Mere dismantling of old cars for spare parts is not processing, production, or manufacture under sales tax law.

Dismantling old motor-cars and removing identifiable spare parts, without any transformative treatment, did not amount to processing under section 5(1)(b)(ii) of the Bombay Sales Tax Act, 1953. The Court held that mere extraction of parts left their identity unchanged and did not create any new commercial commodity, so the activity was neither production nor manufacture. As the respondents therefore did not fall within the statutory categories of processors, producers, or manufacturers, the basis for fastening tax liability from 1 April 1954 was absent. The reference was answered in favour of the respondents and the assessment could not be sustained.

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Issues: (i) Whether dismantling old motor-cars and removing spare parts amounted to processing of goods within section 5(1)(b)(ii) of the Bombay Sales Tax Act, 1953. (ii) Whether such removal of parts amounted to production or manufacture of goods within the same provision. (iii) Whether, on that basis, the respondents were liable to pay tax from 1 April 1954.

Issue (i): Whether dismantling old motor-cars and removing spare parts amounted to processing of goods within section 5(1)(b)(ii) of the Bombay Sales Tax Act, 1953.

Analysis: The provision was construed by giving the word "process" its ordinary transitive meaning, namely, subjecting goods to treatment or a process. The removal of identifiable spare parts from a car, without any treatment, alteration, repair, moulding, or change, was held not to be a process applied to the goods. Dismantling a vehicle for the purpose of selling removed parts as spare parts did not amount to processing in plain language.

Conclusion: The respondents were not processors of goods.

Issue (ii): Whether such removal of parts amounted to production or manufacture of goods within the same provision.

Analysis: The spare parts retained their separate identity even while fitted in the car and continued to retain that identity when removed. Nothing new was brought into existence by the act of removal. The Court distinguished authorities where a commercial commodity was created by labour or transformation, holding that taking parts out of a car for resale as spare parts did not amount to producing anything and was not manufacture either.

Conclusion: The respondents were not producers or manufacturers of goods.

Issue (iii): Whether, on that basis, the respondents were liable to pay tax from 1 April 1954.

Analysis: Liability under section 5(1)(b)(ii) depended on the respondents being processors, producers, or manufacturers and on the relevant turnover threshold. Since the respondents did not fall within those categories, the statutory basis for fastening liability from 1 April 1954 was absent.

Conclusion: The respondents were not liable to pay tax from 1 April 1954 under section 5(1)(b)(ii).

Final Conclusion: The reference was answered in favour of the respondents, and the assessment could not be sustained on the footing that dismantling old cars for spare parts constituted processing, production, or manufacture under the Act.

Ratio Decidendi: Mere dismantling of goods and removal of identifiable parts for resale, without any transformative treatment or creation of a new commercial commodity, does not amount to processing, production, or manufacture under the relevant sales tax provision.

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