1984 (4) TMI 273 - HC - VAT and Sales Tax

Cleaning waste fibre not manufacturing under MP Sales Tax Act. Tribunal decision overturned.

The Court held that cleaning waste fibre and processing it into staple fibre base did not amount to manufacturing under the M.P. General Sales Tax Act, ... - Issues:Whether cleaning and washing waste fibre with chemicals and cutting it into pieces amounts to manufacture under section 2(j) of the M.P. General Sales Tax Act, 1958.Detailed Analysis:1. The Board of Revenue referred a question regarding whether cleaning and processing waste fibre constitutes manufacturing under the M.P. General Sales Tax Act, 1958. The applicant claimed that cleaning waste fibre does not result in a new product and should not be taxed further as it remains the same. The Tribunal, however, held that the process amounted to manufacturing a new product, leading to this reference.2. The applicant's argument was based on the contention that cleaning waste fibre does not alter the fundamental nature of the product, relying on the definition of 'manufacture' under section 2(j) of the Act. The applicant referenced a Supreme Court case where goods that remain essentially the same after labor is applied were not considered manufactured.3. The applicant also cited another case where processing tamarind or pineapple did not change the identity of the goods, indicating that mere processing does not amount to manufacturing. The counsel argued that even though the value of the product may increase after cleaning, it does not constitute manufacturing under the Act.4. In contrast, the respondent's counsel referred to various decisions supporting the view that even processes like cleaning for removing impurities can be considered manufacturing under the Act. However, the Court found that the cases cited by the respondent were distinguishable, and the Supreme Court decision cited by the applicant supported the applicant's position.5. After considering the arguments and case law presented, the Court concluded that cleaning waste fibre and processing it into staple fibre base did not amount to manufacturing under the Act. The Court held that the cleaning process did not result in a new product as defined in section 2(j) of the Act.6. Therefore, the Court answered the reframed question in favor of the assessee, stating that the Tribunal was not justified in considering cleaning and processing waste fibre as manufacturing under the Act. The reference was answered in favor of the assessee with no order as to costs.