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M/s Kalptaru Agro Forest Enterprises Pvt. Ltd. Versus The Commissioner Commercial Tax

2016 (7) TMI 287 - ALLAHABAD HIGH COURT

Input Tax Credit - Manufacturing activity or not - UP VAT - business of sale and purchase of Eucalyptus wood and bamboo - Tribunal observed that, the alleged process of debarking and cutting of wood and bamboo does not result in any new finished commercial item totally different in identity to wood and bamboo, therefore, the process does not involve any manufacture. Consequently the benefit of I.T.C. under Section 13 is not available to the revisionist. - Held that:- it is evident that every .....

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ergence of a new commercial commodity. - For the reasons aforesaid the judgment of the Tribunal cannot be faulted and once it is held that no manufacture was involved in the alleged process, the benefit of Section 13(1)(a) read with Explanation 3 could not be extended to the revisionist. - Decided against the assessee. - TRADE TAX REVISION No. - 52 of 2016 - Dated:- 4-7-2016 - Hon'ble Rajan Roy, J. For the Applicant : Om Kumar, Jairam Srivastava For the Opposite Party : C.S.C. ORDER Hear .....

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uthority. In the first appeal which was partly allowed the claim to I.T.C. carried forwarded was accepted, but the claim of I.T.C. to the extent of ₹ 33,73,939/- was disallowed against which a second appeal was filed before the Commercial Tax Tribunal at Lucknow which has upheld the judgment of the first appellate authority and rejected the appeal of the revisionist whereby the matter has been carried forward further to this court by way of this revision. Contention of the revisionist is t .....

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e and mentioned in such clauses, subject to the conditions given therein and such other conditions and restrictions as may be prescribed, be allowed credit of an amount, as I.T.C., to the extent provided by or under the relevant clause. Section 13(1)(a) provides that subject to conditions given in column 2, every dealer liable to pay tax, shall, in respect of all taxable goods except non-vat goods, capital goods and captive power plant, where such taxable goods are purchased on or after the date .....

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ount of input tax. The revisionist relying upon explanation (iii) to Section 13 contends that the process of manufacture referable to the said provision includes processing and as it undertakes a processing of woods and bamboos, it would be a different finished product, therefore it is entitled to the benefit of the said provision. It is contended that the judgments relied upon by the Tribunal and the appellate authorities are on the meaning assigned to the term 'manufacture' and not  .....

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al Cotton Industries v. Assistant (Anti-Evasion), Bhilwara, Rajasthan, and A.I.T. 2015 180 SC, M/s Gujrat Industries & ors. V. Commissioner of Central Excise-I, Ahmedabad. It also relies upon the definition of processing as contained in English Dictionaries. Based on the aforesaid it is contended that the learned Tribunal has erred in law in misinterpreting the provisions of Section 13 and Rule 21(1)(a)(f) of the V.A.T. Rules. In view of the above decisions it ought to have affirmed the reve .....

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rsion of an I.T.C. under Rule 21(1)(a)(f) of the VAT Rules was justified. The waste product and fire-wood resulting from the process allegedly undertaken by the revisionist has not been shown in the closing stock of the relevant year nor any sale has been shown. The sale of waste product and fire-wood is alleged to have been disclosed in the year 2015-16. The Tribunal arrived at the conclusion as was of the appellate authority also that wood and bamboo had been purchased by the revisionist in sq .....

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in the case of C.S.T. v. Sarvshree Payo Fruit Packagers reported in 1980(Supp.) SCC 174, wherein, it was held that slicing of pineapple did not constitute a manufacture of a new item, as, it did not change the identity of the original product. The waste-product and firewood had been destroyed in the alleged process and did not constitute waste-product or by-product for attracting the provisions of Section 13(3)(b) as these had been allegedly sold in the subsequent years i.e. 205-16, whereas, the .....

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e-product in its stock. The details submitted before it disclose the sale of waste-product and firewood in square meters and sale of waste-product by him in cubic meters. According to the Tribunal, firewood is never sold in square meter or cubic meter. The question of applicability of Section 13(1)(a) to Sl.2(ii) of the Table arises only if the taxable goods except non-vat goods purchased are used in manufacture. The term "Manufacture" has been defined in Section 2(t) of the Act of 200 .....

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contained in Section 2(e-i) of the U.P. Trade Tax Act 1948 which reads as under: "2(e-i). "manufacture" means producing, making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods, but does not include such manufactures or manufacturing processes as may be prescribed." The meaning of the word 'manufacture' as it appears in the Trade Tax 1948 fell for consideration before the Supreme Court in the ca .....

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uch as gitti etc. were also taxable under the said Act. The Supreme Court while deciding the matter observed "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." In this regard it drew support from an earlier decision in the case of State of Tamil Nadu v .....

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t was taxable to purchase Tax under Section 5-A of the Kerala General Sales Tax Act 1963 ? In paragraph 8-11 extracts of the judgment of the U.S. Supreme Court in the case of East Texas Motor Freight Lines v. Frozen Food Express, 100 L Ed. 917, and Anheuser-Busch Brewing Assn. v. U.S., 52 L Ed 336-338, were quoted which read as under : "8. While on the point, we may refer to East Texas Motor Freight Lines v. Frozen Food Express, 100 L Ed 917, where the U.S. Supreme Court held that dressed a .....

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d in the field and cotton-seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton-seed, as well as the dressed chicken, have gone through a processing stage. But neither has been "manufactured" in the normal sense of the word. 10. Referring to Anheuser-Busch Brewing Assn. v. United States, 52 L Ed 336-338, the court said : Manufacture implies a change, but every change is not manufacture, and yet every change in an article .....

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ge but every change is not a manufacture. Every change may be the result of treatment, labour and manipulation i.e. processing, but something more is necessary i.e. a new and different article must emerge "having a distinctive name, character or use". It was held that at some point of time processing and manufacture will merge, but where the commodity retains a continuing substantial identity through the processing stage it could not be said that it had been "manufactured". B .....

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1948, and also essentially similar to the definition contained in Section 2(f) of the Act of 2008, except for the use of the words 'mixing and blending' in the latter provision as has already been noticed in the earlier part of this judgment. After considering the said provision the Supreme Court held as under: "5. From a perusal of the definition, extracted above, it is clear that the processes of producing, making, extracting, altering, ornamenting, finishing or otherwise processi .....

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an identical question, expressed the view that when stone boulders were crushed into stone chips, gitti and stone ballast, the process could not be termed as "manufacture". That case arose under the Uttar Pradesh Sales Tax Act, 1948 (for short "the Act"). The definition of "manufacture" in Section 2(e-1) of the U.P. Act appears to be similar to the definition under consideration." Thus, it is evident that every type of operation of the goods or finishing of goo .....

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t of place to refer to one of the conclusions drawn by the Supreme Court in the State of Orissa v. Titaghur Paper Mills co. Ltd. & ors., 1985 (Supp.) SCC 280 - "timber and sized or dressed logs are one and the same commercial commodity. Beams, rafters and planks would also be timber". In the case of sterling Foods v. State of Karnataka, (1986) 3 SCC 469, the Supreme Court states that frozen shrim/s, prawns and lobsters are not new and distinct commodity, but they retain the same ch .....

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