2. This is a revision filed by a businessman under Section 58 of the U.P. Value Added Tax Act of 2008 (hereinafter referred as 'Act of 2008') which lies 'on any question of law involved'.
3. The revisionist herein carries on a business of sale and purchase of Eucalyptus wood and bamboo within the State. The revisionist filed a return claiming benefit of Input Tax Credit (I.T.C.) under Section 13 of the Act of 2008 relating to the year 2009-10, which was disallowed by the Assessing Authority. In the first appeal which was partly allowed the claim to I.T.C. carried forwarded was accepted, but the claim of I.T.C. to the extent of Rs. 33,73,939/- was disallowed against which a second appeal was filed before the Commercial Tax Tribunal at Lucknow which has upheld the judgment of the first appellate authority and rejected the appeal of the revisionist whereby the matter has been carried forward further to this court by way of this revision.
4. Contention of the revisionist is that it purchases wood and bamboo and after undertaking a process of debarking and cutting including removal of roots same is manufactured as saleble item and is sold. Based on this contention it says that it is entitled to the benefit of Section 13 of the Act of 2008 under which subject to the provisions of the said Act dealers referred to in the clauses mentioned therein and holding a valid registration certificate under the said Act, shall, in respect of taxable goods purchased within the State and mentioned in such clauses, subject to the conditions given therein and such other conditions and restrictions as may be prescribed, be allowed credit of an amount, as I.T.C., to the extent provided by or under the relevant clause.
5. Section 13(1)(a) provides that subject to conditions given in column 2, every dealer liable to pay tax, shall, in respect of all taxable goods except non-vat goods, capital goods and captive power plant, where such taxable goods are purchased on or after the date of commencement of this Act, be allowed credit of the amount, as I.T.C., to the extent provided in column 3 of the table mentioned therein. The revisionist claims the application of Serial No.2 of the table which provides that if purchased goods are used in manufacture of - (i) any goods or (ii) any taxable goods except non-vat goods and where such manufactured goods are sold either inside the State or in the course of inter-state trade or commerce, he shall be entitled to the credit of full amount of input tax. The revisionist relying upon explanation (iii) to Section 13 contends that the process of manufacture referable to the said provision includes processing and as it undertakes a processing of woods and bamboos, it would be a different finished product, therefore it is entitled to the benefit of the said provision.
6. It is contended that the judgments relied upon by the Tribunal and the appellate authorities are on the meaning assigned to the term 'manufacture' and not 'processing'. The revisionist admittedly processes the goods, therefore, it also manufactures. Reliance is also placed on the provisions contained in Section 13(3)(b) to contend that as a consequence of the processing undertaken the waste product or by-product which are produced and are exempt from tax, therefore, it is entitled to full I.T.C. in view of the said provision.
7. The revisionist placed reliance upon the judgment of the Supreme Court reported in (2014)68 VST 498 (SC), Mamta Surgical Cotton Industries v. Assistant (Anti-Evasion), Bhilwara, Rajasthan, and A.I.T. 2015 180 SC, M/s Gujrat Industries & ors. v. Commissioner of Central Excise-I, Ahmedabad. It also relies upon the definition of processing as contained in English Dictionaries. Based on the aforesaid it is contended that the learned Tribunal has erred in law in misinterpreting the provisions of Section 13 and Rule 21(1)(a) (f) of the V.A.T. Rules. In view of the above decisions it ought to have affirmed the reversal of I.T.C. where waste products were exempt from Tax, but the main products were liable to tax.
8. Learned Tribunal has affirmed the finding of the first appellate authority that the alleged process of debarking and cutting of wood and bamboo does not result in any new finished commercial item totally different in identity to wood and bamboo, therefore, the process does not involve any manufacture. Consequently the benefit of I.T.C. under Section 13 is not available to the revisionist. The reversion of an I.T.C. under Rule 21(1)(a)(f) of the VAT Rules was justified. The waste product and fire-wood resulting from the process allegedly undertaken by the revisionist has not been shown in the closing stock of the relevant year nor any sale has been shown. The sale of waste product and fire-wood is alleged to have been disclosed in the year 2015-16. The Tribunal arrived at the conclusion as was of the appellate authority also that wood and bamboo had been purchased by the revisionist in square meters and were sold as bamboo and wood. Reliance has been placed upon the judgment of the Supreme Court rendered in the case of CST v. Lal Kunwa Stone Crusher (P) Ltd., (2000) 3 SCC 525, wherein it was held that gitti etc. produced as a consequence of crushing of boulders were not a new commercial item having a totally different identity than boulders, therefore, the process did not involve any manufacture of new item. The Tribunal also relied upon a judgment of the Supreme Court rendered in the case of C.S.T. v. Sarvshree Payo Fruit Packagers reported in 1980(Supp.) SCC 174, wherein, it was held that slicing of pineapple did not constitute a manufacture of a new item, as, it did not change the identity of the original product. The waste-product and firewood had been destroyed in the alleged process and did not constitute waste-product or by-product for attracting the provisions of Section 13(3)(b) as these had been allegedly sold in the subsequent years i.e. 2015-16, whereas, the process was undertaken in the year 2009-10. The closing stock of the relevant year also did not disclose inclusion of the waste product or firewood therein. An item not mentioned in the closing stock of the relevant year i.e. 2009-10 could not have been sold in the year 2015-16 and as such the alleged sale cannot be accepted. The appellant before it had shown the same as loss in its balance-sheet. Neither at the assessment level nor at the appellate level the appellant asserted that it had wasteproduct in its stock. The details submitted before it disclose the sale of waste-product and firewood in square meters and sale of waste-product by him in cubic meters. According to the Tribunal, firewood is never sold in square meter or cubic meter.
9. The question of applicability of Section 13(1)(a) to Sl.2(ii) of the Table arises only if the taxable goods except nonvat goods purchased are used in manufacture. The term "Manufacture" has been defined in Section 2(t) of the Act of 2008 as under:
"2(t) "manufacture" means producing, making, mining, collecting, extracting, mixing, blending, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods; but does not include such manufacture or manufacturing processes as may be prescribed."
10. Except for the inclusion of the words 'mixing' and 'blending' the definition of 'manufacture' under the Act of 2008 is similar to the definition of 'manufacture' contained in Section 2(e-i) of the U.P. Trade Tax Act 1948 which reads as under:
"2(e-i). "manufacture" means producing, making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods, but does not include such manufactures or manufacturing processes as may be prescribed."
11. The meaning of the word 'manufacture' as it appears in the Trade Tax 1948 fell for consideration before the Supreme Court in the case of CST v. Lal Kunwa Stone Crusher (P) Ltd., (2000) 3 SCC 525, though, in a different context, but one of the contentions before the Supreme Court, based on the said definition, was that the definition used for the purpose of 'manufacture' in the Act makes it very clear that every activity in relation to goods not only altering the same, but also processing of the same has also been included and based thereon the Department contended that the items resulting from crushing of boulders such as gitti etc. were also taxable under the said Act. The Supreme Court while deciding the matter observed "where commercial goods without change of their identity as such goods are merely subjected to some processing or finishing, they may remain commercially the same goods which cannot be taxed again, in a series of sales so long as they retain their identity as goods of a particular type." In this regard it drew support from an earlier decision in the case of State of Tamil Nadu v. M/s Pyare Lal Mehrotra & ors., (1976) 1 SCC 834.
12. In the case of Dy. Commissioner of Sales Tax v. M/s Pio Food Packers, 1980 Supp. SCC 174 the Supreme Court in paragraphs 6 to 11 had the occasion to consider the question does the processing of the original commodity which bring into existence a commercially different and distinct article ? This was considered in the context of a prior question as to whether the preparation of pineapple slices from pineapple which was not the original product was taxable to purchase Tax under Section 5-A of the Kerala General Sales Tax Act 1963 ? In paragraph 8-11 extracts of the judgment of the U.S. Supreme Court in the case of East Texas Motor Freight Lines v. Frozen Food Express, 100 L Ed. 917, and Anheuser-Busch Brewing Assn. v. U.S., 52 L Ed 336-338, were quoted which read as under :
"8. While on the point, we may refer to East Texas Motor Freight Lines v. Frozen Food Express, 100 L Ed 917, where the U.S. Supreme Court held that dressed and frozen chicken was not commercially distinct article from the original chicken. It was pointed out :
Killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than a change which takes place in milk from pasteurizing, homogenizing, adding vitamin concentrates, standardising and bottling.
9. It was also observed :
..... there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cottonseed in the field and cotton-seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton-seed, as well as the dressed chicken, have gone through a processing stage. But neither has been "manufactured" in the normal sense of the word.
10. Referring to Anheuser-Busch Brewing Assn. v. United States, 52 L Ed 336-338, the court said :
Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary ...... There must be transformation; a new and different article must emerge, "having a distinctive name, character or use".
11. And further :
At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been "manufactured"."
13. Thus, though 'manufacture' implies a change but every change is not a manufacture. Every change may be the result of treatment, labour and manipulation i.e. processing, but something more is necessary i.e. a new and different article must emerge "having a distinctive name, character or use". It was held that at some point of time processing and manufacture will merge, but where the commodity retains a continuing substantial identity through the processing stage it could not be said that it had been "manufactured". Based on the aforesaid the Supreme Court opined that pineapple slice was not entirely different from original product i.e. pineapple itself and there was no process of manufacture involved.
14. In the case of State of Maharashtra v. Mahalaxmi Stores, (2003) 1 SCC 70, the Supreme Court had the occasion to consider the definition of the term 'manufacture' as contained in Section 2(17) of the Bombay Sales Tax Act 1959 which is similar to the one contained in Section 2(e)(1) of the Trade Tax Act 1948, and also essentially similar to the definition contained in Section 2(f) of the Act of 2008, except for the use of the words 'mixing and blending' in the latter provision as has already been noticed in the earlier part of this judgment.
15. After considering the said provision the Supreme Court held as under:
"5. From a perusal of the definition, extracted above, it is clear that the processes of producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting of any goods fall within the meaning of the term "manufacture'. But it may be pointed out that every type of variation of the goods or finishing of goods would not amount to manufacture unless it results in emergence of new commercial commodity. In the instant case, the very nature of the activity does not result in manufacture because no new commercial commodity comes into existence.
6. This Court in CST v. Lal Kunwa Stone Crusher (P) Ltd., (2000) 3 SCC 525 on an identical question, expressed the view that when stone boulders were crushed into stone chips, gitti and stone ballast, the process could not be termed as "manufacture". That case arose under the Uttar Pradesh Sales Tax Act, 1948 (for short "the Act"). The definition of "manufacture" in Section 2(e-1) of the U.P. Act appears to be similar to the definition under consideration."
16. Thus, it is evident that every type of operation of the goods or finishing of goods would not amount to manufacture unless it results in emergence of a new commercial commodity, therefore, the contention of the petitioner herein that debarking and cutting of wood, removing of roots involve processing of the original product wood and bamboo resulting in a new item, is unacceptable, as, the new item is nothing but wood and bamboo which do not have an identity totally different from the original product nor does it result in emergence of a new commercial commodity.
17. It is not out of place to refer to one of the conclusions drawn by the Supreme Court in the State of Orissa v. Titaghur Paper Mills co. Ltd. & ors., 1985 (Supp.) SCC 280-"timber and sized or dressed logs are one and the same commercial commodity. Beams, rafters and planks would also be timber".
18. In the case of sterling Foods v. State of Karnataka, (1986) 3 SCC 469, the Supreme Court states that frozen shrim/s, prawns and lobsters are not new and distinct commodity, but they retain the same character and identity as the raw shrim/s, prawns and lobsters.
19. As far as
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reliance placed by the revisionist upon the judgment of the Supreme Court in Mamta Surgical Cotton Industries Rajasthan v. Assistant Commissioner (Anti Evasion), Bhilwara, is concerned, the same is misconceived as would be borne out from a bare reading of the said judgment, specially, the relevant portion where the process of application of cotton into surgical cotton has been discussed, as it clearly brings out the distinguishing vital features of the said case and the one at hand. Surgical cotton is a distinct and separate commercial commodity viz.-a-viz. Cotton which undergoes a processing of a very different kind than the one involved in the present case which is merely of debarking and cutting of woods and bamboo resulting in no new commercial commodity totally different from the original raw material. 20. For the reasons aforesaid, other judgments relied upon by the revisionist also do not help his cause. 21. For the reasons aforesaid the judgment of the Tribunal cannot be faulted and once it is held that no manufacture was involved in the alleged process, the benefit of Section 13(1)(a) read with Explanation 3 could not be extended to the revisionist. 22. As far as application of Section 13(3)(b) is concerned, for the reasons aforesaid as also for those already mentioned in the Tribunal's order and referred herein above which does not suffer from any such error of law so as to give rise to any question of law in this revision, requires no consideration by this court. 23. In view of the above, this revision does not involve any question of law in terms of Section 58 of the Act of 2008. Same is hereby dismissed.