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Commissioner of Sales Tax Vs. Bombay Mercantile Corporation - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberS.T.R. No. 45 of 1968
Judge
Reported in[1975]35STC505(Bom)
ActsBombay Sales Tax Act, 1959 - Sections 2(17), 2(26), 7, 8, 9, 10, 12, 13 and 61(1)
AppellantCommissioner of Sales Tax
RespondentBombay Mercantile Corporation
Advocates:T.R. Andhyarujina, Adv.
Excerpt:
sales tax - resale - sections 2 (26) and 2 (17) of sales tax act, 1959 - whether sale of hand-blending of two grades of lubrication oil is resale under 2 (26) - no different commercial commodity had come into existence as result of process of hand-blending applied to goods in question - process of hand-blending can not be said to amount to 'manufacture' as contemplated under section 2 (17) - held, sale is resale. - .....to the assistant commissioner of sales tax, who dismissed the appeal holding that the process of hand-blending changed the thickness or thinness of the oil as a result of which its value was changed and the said blending turned out a different article. against this decision the respondent preferred a second appeal to the sales tax tribunal. the tribunal allowed the said appeal and came to the conclusion that even after the hand-blending the goods remained in the same form, viz., the fluid state, and further held that hand-blending of the said oil could not be said to be an 'alteration' within the meaning of the said expression in section 2(17) of the said act with the result that the respondent could not be said to have carried out any activity of 'manufacture' in respect of the said.....
Judgment:

Kania, J.

1. This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act').

2. The facts giving rise to this reference are as follows : The respondent was a dealer in lubricating oil. During the assessment period 1st January, 1960, to 30th June, 1960, the respondent purchased six drums of lubricating oil, hand-blended the same and sold the resulting mixture. The Sales Tax Officer who assessed the respondent for the period 1st January, 1960, to 30th June, 1960, came to the conclusion that in selling the said goods, viz., the said hand-blended oil, the respondent had not made a resale as defined in section 2(26) of the said Act and hence disallowed the claim of the respondent for deduction in respect of the amount realised from the said sales. The respondent appealed against this decision to the Assistant Commissioner of Sales Tax, who dismissed the appeal holding that the process of hand-blending changed the thickness or thinness of the oil as a result of which its value was changed and the said blending turned out a different article. Against this decision the respondent preferred a second appeal to the Sales Tax Tribunal. The Tribunal allowed the said appeal and came to the conclusion that even after the hand-blending the goods remained in the same form, viz., the fluid state, and further held that hand-blending of the said oil could not be said to be an 'alteration' within the meaning of the said expression in section 2(17) of the said Act with the result that the respondent could not be said to have carried out any activity of 'manufacture' in respect of the said goods. The judgment of the Tribunal shows that by hand-mixing the contents of different drums a mixture was produced in which the individual density of the component lubricating oil was obscured, but, according to the Tribunal, that could not be considered to be an alteration in the goods. The Tribunal has further observed that it cannot be denied that there has been no alteration or change in the goods. In the light of these conclusions, the Tribunal allowed the appeal and granted the deduction claimed by the respondent. This reference has been made at the instance of the Commissioner of Sales Tax and arises out of the said decision of the Tribunal.

3. The question referred to us is as follows :

'Whether, on the facts and circumstances of the case, the Honourable Tribunal was justified in holding that hand-blending of two grades of lubrication oils does not either change the form of the lubricating oils so mixed or the character or nature of the goods concerned and, therefore, the sale of the mixed oils is resale as defined under sub-section (26) of section 2 of the Bombay Sales Tax Act, 1959, of the oils purchased ?'

4. The relevant part of sub-section (26) of section 2 of the said Act runs as follows :

' 'resale', for the purposes of sections 7, 8, 9, 10, 12 and 13, means a sale of purchased goods -

(i) in the same form in which they were purchased, or

(ii) without doing anything to them which amounts to, or results in, a manufacture...........'

5. In the case before us, it has not been disputed that even after hand-blending the said oil retained its previous form, viz., the liquid state. The only contention of Mr. Andhyarujina, the learned counsel for the applicant, was that as a result of hand-blending the density of the said oil or lubricating oil was bound to be altered and, according to him, this alteration resulted in the production of a type of oil of different density from the oils which were blended together, and hence the activity would amount to manufacture. In this regard we have already held in our judgment delivered on 28th January, 1975, in Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co. [1975] 35 S.T.C. 493 (Sales Tax Reference No. 9 of 1973) (per Madon, J.), as follows :

'........for an activity to amount to manufacture it must result in a different commercial article or commodity. It must not be a commodity which is commercially the same as it was before the activity was applied to it. In a given case, it may be that the ingredients are totally transformed and, in another given case, it may be that they undergo some change, alteration or transformation and yet retain their essential character and properties. The test in all cases, therefore, is to ascertain whether the result is commercially a different commodity and it is irrelevant whether this result is produced by a mechanical or chemical process or otherwise. Even under the very wide definition of 'manufacture' to be found in clause (17) of section 2 of our Act the various activities set out therein must result in a different commercial commodity in order that such activities may amount to manufacture of goods.'

6. We have really to apply this test to the case before us. There is nothing in the judgment of the Tribunal or on the record to show that any new or different commercial commodity came into existence as a result of the process of hand-blending applied by the respondent to the oil purchased by it. If such was the case of the department, it was for the department to prove it and it has filed to do so. In fact, it does not seem to have been contended at all by the department before the Tribunal that a different commercial commodity had come into existence as a result of the process of hand-blending applied to the goods in question by the respondent. The process of hand-blending applied by the respondent cannot, therefore, be said to amount to 'manufacture' as contemplated under section 2(17) of the said Act, and the contention of Mr. Andhyarujina in this regard must be rejected.

7. In the result, the question referred to us must be answered in the affirmative. As the respondent has not appeared, there will be no order as costs.

8. Reference answered in the affirmative.


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