TMI Blog1983 (12) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Act as it was felt that the turnover of sales of medicines dispensed by them on the basis of Hakim Rais Ahmad's prescription and supplied to various patients had escaped assessment. The Sales Tax Officer concluded that during the relevant assessment years the two assessees had sold certain medicines prescribed by Hakim Rais Ahmad after purchasing the same from the market. Likewise they also sold to various patients medicines prescribed by Hakim Rais Ahmad after dispensing the same from the ingredients which they had purchased from kirana dealers. The two dealers could, in so far as the medicines dispensed by them from out of the ingredients purchased from kirana dealers were concerned be treated to be manufacturers thereof inasmuch as the characteristics of the ingredients had while dispensing of medicines, undergone a basic change. Turnover of sale of such medicines was liable to be taxed under the U.P. Sales Tax Act (hereinafter referred to as the Act) but it had, in the relevant years, escaped assessment. The Sales Tax Officer accordingly determined the escaped turnover of the medicines dispensed by the two dealers and assessed them to tax accordingly. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax [1963] 14 STC 581 and that of the Supreme Court in the case of Commissioner of Sales Tax v. Dr. Sukh Deo [1969] 23 STC 385 (SC), the two dealers could not be considered to be manufacturers of such medicines. They further contended that in order to qualify as manufacturing activity, it is necessary that such activity must result in bringing into existence a commodity which is commercially different from the commodities subjected to such activity. They also relied upon certain observations made by this Court and the Supreme Court in the two cases of Dr. Sukh Deo [1963] 14 STC 581 and [1969] 23 STC 385 (SC), which according to them indicate that where on the basis of doctor's prescription a mixture is prepared by mixing various medicines and is then sold to individual patients, such mixture cannot be treated as a commercial commodity different from its ingredients and that the activity of the dispenser in preparing the mixture does not result in any manufacturing activity. The dealers further contended that in any case, their activity of dispensing medicines being on a limited scale does not, as held in the case of Commissioner of Sales Tax v. Bharat Oxygen, Lucknow 1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot include such manufacture or manufacturing processes as may be prescribed; (ee) 'manufacturer', in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture." A perusal of section 2(ee) of the Act shows that the expression "manufacturer" has not been used therein in the normal sense of a person who manufactures a commodity. Instead, the expression has been given an artificial meaning according to which a dealer who after the goods are manufactured effects the first sale thereof in the State of U.P. is to be considered to be a manufacturer. Accordingly the two dealers would, in relation to the medicines dispensed by them, be manufacturers: 1.. the said medicines have been manufactured and if so, 2.. the two dealers were, after manufacture of such medicines, the first persons to effect their sale in the State of U.P. Again the word "manufacture" in the Act has not been used in the sense in which it is understood in common parlance. The question whether the medicines dispensed by the two dealers can be said to be manufactured or not has necessarily to be decided in the light of the definition of the word "manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be treated as a goods which had been manufactured. Same is the position with regard to collecting of goods. We are accordingly of opinion that according to the artificial meaning which has been given to the expression "manufacture" in section 2(e-1) of the Act, the coming into existence of a new commercial commodity is not the sine qua non for treating the said goods as goods obtained by way of manufacture. It is true that where an activity carried on is such which has the effect of bringing into existence a new commercial commodity it would fall within the ambit of the expression "manufacture" as used in the Act. But then, the way in which the expression has been defined in the Act, it would also cover within its sweep such activities where despite those activities the commercial identity of the concerned goods does not undergo a change. Legislative intendment clearly seems to be that whenever the goods are produced or made or subjected to process of the nature specified in section 2(e-1) of the Act, they are to be treated as goods that have been manufactured. In the case of goods that are liable to be taxed at the point of sale by the manufacturer, sales tax liability would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodity is brought into existence. As already stated, in this connection reliance was placed by the learned counsel for the dealers on the judgments of this Court and that of the Supreme Court in Dr. Sukh Deo's cases reported in [1963] 14 STC 581 and [1969] 23 STC 385 (SC) wherein it was held that as by mixing medicines no new commercial commodity comes into existence, it could not be said that the person dispensing mixtures was, for purposes of the U.P. Sales Tax Act (as it then stood), a "manufacturer". A careful perusal of the two judgments show that in those cases this Court and the Supreme Court pronounced upon the ambit and scope of the expression "manufacture" at a time when the Sales Tax Act did not contain any definition of the said expression, and in the context in which the expression was understood in common parlance. As already explained, these decisions would not be apt when we have to determine the ambit of the said expression in the light of the definition contained in section 2(e-1) of the Act which gives to it an expanded meaning. The next case cited at the Bar was the case of Commissioner, Sales Tax v. Bechu Ram Kishori Lal, Faizabad [1976] 38 STC 236; 1976 U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eces, etc., therefrom and thereafter had offered the same for sale, could be called a "manufacturer" of mutton tallow as defined by section 2(e-1) of the Act. The learned judge observed thus: "It is correct that the definition of the expression 'manufacture' has now been given a wider import but when grinding of wheat into flour is not manufacture: vide U.P. Atta Chakki Vyavasai Sangh, Varanasi v. Krishi Utpadan Mandi Samiti, Varanasi 1976 UPTC 322 or where the mixing of scents in ordinary til oil purchased by a dealer has not been held to amount to manufacture of perfumed oil: vide Commissioner of Sales Tax v. Bechu Ram Kishorilal [1976] 38 STC 236; 1976 UPTC 253, it cannot be said with any justification that the sale of mutton tallow by the assessee after removing dust and bonepieces would amount to manufacture." It will be said that in this case the learned single judge held the activity of the concerned assessee as not amounting to manufacture on the basis of the decision of this Court in U.P. Atta Chakki Vyavasai Sangh, Varanasi v. Krishi Utpadan Mandi Samiti, Varanasi 1976 UPTC 322 and that in the case of Bechu Ram Kishorilal [1976] 38 STC 236; 1976 UPTC 253. So far as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been manufactured. It was open to the Legislature to give an artificial meaning to the word 'manufacture'. But that did not result in altering the basic concept of taxable event which arises by coming into being of different or new commodity and not by the inclusion of the word 'process' in 'manufacture'." Likewise in the case of Commissioner of Sales Tax v. Dwarika Prasad Antu 1981 UPTC 650, the same learned single Judge reiterated the view that unless a change. was brought out in the nature of the commodity or a new commercial commodity was produced, it could not be said that any manufacture had taken place. For the reasons already stated by us, we are unable to accept the position that for purposes of section 2(e-1) of the Act manufacture takes place only if as a result of the processes mentioned therein a completely new commercial commodity comes into existence. We are accordingly of the opinion that the cases cited by the learned counsel for the dealers do not help their case. So far as the case of Commissioner of Sales Tax v. Bharat Oxygen, Lucknow 1980 UPTC 686 is concerned, in that case also while observing that in order to constitute manufacture the article produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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