1988 (10) TMI 268 - HC - VAT and Sales Tax

Interpretation of M.P. Sales Tax Act favors assessee, location of processes not decisive

The Court interpreted section 8(1) of the M.P. General Sales Tax Act, 1958, ruling in favor of the assessee. It held that all intermediate processes did ... - Issues:Interpretation of section 8(1) of the M.P. General Sales Tax Act, 1958 regarding the requirement of all intermediate processes in the manufacture of goods to take place in Madhya Pradesh for claiming concession.Analysis:The case involved a reference under section 44(1) of the M.P. General Sales Tax Act, 1958, where the Tribunal referred a question of law regarding the entitlement to concessional tax rate under section 8(1) of the Act. The assessee, engaged in manufacturing tungsten filaments and lead wires, purchased copper rivets from registered dealers and sent them to Bombay for conversion into wires. The assessing authority denied the concessional rate, leading to penalties imposed under section 8(2) of the Act. The Tribunal upheld the decision, stating that the entire manufacturing process did not occur in Madhya Pradesh. The issue revolved around whether all intermediate processes needed to take place in Madhya Pradesh for claiming the concession under section 8(1) of the Act.Section 8(1) of the Act specifies the tax rates for the sale of raw materials for manufacturing goods for sale in Madhya Pradesh or in inter-State trade. The Court interpreted the provision, emphasizing that it does not mandate all manufacturing processes to occur in Madhya Pradesh. The section focuses on the sale of manufactured goods in the state or in inter-State trade. The Court noted that the manufactured goods were indeed sold in Madhya Pradesh or in inter-State trade, despite some processes being undertaken in Bombay. The Court cited a previous Division Bench decision to support its interpretation, highlighting that all intermediate processes need not be confined to Madhya Pradesh for claiming the concession under section 8(1) of the Act.Ultimately, the Court ruled in favor of the assessee, stating that the Tribunal's decision was unjustified in requiring all intermediate processes to be conducted in Madhya Pradesh for claiming the concession under section 8(1) of the Act. The reference was answered in the negative, supporting the assessee's entitlement to the concessional tax rate. No costs were awarded in the case, concluding the judgment.