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2016 (10) TMI 857 - GUJARAT HIGH COURT

2016 (10) TMI 857 - GUJARAT HIGH COURT - TMI - Claim of exemption from tax and Central Sales Tax (CST) - sale by the dealer to the exporter against Form-H - Nature of activity / processing amount to Manufacturing process or not - Section 2(16) of the Gujarat Sales Tax Act - Castor oil - conversion of commercial grade Castor oil to First Special Grade after refining process - Held that: - The word as may be prescribed as used under this definition clause is attracting the provision contained unde .....

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Versus COLLECTOR OF CENTRAL EXCISE, JAIPUR [2004 (11) TMI 109 - SUPREME COURT OF INDIA] where it was held that merely because some process is carried out on the substance, the same is not to be treated as manufacturing process. - Whether the goods exported by the exporter was the same goods purchased from the respondent (dealer) and consequently sale by the dealer to the exporter would be sale prior to export sale and would be covered by section 5(3) of the Central Act? - Held that: - wherei .....

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, it cannot be considered as a manufacturing process and therefore, it appears to this court also that the learned Tribunal has rightly come to the conclusion in passing the order impugned in the appeal. - No illegality or irregularity of any nature committed by the learned Tribunal - appeal dismissed - decided in favor of Tribunal. - TAX APPEAL NO. 923 of 2013 With TAX APPEAL NO. 924 of 2013 TO TAX APPEAL NO. 927 of 2013 - Dated:- 20-10-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. For .....

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process as defined under Section 2(16) of the Gujarat Sales Tax Act ( The Act for short) and consequently, the original appeal filled by the opponent no.2 herein came to be allowed. It is against this judgment and order passed by the learned Tribunal, the present tax appeal came to be filed raising substantial question of law. 2. It appears from the record that this tax appeal is a cognate tax appeal to other appeals, which are numbered as Tax Appeal No.924 of 2013 to Tax Appeal No. 927 of 2013 .....

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aw have been framed for consideration, which are reproduced hereinafter: (A) Whether on the facts and in the circumstances of the case, the Tribunal has rightly held that, the process carried out by the exporter on goods purchased by the respondent herein - original appellant was not process of manufacture as defined under section 2(16) of the GST Act ? (B) Whether on the facts and in the circumstances of the case the Tribunal has rightly held that, the goods exported by the exporter was the sam .....

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ment year 1999-2000 the Assistant commissioner assessed the petitioner under both the Acts vide order dated 30.03.2002, which has led the opponent to file an appeal before the appellate authority and in the appeal the Deputy Commissioner has dismissed both the appeals by an order dated 17.12.2003 and it is against that order Second Appeal came to be filed before the VAT Tribunal at Ahmedabad and all the appeals, as referred to above, came up for consideration before the VAT Tribunal, which came .....

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dustan Unilever Ltd.) had purchased Castor oil from the opponent but has not sold the Castor oil in the very same form in which it had been purchased from the opponent, and after undertaking some process upon it the said oil came to be sold, which amounts to manufacture and resultantly, the tax demand along with penalty and interest had been generated by the authority under both the Acts. So far as Gujarat Sales Tax Act is concerned, the tax demand for the period as stated above came to be raise .....

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ppellate authority and against the said order of appellate authority, the Second Appeal came up for consideration before the VAT Tribunal. The learned VAT Tribunal, as stated above, has allowed the appeal, which has given rise to present tax appeal and hence, in the background of the aforesaid facts, the substantial questions of law came to be framed and the appeal has come up for final disposal. 7. The learned Assistant Government Pleader, Mr. Pranav Trivedi, has contended that the learned Trib .....

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Section 5(3) of the Central Sales Tax Act, 1956. Learned AGP has also contended that the learned Tribunal has misinterpreted the statutory provision contained under Section 5(3) of the Central Sales Tax Act as well as Section 2(16) of the Gujarat Sales Tax Act. The definition contained has also not been properly construed and based upon misconstruction since the order is passed, the same is required to be corrected. It was also contended by the counsel that the learned Tribunal has not consider .....

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transform or fashion raw material into a changed form for use and held that oil is produced out of the seeds, the process is nothing but a manufacturing process and leviable to tax being a new commodity generated out of it. The learned counsel further has drawn attention and contended that almost similar provision contained in Kerala General Sales Tax Act, 1984, wherein the Hon'ble Apex Court while dealing with the said provision in the year 1991, has held that conversion of coconut husk in .....

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from the raw Castor oil and therefore, by contending this the learned counsel has submitted that the decision delivered by the learned Tribunal is not just and proper and not in consonance with proposition of law. 8. As against this, the counsel for the opponent has stated that the learned Tribunal has examined the entire process, which was applied by the purchaser upon the Castor oil and has submitted that after detailed examination of the process itself, the learned Tribunal has held that the .....

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process which has changed the basic substance of Castor oil and therefore, the said processed article remained covered under Entry no.185 (II) in Schedule IIA. The learned counsel has drawn attention and contended the applicability of said Entry contained in Schedule IIA. The learned counsel has further drawn attention of this court about a letter dated 01.11.2004 written by University of Pune and addressed to HUL, which letter is an analysis report of Castor oil samples and has conveyed that g .....

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atory Ltd. has also addressed a letter on 26.08.2005, which indicates that company is reputed and independent inspection and testing by company for Castor oil shipped to international destinations world wide, and therefore, the learned counsel for the respondent has submitted that the Tribunal, in addition to applicability of the relevant entry and provision, has gone into even the process stated to have been applied upon the Castor oil supplied by the opponent and therefore, since the order is .....

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tion of law on the issue and therefore, since the illegality committed by the authorities below came to be corrected by the learned Tribunal by a detailed order, the finding arrived at in the absence of any perversity does not require to be substituted. The substantial question of law which has been framed is getting answer from the finding of the learned Tribunal and therefore, the tax appeal may not be entertained. 9. The learned counsel for the respondent has further contended that even a cri .....

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ent case, the learned Tribunal has examined the entire process executed upon Castor oil at length and only thereafter, has passed the judgment in question. The learned counsel has drawn the attention of this court to various paragraphs of the said order passed by the High Court in quashing petition. However, the same is not that much relatable are not made part of the present order. It was also contended by the counsel that in various decisions delivered by the Hon ble Apex Court it has been car .....

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nsel for the opponent submitted that such a pain staking judgment and order does not call for any interference. Hence, the tax appeal is required to be dismissed. No other submissions are made. 10. Having heard the learned counsels appearing for respective parties and having gone through the material on record, we deem it proper to first of all consider the definition of word manufacture defined under the provision of the statute Section 2(16) is defining the word manufacture which covers the ac .....

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ures or manufacturing processes as may be prescribed . The word as may be prescribed as used under this definition clause is attracting the provision contained under Rule 3 of the rules in which the prescription is made and therefore, referring to this Rule 3 it can be seen that the process which has underwent on their product is not a manufacturing process and therefore, conjoin effect of the aforesaid statutory provision, it appears that the learned Tribunal has rightly come to the conclusion .....

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is not to be treated as manufacturing process. In paragraphs 19 to 24, the Hon ble Apex Court has made reference to several other decisions delivered in past and ultimately held that the activity cannot be termed as manufacture . The said relevant extract of the decision are reproduced hereinafter: 19. This court has held in a number of decisions that merely because some process has been carried on it is not necessary that a new commodity has come into existence. In the case of CCE v. Markfed Va .....

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arth, no duty was leviable on spent earth. 20. In the case of CCE v. Technoweld Industries the question was whether the drawing of wires from wire rods amounted to manufacture. I was held that both the products were wires and merely because they were covered by two separate entries did not mean that the product was excisable. It was held that in the absence of any manufacture the product did not become excisable merely because there were two separate entries. 21. In the case of Meltes (I) (P) Lt .....

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the process had been indicated in the tariff item, it would amount to manufacture. These arguments were negatived. It was held that to start with the commodity was a marble and even after cutting it remained marble. It was held that there was no manufacture. 23. It was submitted that the decision in Aman Marble Industries case is not laying down the correct law in as much as it has not taken note of the amended definition of the term manufacture in Section 2(f). It was submitted that for a proce .....

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tariff item. However, either in the section or chapter note or in the tariff entry it must be specified that the process amounts to manufacture. Merely setting out a process in the tariff entry would not be sufficient. If the process is indicated in the tariff entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purposes of identifying the product and the rate which is applicable to that product. In other words, for a deeming provis .....

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fining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision stated that the process amounts to manufacture. 12. Yet in another decision in case of Osnar Chemical Pvt. Ltd reported in (2012) 2 SCC 282 the ambit of word manufacture has been analyzed by the Apex Court and has held that only when change or series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognized .....

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ition which requires the court to take a reference of it and therefore, reproduced herein after: 30. We may now examine whether the process in question, otherwise amounts to manufacture under the expansive Section 2(f) of the Act. It is trite to state that manufacture can be said to have taken place only when there is transformation of raw materials into a new and different article having the a different identity, characteristic an use. It is well settled that mere improvement in quality does no .....

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n undue emphasis on the addition by way of the absorption of the hydrogen atoms in the process of hardening and on the consequent inter-molecular changes in the oil. The addition of the hydrogen atoms was effected in order to saturate a portion of the oleic and linoleic constituents of the oil and render the oil more stable thus improving its quality ans utility. But neither mere absorption of other matter, nor inter-molecular changes necessarily affect the identity of a substance as ordinarily .....

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Cloth & General Mills Co. Ltd., yet another Constitution Bench, exploring the concept of manufacture echoed the following views: (SCC p.794-95, para 14) 14. … The word manufacture used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance , however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, .....

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ting to sizes of jumbo rolls into toilet rolls, napkins and facial tissue papers amounted to manufacture. While holding that the said process did not amount to manufacture this court inter alia, held as under: (SCC p.317, para 12) 12. …. However, the end use of the tissue paper in the jumbo rolls and the end use of the toilet rolls, the table napkins and the facial tissues remains the same, namely, for household or sanitary use. The predominant test in such a case is whether the character .....

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Pio Food Packers, a three- Judge Bench of this court, while deciding whether conversion of pineapple fruit into pineapple slices for sale in sealed cans amounted to manufacture, observed as follows: (SCC p.176, para 5) 5. … Commonly, manufacture is the end result of one [or] more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages or proceeding ans perhaps a different .....

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say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, I must be regarded as still retaining its original identity. (emphasis supplied by us) 13. Thus, it can be said from the above circumstance that the facts of the case on hand are also akin, wherein the basic characteristic and the use is not drastically changed and since the learned Tribunal after considering several decisions including that of Constitutional Bench of the Ho .....

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o this court also that the learned Tribunal has rightly come to the conclusion in passing the order impugned in the appeal. 14. Before arriving at a final conclusion, the judgment which has been relied upon by the learned Assistant Government Pleader are also required to be dealt with. If we refer to the decision reported in AIR 1998 SC 3055, in which there was a purchase of crude oil of different varieties and after refining processing business was for selling as a refined oil. There is a subst .....

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