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Issues: (i) Whether the dismantling of an unserviceable ship to obtain scrap and other materials amounted to manufacture and whether the ship was used in the manufacture of goods so as to attract purchase tax under section 13(a) of the Bombay Sales Tax Act, 1959. (ii) Whether the transaction had to be treated as a purchase of scrap only, or whether the matter should be sent back for further evidence on the contract of sale.
Issue (i): Whether the dismantling of an unserviceable ship to obtain scrap and other materials amounted to manufacture and whether the ship was used in the manufacture of goods so as to attract purchase tax under section 13(a) of the Bombay Sales Tax Act, 1959.
Analysis: The extended definition of manufacture in section 2(17) is wide and includes extracting and processing, but the activity must still result in a different commercial commodity. The dismantling of the ship produced iron and steel scrap and related materials, which were commercially distinct from the ship itself. On the facts found, the ship functioned as the material used for producing the scrap obtainable from its hull or body proper. That brought the transaction within section 13(a) for the portion of the price attributable to the frame, hull or body proper from which the scrap and allied materials were obtained.
Conclusion: The ship was used in the manufacture of goods to the extent of the frame, hull or body proper, and purchase tax was payable on that part of the purchase price. The finding was in favour of Revenue.
Issue (ii): Whether the transaction had to be treated as a purchase of scrap only, or whether the matter should be sent back for further evidence on the contract of sale.
Analysis: The record showed that what was purchased was a ship under an instrument of sale, not scrap as such. The reference to the Merchant Shipping Act supported the conclusion that the subject of sale was a ship. There was also sufficient material on the terms of sale, and no basis existed for remanding the matter merely to afford a fresh opportunity to lead evidence that had not been produced earlier.
Conclusion: The plea that the ship should be treated as scrap only, and the alternative request for remand, were rejected.
Final Conclusion: The reference was answered against the assessee on the taxable character of the ship's hull or body proper, and the Revenue succeeded to that extent only.
Ratio Decidendi: For section 13(a) of the Bombay Sales Tax Act, 1959, an article used as the source material for obtaining a distinct commercial commodity by dismantling or processing is a good used in manufacture, and purchase tax is attracted on the portion of the purchase price attributable to that material.
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