Intangible licences cannot be treated as manufactured goods for trade tax purposes under the U.P. Trade Tax Act.

REP licences were treated as goods, but the Allahabad HC held that their intangible character meant they could not be said to be manufactured within the meaning of the U.P. Trade Tax Act. Manufacture requires a process of producing, making, altering, processing, treating or adapting goods, which presupposes something capable of being worked upon; a licence is issued or granted, not manufactured. As REP licences were not covered by the relevant schedule notification in the year concerned, tax could arise only at the point of sale by the manufacturer or importer. Because the dealer was neither, the sale consideration could not be taxed on that footing, and the later notification was read as consistent with taxation in the hands of the importer or holder.

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Issues: Whether the sale of REP licences was taxable under the U.P. Trade Tax Act, 1948 and whether the dealer could be treated as the manufacturer of such licences for the purpose of levy at the relevant point.

Analysis: REP licences were held to be goods, but they are incorporeal and intangible in nature. The statutory definition of manufacture contemplates producing, making, altering, processing, treating or adapting goods, which presupposes some process capable of being applied to tangible goods. A licence is issued or granted and not manufactured. The Court also noted that in the relevant year REP licences were not covered by any schedule notification, so the levy could arise only at the point of sale by the manufacturer or importer. Since the dealer was neither an importer nor a manufacturer, the sale consideration could not be brought to tax on that footing. The later notification concerning licences and permits was treated as confirming that such instruments are taxed in the hands of the importer or holder, not a manufacturer.

Conclusion: The dealer could not be treated as the manufacturer of REP licences, and the tax could not be levied on that basis.

Final Conclusion: The revision was rejected and the deletion of tax by the Tribunal was not sustained.

Ratio Decidendi: The definition of manufacture under the U.P. Trade Tax Act applies to goods capable of being processed or transformed, and an intangible transferable licence cannot be said to be manufactured merely because it is first sold by the holder.

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