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Commissioner of Sales Tax Vs. Damodar Padmanath Rao - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 45 of 1965
Judge
Reported in[1968]22STC187(Bom)
ActsBombay Sales Tax Act, 1953 - Sections 5, 5(1) and 8
AppellantCommissioner of Sales Tax
RespondentDamodar Padmanath Rao
Excerpt:
.....manufacture for purpose of section 5 (1) - in making 'vidas' respondent was engaged in activity of processing goods - it is produced with use of several articles - in processing of article use of mechanical force not necessary - manual force or use of land may lead to same result - held, making of 'panpatis' is process for purpose of section 5 (1). - - 2. the short question, therefore, that falls for consideration in this case is -whether the activity of a person like the respondent, who is a pan-shop dealer and who runs a pan-shop, can be said to be included in the activity of manufacturing or processing goods. now, what a pan-shop dealer does is to prepare an article like the vida or pan out of several articles. we, therefore, fail to see why all the materials that are used cannot..........prepare the vida. therefore, the article produced by the respondent can reasonably be said to be processed goods. we must, therefore, hold that in making vidas, the respondent was engaged in the activity of processing goods. it is not necessary, as far as we can see, that in the processing of an article within the meaning of this section, there must be use of mechanical force in particular cases. even the use of manual force or use of the hand may lead to the same result. therefore, we must answer the question by saying that the making of panpattis can be said to be in law a process for the purpose of section 5(1)(b)(ii) of the bombay sales tax act, 1953, though it is not a manufacture of goods. 5. we must, however, make it clear that the answer to this question does not dispose of the.....
Judgment:

Abhyankar, J.

1. The question referred is as follows :-

'Whether on the facts and circumstances of the case the making of panpattis can be said to be in law a process or manufacture for the purpose of Section 5(1)(b)(ii) of the Bombay Sales Tax Act, 1953 ?'

The facts leading to this reference which raises a somewhat novel point are as follows :-

The respondent deals in panpattis, cigarettes and bidis. The respondent did not maintain books of account and no such books appear to have been produced, nor were any purchase vouchers for the relevant period, viz., 1st April, 1956, to 30th August, 1958, were available to the Sales Tax Officer, Nasik. The Sales Tax Officer, Nasik, therefore, based the estimation of the gross turnover of sales relating to the business on his own visit to the respondent's shop. It appears that the Sales Tax Officer went to the shop of the respondent and observed what was being done in the shop by the respondent for half an hour. The Sales Tax Officer found that during that half an hour the respondent effected sales amounting to Rs. 2-2-9 in respect of the sale of panpattis. The Sales Tax Officer, therefore, estimated the total daily sales of the respondent at Rs. 50 and on that estimate he fixed the gross turnover of the respondent at Rs. 18,250 per year. This estimate seems to have been reduced at the appeal stage, but still it was in excess of Rs. 10,000. We are referring to these figures because even after the reference is answered in these proceedings, the matter will have to be considered again by the Tribunal to determine whether the respondent is at all liable to pay any tax in respect of his business of preparing of vidas or panpattis. Now so far as the preparation and sale of panpattis or vidas is concerned, what the respondent actually does is that he makes use of betel leaves and other materials such as edible lime, kattha, and betel powder and such other articles which are, inter alia, used or specially used by the respondent to form a mixture which he puts in one or two betel leaves, winds them in a particular fashion and seals it, as it were with a piece of clove (lavang). Thus, the respondent, according to the department, is engaged in the business of manufacturing of these vidas or panpattis or at any rate the respondent processed the goods, and if the turnover of such goods manufactured or processed by the respondent is worth Rs. 10,000 or more, the respondent would become a 'dealer' within the meaning of section 5 of the Bombay Sales Tax Act. On the other hand, the contention of the respondent is that when he prepares a vida by use of betel leaves and other articles, and sells it in that form, at the most, what he does is that he assembles several articles and sells it in that form and does not 'manufacture' or 'process' any goods. In order to appreciate the rival contentions, it is necessary to understand what the provision of law is. Under section 5(1)(b)(ii), every dealer whose turnover either of all sales or of all purchases made during a year exceeds, in the case of a dealer who produces, collects, extracts, manufactures or processes any goods, Rs. 10,000, is liable to be registered as a dealer and pay tax. Thus, the figure of Rs. 10,000 is material in determining the gross turnover in the case of a person who is alleged to manufacture or process any goods.

2. The short question, therefore, that falls for consideration in this case is - whether the activity of a person like the respondent, who is a pan-shop dealer and who runs a pan-shop, can be said to be included in the activity of manufacturing or processing goods. The Tribunal came to the conclusion that when the pan-shopkeeper prepares pan or vidas and sells them, he cannot be said to be either manufacturing or processing any goods. So far as the question whether in making vidas, it could be said that the respondent manufactured goods, it is not now the contention of the department that the respondent can be said to be engaged in the manufacturing of any goods, but it is contended that when a pan-shop dealer prepares vidas for sale, he is undoubtedly engaged in the processing of goods, because the process by which vida is prepared answers that activity which can be described as processing of goods. This contention has not found favour with the Tribunal. The Tribunal has observed that the word 'process' has not been defined in the Bombay Sales Tax Act, 1953, and according to Webster's New International Dictionary, Second Edition (page 1972), 'process' means

'to subject to some special process or treatment; to subject to a process of manufacture, development, preparation for the market, etc. to convert into marketable form, as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing, fruits and vegetables by sorting and repacking.'

As we shall presently point out this definition or meaning attributed to the word 'process' apparently has not been correctly and fully reproduced in the judgment of the Tribunal. According to Webster's Third New International Dictionary, at page 1808, one of the meanings given to the word 'process' as a verb is as follows :

'To subject to a particular method, system, or technique of preparation, handling, or other treatment designed to effect a particular result : put through a special process :...........'

3. It is, thus, clear that one of the meanings that can be given to the word 'process' is to subject to a particular method or technique or preparation, handling, or other treatment designed to effect a particular result. Now, what a pan-shop dealer does is to prepare an article like the vida or pan out of several articles. It was suggested that what he does is merely mixing of several articles though in a different form. We are unable to interpret what the respondent does as merely an act of mixing. Really what is done when pan or vida is prepared by a pan-shop dealer is that he takes one or two betel leaves and subjects them to a treatment, such as he chips off the ends, and also softens it by weeding out some portion, then he applies edible lime, spreads kattha, and then puts crushed or granulated betel-nuts and cardamom and other articles and to give it a flavour sprinkles some scented water or otherwise adds kopra and some other mixture in order to give it taste and flavour. Then all this is wound up in such a manner as to present it, sometimes in an attractive form, and things inside are kept intact by pressing a piece of clove. Thus, the article that is produced as a result of this process is neither betel leaves nor individual ingredients of the mixture, but an entirely different article. We, therefore, fail to see why all the materials that are used cannot be said to be subjected to a process or that the maker of the vida is not processing goods. If all these actions have to be done in order to produce the article in a saleable form, it must be held that the respondent is engaged in processing goods. Differing therefore from the Tribunal it must be held that even though the panpatti or vida-maker is not engaged in the manufacture of goods, he is undoubtedly engaged in the processing of goods, and as he is engaged in the processing of goods, it must be held that he is a dealer whose activity falls within the provisions of section 5(1)(b)(ii) of the Bombay Sales Tax Act, 1953.

4. Our attention was however invited by the learned counsel for the assessee to a decision of this Court in Nilgiri Ceylon Tea Supplying Co. v. The State of Bombay [1959] 10 S.T.C. 500. In that case the assessee who was a registered dealer in tea purchased in bulk diverse brands of tea and without the application of any mechanical or chemical process mixed up the brands of tea so purchased and sold the tea as a tea mixture. The mixing was not haphazard but according to a formula evolved by them. The Sales Tax Authorities held that the tea had been processed or altered after the purchase within the meaning of the proviso to section 8(a), and therefore the assessees were not entitled to deduct from their turnover under section 8(a) the value of the tea purchased by them. The decision of this Court was that, although in the preparation of the tea mixture which was marketed there might be some skill involved, that could not be regarded as processing within the meaning of the proviso to section 8(a). Dealing with the particular contention as to why it could not be said to have been processed, the Division Bench observed that the quantities of tea purchased by the assessees cannot since the date of the purchase be regarded as processed within the meaning of the proviso to clause (a) of section 8 of the Act, because there was not even application of mechanical force so as to subject the commodity to a process, manufacture, development, or preparation, but the tea remained in the same condition. Thus the crucial fact emerging from that decision is that in spite of the mixing, tea-leaves remained as tea-leaves and there was no application of any mechanical process to achieve the result. It cannot be said in the instant case that the pan or vida was pre-existent in that form. In any case, when vida or pan is produced or prepared, it is produced not only with the use of several articles but subjecting all these articles used to several processes. In fact no one article is available in the same form once it is used in the vida. All the articles that go to make the vida are not available as independent articles. Betel-nuts, betels, lime and kattha and other articles lose their identity. In fact the final article produced is quite a different article from its components. An elaborate procedure is to be gone into and as found by the Sales Tax Officer, it took about 2 minutes to prepare the vida. Therefore, the article produced by the respondent can reasonably be said to be processed goods. We must, therefore, hold that in making vidas, the respondent was engaged in the activity of processing goods. It is not necessary, as far as we can see, that in the processing of an article within the meaning of this section, there must be use of mechanical force in particular cases. Even the use of manual force or use of the hand may lead to the same result. Therefore, we must answer the question by saying that the making of panpattis can be said to be in law a process for the purpose of section 5(1)(b)(ii) of the Bombay Sales Tax Act, 1953, though it is not a manufacture of goods.

5. We must, however, make it clear that the answer to this question does not dispose of the matter and the case has to go back to the Tribunal to decide the crucial question as to whether the finding of the Sales Tax Authorities as to the quantity of turnover of the respondent has been correctly arrived at.

6. As the reference is answered against the respondent, the respondent will be liable for the applicant's costs.

7. Applicant's costs quantified at Rs. 150.

8. Reference answered accordingly.


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