(Prayer:Tax Case Revision filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959, to set aside the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai, dated 06.12.2011, passed in S.T.A.No.129 of 2011.)
S. Manikumar, J.
1. Tax Case Revision is filed against the order, dated 06.12.2011, passed in S.T.A.No.129 of 2011, passed by the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai, for the assessment year 2005-06.
2. Short facts leading to Tax Case Revision are that the respondent-assessee, Tvl.Habib Leather Manufacturing Co., Chennai, was assessed on a total and taxable turnover of Rs.l,63,54,414/- and Rs.l,28,662/- respectively, under the Tamil Nadu General Sales Tax Act, 1959 (In short, "TNGST Act"), for the assessment year 2005-06. During the course of check of accounts, it was found that the dealers had effected purchase of chemicals and consumable, against Form XVII, to tune of Rs.44,662/-, and used the same, in the process of conversion of wet blue into finished leather. The Assessing Officer was of the view that there was no manufacturing activity involved in conversion of wet blue hides into finished leather and hence, the dealers were not eligible to purchase chemical against Form XVII at concessional rate. Therefore, the Assessing Officer levied differential rate of tax of 9% on Rs.44,662/- and also surcharge. He also levied penalty under section 23 of the TNGST Act, 1959, at Rs.2,110/-.
3. Aggrieved against the order of the Assessing Officer, the respondent filed an appeal before the Appellate Deputy Commissioner (CT), who allowed the appeal. Against which, the Joint Commissioner (CT), Chennai (Central) Division, Chennai, petitioner herein, has preferred appeal in S.T.A.No.120 of 2011, before the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai. Following the decision of this Court in Golden Leathers v. Secretary, TNSTAT reported in  35 VST 216 (Mad.), on 14.08.2012, the Appellate Tribunal, has passed the following orders,
"Heard both sides. At the time of hearing, the learned State Representative (F AC) has argued that already similar issue has been decided by our Honourable High Court in W.P.No.3000/2008 dated 22.04.2010 in the case of Tvl. Golden Leather Tannery Vs. Sales Tax Appellate Tribunal, Chennai. In that order, Writ petition was disposed of in favour of the assessee. As against that judgment, the State intends to the SLP before the Honourable Supreme Court. Hence, this State appeal has been filed. If at all aggrieved as against the order passed by the first appellate authority, the State ought to have filed appeal stating the grounds how and what way the first appellate authority's order was not in accordance of law. Instead of stating that grounds (i.e) why the first appellate authority's order is not sustainable, it is simply mentioned in the grounds of appeal that the issue has been decided in favour of the assessee by our Honourable High Court, and the State Department intends to prefer the SLP before the Supreme Court. The reason stated by the State Representative is not at all acceptable one. It is very clear that the appellant/State has casually filed this appeal without applying its mind. Suppose, if already the appeal is filed and pending for disposal, then if similar issue is pending and to be decided by the Higher Forums, i.e. High Court or Supreme Court, then the party can file a petition to defer the hearing, till the issue is settled by the Higher Forum. Instead of that, this appeal is filed as if the State is going to file appeal and hence, they are filing this appeal is simply abuse of the process of law. Anyhow, since the appeal is filed, we also peruse the records and pass orders, on merits also.
9. The first appellate authority relying on the judgment of the Honourable High Court in W.P.No.3000 of 2008, dated 22.04.2010 that the activity done by the dealer/assessee amounts to manufacturing process. hence, they are eligible to purchase chemicals against Form XVII for the leather. Accordingly, allowed the appeal. In the instant case, there is no dispute that the respondent had used all the raw materials purchase by him against Form XVII declarations at the concessional rate of tax under section 3(3) of the Act in the conversion of wet blue hides and skins into finished leather.
10. To this effect the very same question of fact involved in the case of Golden Leathers, Tannery represented by its partner Mr. D.Muralidharan vs. The Secretary the Taminadu Sales Tax Appellate Tribunal, City Civil court Buildings, II Floor, Chennai-l04 and 3 others which was numbered as Writ petition of 3000/2008 has been disposed of by our Honourable Division Bench dated 22.04.2010. This judgment was relied on by the first appellate authority for allowing the appeal. In that judgment, our Honourable High Court has discussed this point as follows:
"The Tribunal did not take note of the factual findings of the Appellate Assistant Commissioner (CT) who had not only referred to various stages, which the wet blue leather undergoes and becomes finished leather, but also the fact that each activity is known in the industry with different names. One is called the full-fledged unit, by which, the raw hides and skins get transformed into finished leather, but the other is called the wet unit and the third is called the dry unit. It is after discussion these facts the Appellate Assistant Commissioner (CT) came to the conclusion that a manufacturing activity takes place. The Tribunal appears to have been persuaded by the fact that in item 7B of schedule 11 to the Act, the two categories of leather that are mentioned in the entry are 'raw hides and skins' and 'dressed hides and skins'. The entries indicate taxability and the rate. That cannot decide the issue as to whether any manufacturing activity takes place or not. Both 'wet leather' and 'finished leather' may be described as "dressed hides and skins' that is opposed to 'raw hides and skins'. But we must still examine whether, when the blue take through the various stages, a manufacturing activity takes place. The change or series of changes take the wet blue to a point where it can no longer be regarded as wet blue but must be recognized as finisher leather. So there is a manufacture. This question must be decided on the facts and circumstances of each case that comes up for consideration, the processes that the particular goods pass through and whether they get converted or not and whether the inputs are used for such activity. In this case, we are satisfied that the activity amounts to a manufacturing activity."
The above mentioned facts of the case is squarely applied for our case also. In this case, the respondent assessee has purchased the chemicals on the strength of the Form XVII and used them in the conversion or wet blue into finished leather as held by the Honourable High Court conversion of wet blue into finished leather would amount to manufacture and hence the respondent/ dealer are entitled to the concessional rate of tax available under section 3(3) of the TNGST Act 1959. Hence, we hold that the disputed turnover is eligible for concessional rate or tax under Section 3(3) of the TNGST Act, by issue of Form XVII Declarations. Since, we have held that the assessee dealers are eligible for concessional rate of tax against Form XVII for the declared purpose viz. manufacture of finished leather from wet blue hides and skins, there is no question of misuse of Form XVII declarations attracting levy of penalty under section 23 of the Act for violation of Section 45(2)(e) of the TNGST Act, 1959. Hence, from the above mentioned facts, we hold that the Appellate Deputy Commissioner (CT) has rightly allowed the appeal."
4. Being aggrieved by the same, the present Tax Case (Revision) petition has been filed, on the following substantial questions of law,
"1) Whether the Tribunal has committed a grave procedural error in having overlooked the judgements of Supreme Court in a case of A.Hajee Abdul Shukuoor and Compounding order v. State of Madras reported in 15 STC 719 and in the case of State of Tamil Nadu v. Mahi Traders & Others reported in 73 STC 228, admittedly cited on behalf of the Revenue in para 6 of the impugned judgment ?
2) Whether the order of Tribunal is perverse in its factual finding that process involved in the conversion of wet blue leather (also known as tanned leather or semi finished leather) into finished leather amount to manufacture by overlooking the factual findings regarding the process underwent in the conversion of raw hides and skins into dressed hides and skins as approved in the case of Hajee Abdul Shukoor v. State of Madras reported in 15 STC 719 and in the case of State of Tamil Nadu v. Mahi Traders and Others reported in 73 STC 228 ?
3) Whether the Tribunal has corrected appreciated and applied the principles laid down by Supreme Court in the decisions relied upon in the impugned judgment to the facts of the present case inasmuch as wet blue leather does not admittedly constitute a raw material for manufacture of finished leather ?
4) Whether the order of the Tribunal is perverse inasmuch as the processes which the wet blue leather is subjected to would not alter but retain the essential characteristics as leather despite undergoing mere physical or chemical changes not amounting to transformation into a new and distinct commercial commodity?
5. In support of the substantial questions of law raised, following grounds have been raised in the present tax case revision,
"(a) The Tribunal failed to appreciate that conversion of wet blue into finished leather does not amount to manufacture. Both wet blue and finished leather are one and the same and has the same entry that is 7(b) of the II Schedule to the TNGST Act, 1959. Hence, it could not be used for purchase of chemical in the aforesaid process.
(b) The Tribunal ought to have considered that the process employed in converting wet blue leather (tanned leather) would not amount to manufacture of both, wet blue leather and dressed hides and skins, and basically it remains as tanned leather only.
(c) The Appellate Tribunal ought to have considered the primary issue, as to whether, wet blue leather ought to be treated, as raw hides and skins, and then only the question of examining as to whether any manufacturing activity is involved or not. In this regard, it is submitted that wet blue leather cannot by any stretch of imagination be treated as raw hides and skins as contained in entry 7(b) of the Second Schedule to the TNGST Act 1959 since it pertained to raw hides and skins in its putrescible state. On the other hand, wet blue leather being tanned leather is not essentially difference from dressed hides and skins which is also characteristically basically tanned leather. It is therefore respectfully submitted that there is no manufacturing process of wet blue leather into finished leather.
(d) The Tribunal had simply followed the Division Bench judgment of this Court, without giving independent finding, as to whether how the wet blue leather was manufacturing out of raw hides and skins in the facts of this particular case.
(e) The Tribunal ought to have considered that raw hides and skins procured from the slaughtered animals, are easily putrescible if it is not preserved before reaching the tanneries, which would always be away from the place of procurement. Therefore these raw skins are subjected to curing through several processes viz., salting, wet salting and drying. At the stage of drying, it is called "picked" It is the stage of temporary curing to prevent decay. After tanning is done, the leather becomes non putrescible and the leather attains its character, nature and use and therefore ready for use. In view of the above, it is submitted that hides and skins, after under going process including tanning become dressed hides and skins, which are also tanned leather after under going refining process, according to the needs of the leather industries. The Tribunal ought to have followed the aforesaid principles of law.
(f) The Tribunal ought to have followed the principle laid down in the judgement of this Court in 73 STC 228 and15 STC 719.
(g) The Tribunal ought to have considered that manufacture implies a change, but every change is not manufacture and 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 distinct name character or use. Applying the above yardstick, mere process on wet blue leather does not bring out a new distinct commodity, since dressed hides and skins, are nothing but, making ready for multifarious users depending upon specific requirements, at same time, retaining the common bond of tanner leather."
Heard the learned counsel appearing for the parties and perused the materials available on record.
5. Issue in the present case is covered by a decision of this Court in Golden Leathers v. Secretary, TNSTAT, reported in (2010) 35 VST 216 (Mad), wherein, a Hon'ble Division Bench has categorically held that the process of transformation of blue leather into finished leather amounts to manufacturing activity. The relevant portion of the said decision is extracted:
"In the present case, it is very clear from the facts before us that if a person placed an order for finished leather, wet blue leather will not be supplied to them. The same observations are made by the Supreme Court in the decision reported in (1991) 80 STC 249 (SC). It is clear that after the 12 processes, which have been described in the earlier paragraphs, wet blue leather gets transformed into finished leather, after which, it loses it identity as wet blue leather and becomes a different commodity with a distinct identity in the market and in the industry concerned. Therefore, we find that the activity satisfies all the propositions laid down by the Supreme Court to decide as to whether a process is a manufacture or not.
The Tribunal did not take note of the factual finding of the Appellate Assistant Commissioner, who had not only referred to various stages, which the wet blue leather undergoes and becomes finished leather, but also the fact that each activity is known in the industry with different name. One is called the full-fledged unit, by which, the raw hides and skins get transformed into finished leather; the other is called the wet unit; and the third is called the dry unit. It is after discussing these facts the Appellate Assistant Commissioner came to the conclusion that a manufacturing activity takes place. The Tribunal appears to have been persuaded by the fact that in item 7B of Schedule II to the Act, th
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e two categories of leather that are mentioned in the entry are raw hides and skins and dressed hides and skins. The entries indicate taxability and the rate. That cannot decide the issue as to whether any manufacturing activity takes place or not. Both wet leather and finished leather may be described as "dressed hides and skins" that is opposed to "raw hides and skins". But we must still examine whether, when the wet blue takes through the various stages, a manufacturing activity takes place. The change or series of changes take the wet blue to a point where it can no longer be regarded as wet blue but must be recognized as finisher leather. So there is a manufacture. This question must be decided on the facts and circumstances of each case that comes up for consideration, the processes that the particular goods pass through and whether they get converted or not and whether the inputs are used for such activity. In this case, we are satisfied that the activity amounts to a manufacturing activity." 6. In the case on hand, wet blue (semi-finished) leather has been converted into finished leather. Golden Leathers' case (cites supra) squarely applies to the case on hand and we have no hesitation to hold that the process of conversion of wet blue (semi-finished) leather into finished leather, amounts to an manufacturing activity. 7. Following Golden Leathers' case (cites supra), this Court is inclined to dismiss this tax case revision petition, as no question of law, much less substantial question of law, arises for consideration in the present revision. 8. In the result, the Tax Case Revision is dismissed. No Costs.