INCOME TAX MATTERS ( A monthly journal on - Income tax and wealth tax- since 1999) - ( subscription for the year 2012 (TWO VOLUMES) is only Rs. 2200/-) - For subcription and to Know more click here

 

HIGH COURT OF PUNJAB AND HARYANA - Nand Kishore & Company Versus The State of Punjab Date of decision: 13.8.2008

we have no hesitation in striking down notification No. S.O. 53/P.A. 8/2005/S.8/2007 dated 5.11.2007 adding entry 152 in Schedule `B' to the VAT Act, whereby tax is sought to be levied on sale of sugar imported from outside the State of Punjab. As a necessary consequence and to correct the mischief created with the issuance of notification No. S. O. 52/P.A. 8/2005/S.8/2007 dated 5.11.2007 (Annexure P.1), we further hold that the words “manufactured in the State of Punjab” used in entry 49 in Schedule `A' as substituted vide notification (Annexure P.1) to be violative of Articles 301 and 304(a) of the Constitution of India, as the same creates discrimination in the levy of tax on the sale of sugar brought from outside the State as against manufactured within the State of Punjab. - full text click here

 

HIGH COURT OF PUNJAB AND HARYANA - Anmol Bakers Pvt. Ltd Versus State of Punjab - Date of decision 6. 12 .2007

 

Keeping in view the various aspects and in the interest of justice, we deem it appropriate to exercise discretion by directing the respondent D E T C ( Appeals) Patiala Division, Patiala to accept the pre-deposit amount of Rs. One crore.(which is less than 25% of the total demand of Rs. 60760078/-). The aforementioned amount shall be considered sufficient compliance of the requirement of Section 62(5) of the Act. However, it is made clear that if the amount is not deposited on or before 7.1.2008 then those orders would continue to operate - full text click here

 

HIGH COURT OF PUNJAB AND HARYANA - Shiv Shakti Exporters Versus State of Punjab-Dated 1.2.2008

At about 8 A.M. in the morning on 14.4.2005, ETO intercepted two trucks on Mohali–Kharar road

The trucks did not stop at the Balongi ICC to give information. Neither of the drivers could produce bill/delivery challan and form No.VAT 12 pertaining to the goods.Proprietor of the consignee-firm appeared before the Detaining
Officer on the same day i.e. 14.4.2005 at about 10.35 AM at the ICC Balongi and produced the documents which includes STXXIV A from ICC Banur. In the report, the Detaining Officer has clearly mentioned that the owner was asked to explain the fact that how he could procure Form ST XXIV A from the ICC, Banur at about 9.30 a.m. whereas the checking officer had intercepted the vehicles at 8.05 AM at ICC, Balongi. The Detaining Officer has also mentioned in his report that the owner had admitted that the documents pertaining to both the vehicles were with him
and on learning about the detention of the vehicles he rushed at the ICC, Banur and got generated the information by producing those documents at the ICC, Banur. No account books or any other document or evidence was produced by the owner to prove the
genuineness of the transaction. Counsel for the appellant had no answer to the question to the effect that how the information was generated regarding the import of goods at ICC, Banur after 9.30 AM when the vehicles were detained at 8.30 AM at Balongi. Penalty under section 51 upheld. - full text click here

Shri Hari Sahib Steel Industries, Jassaran Road, Mandi Gobindgarh .... PETITIONER Versus The State of Punjab and another ..... RESPONDENTS

 

Applied for the registration on 6.8.2007 under PVAT & CST Act and completed all the formalities.The Depatment is not taking the decision on the application though it is obligatory on the Registering Authority to decide the application within a period of 30
days. Held, in view of the aforesaid facts, without issuing notice to the respondents, as it will un-necessary delay the matter, to consider the application submitted by the petitioner on 6.8.2007, in accordance with law and take a decision by passing a speaking order within a period of one month. - full text click here

 

SUPREME COURT - S/s Kanpur Edibles Pvt. Ltd Versus Commissioner, Trade Tax, U.P. - October 24, 2008

 

REVISION AFTER REASSESSMENT -

Orders of assessment were passed for the two assessment years 1997-98 and 1998-99 on 27.2.1999 and 17.6.2000 respectively. On 21.8.2001 notice for re-assessment in terms of Section 21 of the Act was issued. The order was passed on 29.5.2003 holding that the notice issued under Section 21 was cancelled. On 31.1.2006 and 8.2.2006 notices under Section 10-B of the Act for revision of the order dated 29.5.2003 in respect of two assessment years were issued.Held that The crucial expressions in Section 10B(1) are "for the purpose of satisfying himself as to the legality or propriety of such order" and "with respect thereof". In the present case what the revisional authority was empowered to test was the legality or propriety of the order cancelling the notices issued under Section 21(1) by order dated 29.5.2003. Such an exercise cannot encompass an order of assessment. It is of significance to note that the original orders have not been varied and could not have been varied after the period of limitation. What could not have been directly achieved has been attempted to be done in an indirect manner. - full text click here

 

HIGH COURT OF PUNJAB AND HARYANA - R.S. Cotton Mills Vs. The State of Punjab - Decided on 24.9.2008.

            Non submission of ‘C’ forms alongwith annual return should be viewed with respect to judgment of Punjab and Haryana High Court in Prestolite of Indian Limited to the effect that ‘C’ and ‘D’ forms could be filed even after the filing of return or at appellate stage and same could be taken cognizance of. Regarding pre‑deposit of 25% of the demand, the court held that till the appeal is decided, the impugned demand will not be enforced. - FOR FULL TEXT CLICK HERE

 

 

SUPREME COURT- State of Haryana Versus M/s. A.S. Fuels Pvt. Ltd. - dated August 20, 2008 - Deferment and Exemption - full text click here

 

SUPREME COURT - Yasha Overseas Versus CST - dated 06/05/2008 -

DEPB has an intrinsic value that makes it a market commodity.Therefore, DEPB, like REP licence qualifies as `goods' within the meaning of the Sales Tax laws of Delhi, Kerala and Mumbai and its sale is exigible to tax.

- full text click here

 

HIGH COURT ( P & H) - Shiv Shanker Steel Industries. Vs. The State of Punjab - dated 25.08.2006

Keeping in view the contumacious conduct of the petitioner, we do not feel inclined to entertain the present petition and exercise extraordinary and equitable jurisdiction of this Court under Article 226 of the Constitution of India.Having regard to the facts and circumstances of the case, while permitting the petitioner to withdraw the petition, we impose cost of Rs.20,000/- on the petition (published in 10 STM 33) - full text click here

SUPREME COURT - Bharat Sanchar Nigam Ltd. versus Union of India - dated 02/03/2006

If the sale of SIM card is merely incidental to the service being provided and only facilitates the indentification of the subscribers, their credit and other details, it would not be assessable to sales tax. (published in 9 STM 425) - full text see below

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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 3649-3650 OF 2003

 

M/s India Cine Agencies ...Appellant

Versus

Commissioner of Income Tax, Madras ...Respondent

WITH

Civil Appeal No. 1522 of 2007
Civil appeal No. 3720 of 2007
Civil appeal Nos. 451-452 of 2008
Civil appeal Nos. 6835-6836 of 2005

JUDGMENT

Dr. ARIJIT PASAYAT, J.

 

1. In all these appeals common questions are involved

relating to the entitlement of benefit in terms of Section 32AB,

Section 80HH and Section 80I of the Income Tax Act, 1961 (in
 short the `Act'). In all these cases the issue is the effect of

conversion of Jumbo rolls of photographic films into small

flats and rolls in the desired sizes. The assessees' contention

was that the same amounted to manufacture/production as

the case may be. Stand of the revenue was that it was not

either manufacture or production. In some cases the High

Court held that in any event because of Item 10 of the

Eleventh Schedule, no deduction was permissible. The High

Court decided in favour of the revenue and therefore these

appeals have been filed by the assesses.

 

2. As noted above, the core issue is whether activity

undertaken was manufacture or production.

 

3. In Black's Law Dictionary, (5th 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; by the hand, by machinery, or

by art. The production of articles for use from raw or prepared

materials by giving such materials new forms, qualities,

2
 properties or combinations, whether by hand labour or

machine". Thus by process of manufacture something is

produced and brought into existence which is different from

that, out of which it is made in the sense that the thing

produced is by itself a commercial commodity capable of being

sold or supplied. The material from which the thing or product

is manufactured may necessarily lose its identity or may

become transformed into the basic or essential properties.

(See Deputy Commissioner of Sales Tax (Law), Board of

Revenue (Taxes), Ernakulam v. M/s. Coco Fibres (1992 Supp.

(1) SCC 290).

 

4. Manufacture implies a change but every change is not

manufacture, yet every change of an article is the result of

treatment, labour and manipulation. Naturally, manufacture

is the end result of one or more processes through which the

original commodities are made to pass. The nature and extent

of processing may vary from one class to another. There may

be several stages of processing, a different kind of processing

at each stage. With each process suffered, the original

3
 commodity experiences a change. Whenever a commodity

undergoes a change as a result of some operation performed

on it or in regard to it, such operation would amount to

processing of the commodity. But it is only when the change

or a series of changes takes 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. Process

in manufacture or in relation to manufacture implies not only

the production but also various stages through which the raw

material is subjected to change by different operations. It is

the cumulative effect of the various processes to which the

raw material is subjected to that the manufactured product

emerges. Therefore, each step towards such production would

be a process in relation to the manufacture. Where any

particular process is so integrally connected with the ultimate

production of goods that but for that process processing of

goods would be impossible or commercially inexpedient, that

process is one in relation to the manufacture. (See Collector

of Central Excise, Jaipur v. Rajasthan State Chemical Works,

4
 Deedwana, Rajasthan (1991 (4) SCC 473).

5. `Manufacture' is a transformation of an article, which is

commercially different from the one, which is converted. 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 M/s. Saraswati Sugar Mills and others v.

Haryana State Board and others (1992 (1) SCC 418).

 

6. 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

5
 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 v. Union of India (1989 (3) SCC 488).

 

7. To put it differently, the test to determine whether a

particular activity amounts to `manufacture' or not is: Does a

new and different good emerge having distinctive name, use

and character. The moment there is transformation into a new

commodity commercially known as a distinct and separate

commodity having its own character, use and name, whether

be it the result of one process or several processes

`manufacture' takes place and liability to duty is attracted.

Etymologically the word `manufacture' properly construed

would doubtless cover the transformation. It is the

transformation of a matter into something else and that

something else is a question of degree, whether that

something else is a different commercial commodity having its

distinct character, use and name and commercially known as

6
 such from that point of view, is a question depending upon the

facts and circumstances of the case. (See Empire Industries

Ltd. v. Union of India (1985 (3) SCC 314).

 

8. The aforesaid aspects were highlighted in Kores India

Ltd., Chennai v. Commissioner of Central Excise, Chennai

(2005 (1) SCC 385) in the background of Central Excise Act,

1944 (in short the `Excise Act') and Central Excise Rules, 1944

(in short the `Excise Rules') and Central Excise Tariff Act,

1985 (in short the `Tariff Act'). The stand of the revenue was

that it amounted to "manufacture", contrary to what has been

pleaded in these cases. This Court held that it amounted to

manufacture.

 

9. The matter can be looked at from another angle. In

Commissioner of Income Tax v. Sesa Goa Ltd. (2004 (271) ITR

331) this Court considered the meaning of word `production'.

The issue in that case was whether the extraction and

processing of iron ore amounted to manufacture or not in view

of the various processes involved and the various processes

7
 would involve production within the meaning of Section 32A of

the Act. It was inter alia observed as under:

"There is no dispute that the plant in respect
of which the assessee claimed deduction was owned
by it and was installed after March 31, 1976, in the
assessee's industrial undertaking for excavating,
mining and processing mineral ore. Mineral ore is
not excluded by the Eleventh Schedule. The only
question is whether such business is one of
manufacture or production of ore. -The issue had
arisen before different High Courts over a period of
time. The High Courts have held that the activity
amounted to "production" and answered the issue
in question in favour of the assessee. The High
Court of Andhra Pradesh did so in CIT v. Singareni
Collieries Co. Ltd. [1996) 221 ITR 48, the Calcutta
High Court in Khalsa Brothers v. CIT [1996] 217
TTR 185 and CIT v. Mercantile Construction Co.
[1994] 74 Taxman 41 (Cal) and the Delhi High
Court in CIT v. Univmine (P.) Ltd, [1993] 202 ITR
825. The Revenue has not questioned any of these
decisions, at least not successfully, and the position
of law, therefore, was taken as settled.

The reasoning given by the High Court, in the
decisions noted by us earlier, is, in our opinion,
unimpeachable. This court had, as early as in 1961,
in Chrestian Mica Industries Ltd. v. State of Bihar
[1961] 12 STC 150, defined the word "Production",
albeit, in connection with the Bihar Sales Tax Act,
1947. The definition was adopted from the meaning
ascribed to the word in the Oxford English
Dictionary as meaning "amongst other things that
which is produced; a thing that results from any
action, process or effort, a product; a product of
human activity or effort". From the wide definition

8
 of the word "production", it has to follow that
mining activity for the purpose of production of
mineral ores would come within the ambit of the
word "production" since ore is "a thing", which is
the result of human activity or effort. It has also
been held by this court in CIT v. N.C. Budharaja and
Co. [1993] 204 ITR 412 that the word "production"
is much wider than the word "manufacture". It was
said (page 423) :

"The word `production' has a wider
connotation than the word
`manufacture'. While every manufacture
can be characterised as production, every
production need not amount to
manufacture .

The word 'production' or 'produce'
when used in juxtaposition with the word
'manufacture' takes in bringing into
existence new goods by a process which
may or may not amount to manufacture.
It also takes in all the by-products,
intermediate products and reside rodeos
which emerge in the course of
manufacture of goods."

 

10. In "Words and Phrases" 2nd Edn. by Justice R. P. Sethi

the expressions `produce' and `production' are described as

under:

"In Webster's New International Dictionary,
the word "produce" means something that is
brought forth either naturally or as a result of effort
and work; a result produced. In Black's Law

9
 Dictionary, the meaning of the word `produce' is to
`bring into view or notice; to bring to surface'. A
reading of the aforesaid dictionary meanings of the
word `produce' does indicate that if a living creature
is brought forth, it can be said that it is produced.
(See Commissioner of Income Tax v. Venkateswara
Hatcheries (P) Ltd. (1999 (3) SCC 632),
Commissioner of Income Tax, Orissa and Ors. v.
M/s N.C. Budharaja and Company and Ors. (1994
Supp 1 SCC 280).

Production or produce- The word `production'
or `produce' when used in juxtaposition with the
word `manufacture' takes in bringing into existence
new goods by a process, which may or may not
amount to manufacture. It also takes in all the
byproducts, intermediate products and residual
products, which emerge in the course of
manufacture of goods. The expressions
`manufacture' and `produce' are normally associated
with movables articles and goods, big and small but
they are never employed to denote the construction
activity of the nature involved in the construction of
a dam or for that matter a bridge, a road and a
building. (See Moti Laminates Pvt. Ltd. and Anr. v.
Collector of Central Excise, Ahmedabad (1995 (3)
SCC 23).

 

11. In Advanced Law Lexicon, 3rd Edn. by P. Ramanatha

Aiyar, the expressions `production' and `manufacture' are

described as under:

"'Production' with its grammatical variations
and cognate expressions; includes-

10
 (i) packing, labeling, relabelling of
containers.

(ii) re-packing from bulk packages to retail
packages, and

(iii) the adoption of any other method to
render the product marketable.

`Production' in relation to a feature film,
includes any of the activities in respect of the
making thereof. (Cine Workers and Cinema Theatre
Workers (Regulations of Employment) Act (50 of
1981) S.2(i).

The word `production' may designate as well a
thing produced as the operation of producing; (as)
production of commodities or the production of a
witness.

`Manufacture' includes any art, process or
manner of producing, preparing or making an
article and also any article prepared or produced
by manufacture. (Patent and Designs Act (2 of
1911), S.2(10).

`Manufacture' includes any process-

(i) incidental or ancillary to the completion
of a manufactured product; and

(ii) which is specified in relation to any goods
in the section or Chapter notes of the First
Schedule to the Central Excise Tariff Act, 1985 (5 of
1986) as amounting to manufacture, or, and the
word `manufacturer' shall be constructed
accordingly and shall include not only a person who
employs hired labour in the production or

11
 manufacture of excisable goods but also any
person who engages in their production or
manufacturer on his own account.

(iii) which is specified in relation to any
goods by the Central Government by notification in
the Official Gazette as amounting to manufacture.
(Central Excise Act (1 of 1944) S.2(f))

 

12. The matter can yet be looked from another angle. If there

was no manufacturing activity, then the question of referring

to Item 10 of the Eleventh Schedule for the purpose of

exclusion does not arise. The Eleventh Schedule, which was

inserted by Finance (No.2) Act, 1977 w.e.f. 1.4.1978 has

reference to Sections 32A, 32AB, 80CC (3)(a)(i), 80-I(2), 80J(4)

and 88A (3)(a)(i) of the Act.

 

13. In view of what has been stated above the appeals

deserve to be allowed which we direct.

 

........................................J.
(Dr. ARIJIT PASAYAT)

........................................J.
(Dr. MUKUNDAKAM SHARMA)

12
 New Delhi,
November 12, 2008