Sub-section (3) of section 24 of the Act empowers this Court to pass such orders as it thinks fit after giving the concerned party a reasonable opportunity of being heard in the matter. Therefore, it is difficult to accede to the submission that though the appellants were liable to pay the tax levied on them by the orders under appeal, on a correct interpretation of section 6 of the Act, the orders should be set aside. The conclusion of the Commissioner is correct though the reasoning may be wrong Therefore, we reject the contention of the appellants and uphold the orders of the Commissioner though on a ground diff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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