TaxTMI 
TaxTMI 
2018 (1) TMI 1194
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.... machinery spares, Generator spares, Hand lift for Rs. 8,42,490/- effected by issue of Form XVII declarations and for which, the concessional rate of tax, at the rate of 3% under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959 was availed by the assessee. The assessing officer rejected the concessional rate of tax by holding that, as per provisions of section 3(5) and entries 3(i) to 3(ix) of English Schedule to the Tamil Nadu General Sales Tax Act, 1959, the assessee was not eligible to purchase machinery spares separately for repairs, reconditioning or replacement. The assessing officer, inter-alia, also noticed that the assessee had purchased chemicals, dyes and finishing chemicals for Rs. 1,05,89,361/- and used for converting wet blue to finished leather and since both wet blue and finished leather are one and the same commodity, under Entry 7(b) of the second schedule to Tamil Nadu General Sales Tax Act, 1959 and there no new commodity had emerged in the process of conversion, the assessing authority held that there is no manufacturing activity involved and therefore, the assessee was not eligible to purchase the dyes and chemicals by issue of Form-XVII declaration ....
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....also known as tanned leather or semi finished leather) into finished leather amount to manufacture by overlooking in the conversion of law hides and skins into dressed hides and skins as approved in the case of Hajee Abdul Shukuoor Vs. State of Madras reported in 15 STC 719 and in the case of State of Tamil Nadu Vs. Mahi Traders & others reported in 73 STC 228? (iii) Whether the Tribunal has correctly appreciated and applied the principles laid down by Supreme Court in the decisions relied upon the impugned judgment to the facts of the present case in as much as wet blue leather does not admittedly constitute a raw material for manufacture of finished leather?" 6. Supporting the substantial questions of law, Mr.S.Kanmani Annamalai, learned Additional Government Pleader (Taxes), submitted that the Tribunal has failed to appreciate that conversion of wet blue into finished leather does not amount to manufacture. Both wet blue and finished leather are one and the same, and has the same entry, that is, 7-(b) of the II Schedule to the Tamil Nadu General Sales Tax Act, 1959. Hence it could not be used for purchase of chemical in the aforesaid process. Learned counsel for the ....
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....principles of law. 10. Learned Additional Government Pleader (Taxes), submitted that the Tribunal ought to have followed the principles laid down, in the judgment of this Hon ble High Court in 73 STC 228, 15 STC 719. He further contended that the Tribunal ought to have considered that manufacture implies a change, but every change is not manufacture and yet every change in an article, is the result of treatment. But something more is necessary. There must be transformation; a new and different article must emerge having distinct name, character or use. Applying the above yardstick, he submitted that mere process on wet blue leather does not bring out a new distinct commodity, since dressed hides and skins are nothing but making them ready for multifarious users depending upon specific requirements, at the same time, retaining the common bond of tanned leather. 11. Heard the learned counsel for the parties and perused the materials available on record. 12. In Golden Leathers Vs. Secretary Tamil Nadu Sales Tax Appellate Tribunal, Chennai and Others, reported in (2010) 35 VST 216 (Mad), a Hon'ble Division Bench of this Court, after considering the several decisions,....
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....e seek help from the various rulings of the Courts. In the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam V. Coco Fibres (reported in (1991) 80 STC 249), the Supreme Court held that when coconut husk is converted into coconut fibre, a manufacturing activity takes place where green husks are soaked in saltish sea water for days together and after decomposition, it is subjected to beating process and the fiber is extracted. The Supreme Court held as follows (at page 251 of STC): "...The word 'manufacture' has not been defined under the Act, and therefore, we have to look into the meaning known in commercial parlance. In Blacks Law Dictionary, Fifth Edition, the word manufacture has been defined as, the process or operation of making goods or any material produced by hand, by machinery or by other agency; anything made from raw materials by hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand, labour or machine. Thus, by process of manufacture, something is produced and brought into the exi....
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....d remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. The test laid down by this Court is that the article which comes into being must be commercially different from the one from which it is made or manufacture." 11. In the case of Aspinwall & Co.Ltd. Vs. Commissioner of Income Tax reported in (2002) 125 STC 101 (SC); (2001) 251 ITR 323 (SC), the question was as to whether when raw coffee berries undergo nine processes to become coffee beans, there is a manufacturing activity. The Supreme Court took note of the factual observation of the Tribunal regarding nine processes involved in curing of coffee and then, they held that the conclusion of the Tribunal that a manufacturing activity takes place is correct. It was further held as follows (at page 106 of 125 STC): "Adverting to the facts of the present case, the assessee after plucking or receiving the raw coffee berries makes it undergo nine processes to give it the shape of coffee beans. The net product is absolutely different and separate from the input. The change made in the article results in a new and different article which is recognized in the tr....
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....nverted. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point thus is that, in manufacture something is brought into existence, which is different from that, which originally existed in the sense that the thing produced is by itself a commercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article. (See Saraswati Sugar Mills V. Haryana State Board (1992) 1 SCC 418). The prevalent and generally accepted test to ascertain that there is manufacture is whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged as a result of the process. There might be borderline cases where either conclusion with equal justification can be reached. Insistence on any sharp or intrinsic distinction between processing and manufacture, results in an oversimplification of both and tends to blur their interdependence. (See Ujagar Prints Vs. Union of ....
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....isions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognized in the trade as a new and distinct commodity. Pathak J., as he then was, stated the test in the following words (at page 65) : 'Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place.' The word 'production' and 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence....