U.P. Trade Tax Act, 1948 – s. 2(e)(i) – Mixing of base paint with different colours, result into a new product or not – High Court held that mixture of the base paint with different colours- did not result in a ‘new’ product and therefore did not result from the process of ‘manufacture’ as defined under section 2(e)(i) of the 1948 Act – Revenue contended that the sale of paints which had undergone mixing amounted to ‘manufacture’, thereby resulting in a new product, which was afresh incidence of taxation – Held: In the instant case, the findings based on the expert’s evidence are that the base paint was mixed with colouring as an additive – Both of these had suffered tax - The resultant article i.e., the paint of a different shade, did not result in a new commercial product – New product was nothing else but ‘paint’, and not a different article – High Court did not commit any error.
Dismissing the appeal, the Court
HELD: 1. In Mahalaxmi Stores, this court relied on previous decisions such as Commissioner of Sales Tax Vs. Pio Food Packers (1980) Suppl. SCC 174, and Chowgule and Company(P) Limited Vs. Union of India to state that the manufacturing process can vary, and that the process of producing every type of variation, or finishing of goods, would not amount to ‘manufacture’ as contained in the statute unless it resulted in the emergence of a new commercial commodity. [Para 7]
2. In Sonhbadra, this court while deciding the facts of the case before it cited a large number of decisions rendered in the context of what was meant by ‘manufacture.’ This court specifically noticed in Union of India V. Delhi Cloth and General Mills that ‘manufacture’ meant bringing into existence a ‘new’ substance and did not mean merely to bring about some change in the substance. In Mahalaxmi Stores, it was held that processing or variation/finishing of goods would not per se amount to manufacture unless it resulted in the emergence of a new commercial commodity. The decision in Aspinwall & Co. Ltd. V. Commissioner of Income Tax, Ernakulam follows the same principle. The court held that manufacture must be understood in common parlance and means production of articles for use from raw or prepared materials by giving them forms, qualities or combination. Importantly however, it was held that if the change made in the article resulted in a ‘new’ and ‘different’ article, it would amount to ‘manufacturing’. The tipping point, or the determinative test, therefore is that the result of the process (amounting to ‘manufacture’) must be the emergence of a commercially recognizable new commodity, and not mere variation of an existing one. [Para 8][942-A-E]
State of Maharashtra v. Mahalaxmi Stores (2003) 1 SCC
70 : [2002] 4 Suppl. SCR 292; Sonebhadra Fuels v. Commissioner Trade Tax, U.P., Lucknow (2006) 7 SCC
322 : [2006] 4 Suppl. SCR 213; Commissioner of Sales Tax v. Pio Food Packers (1980) Suppl. SCC 174 : [1980] SCR 1271; Chowgule and Company(P) Limited v. Union of India (1981) 1 SCC 653 : [1981] 2 SCR 271; Union of India v. Delhi Cloth and General Mills (1963) Suppl.
1 SCR 586; Aspinwall & Co. Ltd. v. Commissioner of Income Tax, Ernakulam (2001) 7 SCC 525 : [2001] 2 Suppl. SCR 559 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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