TMI Blog1976 (3) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 1969 to 31st March, 1970. As regards the appeal of Vora Bros., the period of assessment is 1st Nov., 1967 to 31st Oct., 1968. At the assessment for the above periods, the claims for a deduction in respect of the sales of such batteries effected by the appellants, on the basis of their being resales, were disallowed. The lower authorities held that the process of charging done by the appellants prior to the sale and after the receipt of the battery from the manufacturers constituted manufacture within the meaning of s. 2(17), B.S.T. Act, 1959. The sales were therefore held as taxable under Sch. C-Entry 58. 2. The material adduced before the lower authorities on this point may briefly be stated at this stage. A witness was examined before the Assistant Commissioner, to explain the technical aspects of the process done by the appellant before the sale of the battery. There was also a demonstration of the working of the battery in the condition in which it had been received from the manufacturer. Extracts from technical treatises were also produced. The lower authorities mainly relied on a judgment of this Tribunal in Appeal No. 106/65 decided on 22nd Aug., 1966, in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nically what a dry battery is. Thereafter he states that the positive and negative plates forming the main components of the battery are put by the manufacturers themselves in electrolyte. An electrolyte is a conductor of electricity. After being put in the electrolyte, D.C. current is passed through the plates for several hours. This process of charging done by the manufacturers, is styled technically as the Formation charge. 5. This point is made further clear by extracts from the technical treatises adduced on the record. E.S. Chapman in his Article 'Accumulator Construction and Manufacturer has stated as follows. In plate manufacture, the first process is styled as pasted positive and negative. Pasting is done on the plates and then they are dried. After the drying, there is the process known as Formation charge:— "Forming : The object of this process is to form Pb30/4 of the dry positive plate into lead promoxide Pb2O active material of a full charged positive plate, and at some time to reduce the PbO dry paste of the negative plate to the spongy lead (Pb) active material of a fully charged negative plate". 6. For achieving this object, the plates are immersed in a so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to prevent deterioration during storage. He however makes it clear that even when the manufacturer thus throws out electrolyte and the plats assembled in the battery manufactured by the manufacturers are dried, yet such plates do have electricity charge, which can be retained easily for about six months if the battery remains in hermetically sealed condition. However, when the battery comes in contract with air, the charge is lost gradually. It is precisely in this state that the batteries are received by the dealers like the present appellants. 8. Then follows the process with which we are concerned in the present case. It is the process done by the dealers, after the receipt of the batteries from the manufacturers and before the sale to customers. This process is called Initial charge. As Smith has stated in his work 'Storage Battery', the initial charge consists of passing the current into the battery for a number of hours as recommended by the manufacturer. This initial charge serves to complete the ………chemical conversion of any lead sulphuric remaining in the plates. The initial charge ensures that the battery starts its life in the best condition, so that it is capable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the guarantee card issued by the manufactures to a purchaser from the appellant. The guarantee card contains a guarantee given by the manufacture to the consumer. It is a guarantee against all the defects in material and workmanship and extends to making goods the defects arising due to the use of faulty material or workmanship during manufacture and developing. 10. Mr. Mahurkar, Sales Tax Practitioner for the appellant, Shiv Datt and Co., has exhaustively and carefully set out from the material on the record, the nature of the various processes and in particular of the process with which we are concerned, namely, initial charge. The position which follows from the same has been outlined above. There is no contest about the nature of the process in question and the scientific or technical explanation of the same as outlined above. After the above analysis of the material is thus set out, it is now requisite to proceed to consider the legal position. The stand of the respective parties stated in a nutshell is as follows. According to Mr. Mahurkar, Sales Tax Practitioner, and Mr. R.S. Pandit, Advocate, who appears for Vora Bros., the activity done by the appellants does not amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing process into chewing tobacco could be said to have done an activity constituting manufacture. The Supreme Court observed that raw tobacco was covered into chewing tobacco by a process of manufacture and became a different marketable product. Thus, according to the Supreme Court, in order to constitute an activity a process of manufacture, it was requisite that the product which is subjected to the process becomes a different marketable product. The Supreme Court in The State of Madras vs. Bell Mark Tobacco Co., 19 STC 129, followed the principle in Swastik Tabacco's case, as set out above. In 21 S.T.C. 17, CST, U.P., Lucknow vs. Harbilas Rai and Sons, the Supreme Court reiterated the above principle by emphasising the converse. It was observed hat if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. In Calcutta High Court's case, Shah Bros. and Co. vs. The State of West Bengal, 14 STC 878, the same principle was followed. The Bombay High Court in Nilgiri Ceylon Tea Supplying Co. vs. The State of Bombay, 10 STC 500, considered a case of mixing up of brands of tea. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious that this Tribunal is bound by that interpretation of the term "manufacture" defined in the Bombay Sales Tax Act, as is put by the Bombay High Court in the dictum cited above. From the same it is clear that it is not permissible in this connection to seek to interpret the term by referring merely to the plain language of the statute. It is requisite to apply the test, namely, whether the activity in question results in a commercially different commodity. The contention of Shri Ghanekar that the term should be interpreted with reference to the plain meaning of the statute, therefore, does not stand. 16. This takes us to consider the next position. This is as to whether in the present case it can be said that after the dry battery obtained by the appellant from the manufactures was subjected to the process outlined above, it can be said that a different commercial commodity came into existence. In this connection certain factors clearly emerging from the exhaustive discussion above, concerning the nature of the process, have to be borne in mind. At the stage when the dry battery is received by the appellant, it has already undergone the process of formation charge. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity being provided by immersion into an electrolyte, the charge was actually seen. After the appellant received the dry battery in the condition above stated, what the appellant did, was precisely this. Electrolyte was put in the cells and electric current was passed for a particular number of hours prescribed by the manufactures. The sole objection of this process, namely, initial charge, was to ensure that the battery starts its life in the best possible condition, so that it is capable of giving rated capacity and satisfactory performance from the moment it goes into service. This has been stated by G. Smith in "Storage Batteries". published by Issac Pitman (extract is on the record.). 19. On analysis therefore, the position is that the dry battery received by the appellant from the manufacture had already accumulated the charge. The activity done by the manufacturer had the effect of ensuring that the battery was put in the best possible condition so that it was capable of giving rated capacity and satisfactory performance, once the customer purchased it from the dealer and put it into use. It is difficult to see how it could be said that the dry battery after the initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 247 may have observed that placing of orders separately for the two sets of articles is one of the indicative factors. However, the crucial text is laid down by the Supreme Court in Tungabhadra Industries Ltd. vs. Commercial Tax Officer, 11 STC 827. 22. In the said case the Supreme Court has exhaustively and critically considered the legal position in this respect. Since the reasoning in the said case and the dictum laid down constitutes an enunciation of the law which has been consistently followed and has not been departed from, it will be helpful to set out the same in some detail. The Supreme Court has to consider the question whether hydrogenated oil could be held to be the same commodity as groundnut oil or whether it was a different commodity. The Supreme Court noted the process of the preparation of the Hydrogenated oil. The Court first considered the processing of groundnut oil into refined oil and held that this process did not change the character of ground nut oil. Thereafter, the Court considered whether the subsequent process of hardening by chemical processes rendered the oil something else than groundnut oil. It was contended before the Court that by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... progressed so, for that the manufactured article becomes commercially known as another and different article from the raw materials. Mr. Ghanekar stated that this judgment has been referred to by the Supreme Court in a later judgment in Comm. of Sales Tax U.P., Lucknow vs. Harbilas Rai Sons, 21 STC 17. On a perusal of the later Judgment, the following position becomes clear. The Allahabad High court had observed that the process in question did not result in the production of different commercial article and therefore there was no manufacture. The Supreme Court agreed with this proposition of the Allahabad High Court. Thereafter, the Supreme Court considered the Madhya Pradesh High Court ruling in Hiralvl's case. After citing the observations of that High Court, that it was not necessary that by the process the article should become commercially known as a different article, the Supreme Court again laid down that in the context of the Sales Tax Legislation if the goods to which some labour is applied. remain essentially the same commercial article, it cannot be said that the final product is the result of the manufacture. Thus in effect the law as laid down in Tungabhadra's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court reiterated the principles laid down in Dunken Coffee Manufacturing Co's case. In CST vs. Musarafalli Kutbuddin, 35 STC 503 : 1975 CTR (Bom) 72 the High Court again laid down the same principles. In CST vs. Bombay Mercantile Corporation 35 STC 505, the finding of facts was that the process question effected no alternation or change in the goods. On the basis, the High court held that it could not be said that the different commercial commodity came into existence as a result of the process. 29. At this stage the judgment of the Tribunal in Chandrakant Co. may briefly be referred to. The facts as they appear from the judgment are as follows. The process done by the dealer appears to have been the same, as in the present cases. However, the Tribunal has observed that a dead battery is rendered active by the process and therefore metamorphosis takes place, and there was radical change in the character of article made by the chemical process of charging. In this view it was held that the process amounted to manufacture. 30. Several considerations have to be noted concerning the judgment. The article received by the dealer from the manufacturer is described as a dead batt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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