2007 (2) TMI 308 - SC - VAT and Sales Tax

Auto rickshaw chassis assembly deemed 'manufacture' under tax law; appellant liable for purchase tax

The court held that mounting the auto rickshaw body on the chassis constitutes 'manufacture' under section 2(e-1) of the U. P. Sales Tax Act. The ... Whether mounting of the body of the auto rickshaw on the chassis thereof would amount to 'manufacture' within the meaning of section 2(e-1) of the U. P. Sales Tax Act, 1948? Held that:- Appeal dismissed. The Tribunal also opined that by mounting auto rickshaw body on the chassis a new product comes into being. However, it had proceeded to hold that both chassis and auto rickshaw being under the same entry no tax would be payable. The Tribunal was not correct in that behalf as it failed to take into consideration the fact that if two articles were purchased by the assessee and the articles it sold were different commodities, purchase tax would be payable therefor as the terms and conditions laid down in form III-A had not been satisfied. Issues Involved:1. Whether mounting the body of the auto rickshaw on the chassis amounts to 'manufacture' under section 2(e-1) of the U. P. Sales Tax Act, 1948.2. Applicability of purchase tax under section 3-AAAA of the Act.3. Interpretation of 'manufacture' under the U. P. Sales Tax Act compared to other statutes.Detailed Analysis:1. Whether mounting the body of the auto rickshaw on the chassis amounts to 'manufacture' under section 2(e-1) of the U. P. Sales Tax Act, 1948.The primary issue was whether the process of mounting the auto rickshaw body on the chassis constitutes 'manufacture' as defined under section 2(e-1) of the U. P. Sales Tax Act, 1948. The court noted that 'manufacture' includes producing, making, altering, finishing, or otherwise processing, treating, or adapting any goods. It was determined that this definition is broad and encompasses not only the creation of a new product but also alterations to an existing product. The court held that the assembly of the auto rickshaw body onto the chassis results in a new commercial commodity, thus qualifying as 'manufacture.'2. Applicability of purchase tax under section 3-AAAA of the Act.The appellant argued that no purchase tax was payable under section 3-AAAA of the Act, as the goods remained in the same form and condition. However, the court disagreed, stating that the goods (chassis and body) were sold in a different condition after being combined into a single auto rickshaw. Section 3-AAAA stipulates that tax is payable on the purchase price of goods unless they are resold in the same form and condition. The court concluded that since the appellant sold the auto rickshaw as a combined product, it was not in the same condition as purchased, making the appellant liable for purchase tax.3. Interpretation of 'manufacture' under the U. P. Sales Tax Act compared to other statutes.The court compared the definition of 'manufacture' under the U. P. Sales Tax Act with definitions in other statutes, such as the Rajasthan Sales Tax Act. It was highlighted that the U. P. Act's definition is broader, including any processing, treating, or adapting of goods. The court referenced previous judgments, including Sonebhadra Fuels v. Commissioner, Trade Tax, U. P., which affirmed the wide scope of 'manufacture' under the U. P. Act. The court also considered cases like Pio Food Packers and Sterling Foods but found them inapplicable to the present case due to differences in the statutory context and the nature of the goods involved.Conclusion:The court concluded that the process of mounting the auto rickshaw body on the chassis constitutes 'manufacture' under section 2(e-1) of the U. P. Sales Tax Act, and the appellant is liable for purchase tax under section 3-AAAA since the goods were not sold in the same form and condition as purchased. The appeal was dismissed with costs assessed at Rs. 10,000.