Granulation of Fertilizers Not Manufacturing: Bombay High Court Decision

The High Court of Bombay held that the process of mixing fertilizers and selling them after granulation did not amount to manufacture under section 2(17) of the Bombay Sales Tax Act, 1959. The court distinguished relevant precedents and concluded in favor of the assessee in all four references, ruling against the Commissioner's determination. The references were disposed of with no order as to costs.

---

---

Issues Involved:
1. Whether the activity of mixing fertilizers in different proportions and selling them after granulation amounts to manufacture within the meaning of section 2(17) of the Bombay Sales Tax Act, 1959.

Detailed Analysis:

Common Judgment for All References:
The High Court of Bombay delivered a common judgment for four references as the issues raised were common. The facts of the case involving Maharashtra Agro Industries Development Corporation Limited were taken as representative for all cases.

Issue 1: Definition of Manufacture under Section 2(17) of the BST Act
The primary question was whether the activity of mixing fertilizers in different proportions and selling them after granulation constitutes "manufacture" under section 2(17) of the Bombay Sales Tax Act, 1959.

Facts and Arguments:
1. Assessee's Activity:
- The assessee was involved in reselling various types of chemical fertilizers and also in mixing two or more fertilizers in different proportions and selling the mixture in granulated form.
- The assessee argued that mixing fertilizers does not create a new commodity and thus does not amount to manufacture.

2. Commissioner's Determination:
- The Commissioner of Sales Tax, relying on the Supreme Court's decision in Shaw Wallace & Co. Ltd. v. State of Tamil Nadu, held that the process of mixing fertilizers constitutes manufacture.

3. Tribunal's Decision:
- The Maharashtra Sales Tax Tribunal reversed the Commissioner's order, holding that the process did not constitute manufacture.

Legal Provisions and Amendments:
1. Original Definition:
- Section 2(17) of the BST Act defined "manufacture" as producing, making, extracting, altering, ornamenting, finishing, or otherwise processing, treating, or adapting any goods.

2. Amendment in 1994:
- The definition was amended to include processes specified by the State Government through notification, having regard to the impact on goods and alteration in their nature, character, or utility.

3. Notification in 2000:
- The State Government issued a notification on December 8, 2000, specifying that the preparation of mixed fertilizers by mixing fertilizers constitutes manufacture.

Court's Analysis:
1. Period Relevant to the Case:
- The relevant period for the case was 1992-1993 and 1993-1994, before the 1994 amendment and the 2000 notification.

2. Court's Interpretation:
- The court noted that up to May 1, 1994, the process of mixing fertilizers was not included in the definition of "manufacture."
- The amendment in 1994 and the subsequent notification in 2000 indicated that the legislature did not consider the process as manufacture before these changes.
- Accepting the State's contention that the process was always included would render the amendment and notification redundant.

3. Distinguishing Precedents:
- The court distinguished the case from Shaw Wallace, noting differences in statutory definitions and the specific context of the Tamil Nadu General Sales Tax Act.
- The decision in Dunken Coffee Manufacturing Co. was also distinguished as it involved a different process and context.

Conclusion:
The court concluded that the process of mixing fertilizers carried on by the assessee during the relevant years did not constitute manufacture under section 2(17) of the BST Act.

Final Judgment:
1. S.T.R. No. 15 of 2000 and S.T.R. No. 3 of 2002:
- The question of whether the activity of mixing fertilizers in different proportions and selling them after granulation amounts to manufacture was answered in the negative, in favor of the assessee.

2. S.T.R. No. 5 of 2000 and S.T.R. No. 2 of 2000:
- The question of whether the Tribunal was justified in holding that the activity does not constitute a manufacturing activity was answered in the affirmative, in favor of the assessee.

The references were disposed of accordingly, with no order as to costs.

---