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TMI Blog2021 (3) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... he common order on Point Nos.1 and 3 of the order under revision reads thus: Point No.1: "On a clear reading of the Enquiry Report as well as the documents, it is seen that various machineries were used by the appellant/assessee for the manufacturing of 'Chandrika Soap' by the Surya Laboratories sold by the assessee, cannot be considered to be a handmade Soap. So we found that the appellant assessee is not entitled to the concessional rate of tax as it is handmade. This point answered against the appellant." Point No.2: "..In the result, the appeal T.A.Nos.36/2009, 83/2009 and 84/2009 are dismissed except the calculation of interest (Point No.3) holding that the product sold is other than handmade Soap (not handmade soap) and assessee is liable to pay tax at the rate of 12%. With regard to interest, the assessing authority is directed to levy interest on the differential tax between assessed tax and the tax paid based on the return." 2.1. Hence S.T. Revision Nos.41, 42 and 43 of 2013 are at the instance of Revenue challenging the direction of Tribunal restricting the assessing authority to levy interest on differential tax between the assessed tax and the tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its judgment dated 4.8.2009 either did not consider the issue in right perspective or relied on irrelevant certificates vis-à-vis the rate at which tax has to be collected from the assessee. This Court taking note of these grounds of challenge by the department in S.T.Rev.No.41/2010, on 28.10.2010, issued the following directions: "The Commissioner of Commercial Taxes, Kerala, will contact his counter-part in Bangalore and arrange for inspection of respondent soap factory at Mysore by the assessing officer or any other officer authorized by him to verify as to whether manufacture is done by human-hand or by engaging machinery in the factory and the changes if any made by the present owner also should be reported to this Court with specific details of staff engaged in the factory in the manufacture, packing etc. If there is any retrenchment of employees made on or after the respondent handed over the charge of the factory to the present owner, the same should also be reported to this Court. Government Pleader will file a report of inspection within one month from now". 5. Finally, on 20.1.2011, the revisions were allowed and the revisions remitted for reconsideration af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to define "machinery" as applicable to all cases. However, it could be said that when used in ordinary language, prima facie means some mechanical contrivances, which by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter-dependent operation of their respective parts, generate power, or evoke modify, apply or direct natural forces with the object in each case of effecting so definite and specific result. Determination as to what is or what is not "machinery" must to a large extent, depend on the special facts of each case. * Illustrations are better guides to ascertain the true meaning of the word "machinery" when used ordinarily and not as a specific definition. * Whether an intelligent person would in the ordinary use of language describe a particular thing as machinery." "Taking into consideration, the criteria laid down in the Judgments discussed above, in order to find whether the factory is using machinery for the manufacture of soaps we shall now proceed to consider the functioning of the contrivances used in the manufacture under scrutiny. As detailed ibid the contrivances used for production of soap in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries and Commerce, Government of Karnataka as per PMT No.08/16/037 to as has been subsequently amended on 11.11.2007." "Based on the aforesaid discussions the issues raised are answered as follows: * Applying the tests laid down in the judgments discussed above, it is found that the contrivances used in the factory for the production of soaps will not encompass within the meaning of the word machinery, except the mixing drum used for preliminary mixing of the raw materials. * The mixing drum is a device having an alliance of several parts into one unit, all functioning simultaneously on the supply of power at a given point. By applying the power, the force is multiplied leading to the rotation of bales which results in the mixing of the contents in the drum which would encompass within the meaning of the word 'machinery'. *There is no change, either in the proprietorship or in the status of the factory since its commencement in 1984 and Sri C.K.Janan continues to be the proprietor of the factory." 7. After referring to the very same circumstances now adverted to by us in this judgment, the Tribunal has recorded the following finding, i.e. over and above than what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at concessional rate of 4% was accepted for the same manufacturing process prior to the subject assessment years and same concessional rate of 4% was accepted for the subsequent assessment years i.e. 2005, 2006 etc. He refers to and relies on the judgment of Supreme Court reported in Collector of Central Excise, New Delhi v Louis Shoppe and another (1996(3) SCC 445) for the proposition that test is predominance of handmade activity in the manufacture of soap and not a pedantic view on classification. 12. The main argument of Sr.Advocate focuses on the report dt.28.10.2010 and the contrary findings recorded by the Tribunal. The report erases any doubt in the manufacturing process of assessee and it is handmade. He prays for setting aside the order under revisions by holding that the assessee is entitled to concessional rate of tax at 4% for the subject assessment years as well. 13. Sr.Government Pleader Mohammed Rafiq contends that Entry 133 provides for concessional rate of tax at 4% for 'handmade soap'. Entry 133, read literally, according to him operates like this. 'Handmade soaps' at the point of first sale at 4% and 'Soaps other than handmade' at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the word "machinery" was interpreted is the decision of the Privy Council in Corporation of Calcutta v Chitpore Municipality (AIR 1922 PC 27 (1922) 15 M.I.W.253). The criteria laid down and applied by the Privy Council in that case has been the basic guideline followed in several cases in which such a question arose. They are: * The word "machinery" must mean something more than a collection of ordinary tools. It must mean something more than a solid structure built upon the ground whose parts either do not move at all or if they do move, do not move the one with or upon the other is interdependent action with the object of producing a specific and definite result. *It is not possible to define "machinery" as applicable to all cases. However, it could be said that when used in ordinary language, prima facie means some mechanical contrivances, which by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter-dependent operation of their respective parts, generate power, or evoke modify, apply or direct natural forces with the object in each case of effecting so definite and specific result. Determination as to what is or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's commodity at 4%. That situation continued through the different assessment years. The assessment years in hand relate to 1999-2000 to 2004-2005. The first report following the inspection on 23.1.2006 definitely shows that the assessee's process does not consume electricity. In the common course of human conduct; manufacturing of soap, to be called 'hand made', cannot be conceived as something that would be made merely by using hand without the aid of any tools, implements or other equipments which can be used with such force as could be exerted by human beings. The manner in which "hand made soap" ought to be understood for the purpose of the Act, cannot be something where the process of manufacture excludes machineries as a whole." 18. The Supreme Court in Louis Shoppe case was dealing with the classification of wooden furniture and held that wooden furniture as such does not qualify as 'handicraft'. It may be characterised as 'handicrafts' if the following tests are satisfied: (1) It must be predominantly made by hand. It does not matter if some machinery is also used in the process. (2) It must be graced with visual appeal in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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