IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Dated the 10% day of February 2009
:PRESENT: ..
THE HON BLE MR. JUSTICE : DEEPAK ~ V.
AND ._ _
14.0'?
THE HON'BLE MR.JUSTICE,.:,.Y.JA(3AhI?$iz$TH;A§§V [
SALES TAX APPE;,ALo.No_}..1;2f'.j"_'2oos. ' J. J T
BETWEEN: ' " ' 1
B.N.PrasaunaKumar,
PWD Contractor, _
Garden House, Garde1i;--Road,, . "
Tumkur, represented by;_'its' _ .V -.
Proprietor, Sri A_B.N.
Aged a.bout5'?.yea1'S;. _, ' '
S/oS1'iD.(_f3i_1V\Ia;'3j't_x11§1i.a}i..
. . Appellant
I ( Advocate. )
A N D:
'~ _ ..A.§1ditioaa}'x?emmissioner of
. W _Comfi1ereia1 Taxes, Karnataka, Zone---II,
_ _ FiooI',a.Vanijya Therige Karyalaya,
. Banga1ore--56O 009.
2. Joirnt' Commissioner of Commercial
" Taxes (Appeals),
< 4_ Bangalore Division, Ahhaya Complex,
Seshadripura, Bangalore.
. Deputy Commissioner of
Commencial Taxes {Assts.),
Commercial Taxes Building, Tumkur.
. . Respondents
{ By Ms. Geetha Menon, Govt, Advocate. )
rd
2
Sales Tax Appeal filed under Section 24(1) of the
Karnataka Sales Tax Act, 1957 against the order dated
15.3.2006 passed in No. SMR/KS1’/BD/CR-I3/2005-06
by the Additional Commissioner of OoII1111eI’cia]V.’~I’.a.xes,
Zone-II, Gandhillagara, Bangalore, setting aside–._:’tl1e
order dated 12.2.2005 passed in No. KST/liili’/4’_-?£?.[.{3+€§§’
05 of Joint Commissioner of Ta:-ie’s.. V’
(Appeal ), Bangalore, and -:
6.12.2004 under Section 5-A(Z§}{iii’}A_A_iof 2
1957.
This appeal “L’~-fore hearing day,
Deepak Verma, J, :foilowii11g’:
.lg_e¢flooMENT
appeared for the appellant
, ‘_ aridi. Menon appeared for the respondents.
appeal under Section 24(1) of the
Tax Act, 1957 (hereinafter referred to
,asL”tlie»–;-iiet’) agaizist the order dated 15.3.2006 passed by
A’ Commissioner of Commercial Taxes, Zonenll,
ii ~~-‘Bangalore, under the powers of S110 motu mvision
exerciseci by him under Section 22–A(/1–)3)f the Act.
3. Notice was issued to the appe11ant–assessee
pmposing to take up the matter in suo mou;”1’e\?ision
against the appeilate order dated 10.2.20(_}5:—
the Joint Commissioner of Commereis’_l ” the
ground that the same was ”
the revenue. The revisio1is1.:ve:authoi’ity a” ‘ L’
question to answered by_.it,’
“(1) Does jelly
and ss:i£i’je;j§1voI:%¢es 1 a’ process
of a product
t=1se’–ii1:g1edie;its used?”
4. Wliiiew ..–the matter, the revisional
authority%”‘sef.’ order passed by the appellate
V. _ ‘restored the order of the assessing
6. 12.2004. Again’ st the said order, this
preferred.
” ~ ‘fits appeal has been admitted on the fol1ow1ng’
sulastantial question of law:
“Whether the appellant is entitled to
purchase superior kerosene oil at
concessional rate of tax under Section 5-A of
G
laying roads, manufactured bitumen mixture __1.1si11g
bitumen, chemicals, jelly, etc. The first
authority, after appreciating the process of
involving proper mixing of all itra’ ‘V:
of bitumen mixture to work site laying
held that SKO acts as “ti__1e’ of ‘ it
bitumen mixture wast-11% for..1a3tiiigv~of.t:oads. As
bitumen mixture vvaas’ works
contract of ‘V A Po Violation of
section
8. . of Commercial Taxes,
exercising’, the on him under Section
22–.if\(1}~ of tlie issued notice for taking up the said
» :£&»atter ingsno motu revision. The first respondent i.e.,
‘ti’1.e.i’revisionalsvauthority, proceeded on the assumption
Z ‘teas being used by the appellant, in heating
» itbe, containing the asphalt mix. Thus, from the
uV’.i1nf>ug:t1ed order, it appears that there was some doubt
“with regard to the use of SKO by the appellant.
However, the appellate order passed by the Joint
0/
Commissioner, makes evetything crystal clear, hats
held as under:
“4) The bitumen mixture] aspiiei-t i
mamlfaetured by using
bitumen, chemicals,
technical specifieatieiisfer 21’a_\’rVi1:g ef
and this bitumen is
at one place cf
made is awa1’de¢i,_” bitumen
mixture’ _ ‘V by
lorries;-.an§ii’iti1ereaf£eVr, the asphaited.
process involves
__and proper mixing of the
specialized technical
A . _speeifie:atioi1si”v_ for this purpose of
” i:iaeufaetu.re__.eupefior kerosene oii is used.
_ superior keresene oil acts as a
‘ melting the bitumen to specified
and thereafter when the bitumen
~~ assumes a semi liquid form, the other
it ‘ ingredients axe mixed while the process is in
i heating by using superier kerosene oil, and
thereafter, the bitumen mixture emerges.
6) In the course of such manufacture, the
superior kerosene oil acts as a
eensumable’/input, and thereby the
Ci
provisions of sec. 5-A apply and the
appellant is therefore, eligible to
such an input and thus the px’ovisi<J;n.s"
sec. 5-A are not contravened.
7) That the mgedicgfir
manufacture of such bitmriefi
constitutes an and “merefcre,”‘~..;’the
superior kerosene “1-“:.:;«1_n .. be i’
against Form-3′?}”f«–
9. The reascziing authority appears was not used by the fact, it was used in which was used fer laying on
the road,” as its a tarred road.
ccmflsel for the appellant placed reliance
L’ =3 —Bench judgment of this court reported in
{some (I(a.rn), in the case of Hccbeeb Proteins &
Fats Vs. Commissioner of Commercial Taxes,
5 wherein it has been held as under:
“25. The word ‘consume’ contemplates the
complete exhaustion of the purchased goods.
Alternatively, the conversion (gs commodity
9
into a diifsrsnt soinmerciai commodity by
subjecting it to some processing is
consumption of the former commodity. The
‘consumption’ in the true economic
does not mean only use of goods it
production of consumer goods. .. it
utilisation of consumer goodsiibyo. consutiiszfs,’ ”
It also means ‘used 1.113’: *
goods purchased bei’oor1sui:vgod1,:”‘¢.he
consumption should 2 tho” of
manufacture, the
manufacture of Viotlisg There are
several ‘Wfor ‘whether a
is oonsaiznod théiimanufactum
iof gstzofafly prevalsnt test is
Whsflxsr faroducod is rgarded in
J the t”1*s§1e,.}f:–y ms who deal in it, as distinct
it iqensty the commodity involved in
.its_ and where there is no
difference in idemity between the
commodity and the processed
V *~ article, it is not correct to say that one
At ‘T commodity has been consumed in the
A’ manufacture of another. Although it has
undergone a (logos of processing, processed
commodity must be regarded as still
retaining its original identity.
0;’
’10
26. Manufacture implies a change but
every change is not a manufacture;
Something more is necessary. There ~ K
be a transformation as a rwuit .9? A
process undertaken on product’ = = _
new and different article :_ T
name or character must eixierge. The
test for determining ta
has taken place is whethver-.._vt11e.’eo1_I’1m0dity
which is of
manufacture as
the in
the trade av _ commodity.
Thfi ” — « betsire~c:1- “‘§”DrocessiI18” and
now well understood
weit “Processing” means
_ subj’ecting ‘v._aI__oonimodity to a process or
as to develop it or make it fit for
_ ieorltet. With each process, the original
– undergoes a change. But it is
or1ly”§–.Vw:hen the change takes the oommodity
x to a point where it can be no longer regarded
the orignal commodity but is recognised
in the trade as a new and distinct
commodity that a manufacture can be said
to take place. Where the commodity retains
a. continuing substantial identity through a
Cl?
11
preeessing stage, it cannot be said that there
has been a manufacture.”
11. Reliance has aise been placed on a A
the Supreme Court reported in (200735 ‘
the case of Commercial ”
Rcyhstfusm Taxchem Ltd, it”?
has been held as undé-;::;’
“33. Thg. ~. ” diesel
as Afdwr’ of the
arid fabric. The
xiiiewix; aassessee is a fuel and
i13.ub1’ic.=i1it.’jas’e:1cfi1:ied’under section 2(34) of
‘V had the occasion to consider as to
‘ jvhat constitute manufacture. The same has
% (1999)114 src 337 in the case of Union
of J.G.G’1ass Industries Ltd. Paragraphs» 16
V’ ‘5_” 17 thereof, which are relevant, are reproduced
;be1ew:
“16. On an analysis of the aforesaid rulings,
a twofoid test emerges for deciding whether
the process is that of “manufacture”. First,
‘%
12
whether by the said process a difi’erent_
commercial commodity comes into existenee’._ 7_V
or whether the identity of the
commodity ceases to exist;
whether the commodity wtliohewas ” _
existence will serve no jbizt ‘for: _
said process. In other wofds;’-._whethe1f’ the
commodity already in no
commercial use, but fozf…the_ girooessf In
the present .A are
themsekves and can
be sold. 2nd’_- process of
iogosfon bottles, the
does not
to be bottles. It
cannot but for the process of
printing, Vthe Willi serve no purpose or
.. are of ii0~._€;0Ifll1’i6I’Cial use.
_ counsel for the Revenue has
‘ stzbenuoijsly contended that the printing on
the. :’bottles will make them a difierent
” .oommodity known as printed bottles.
According to him such printed bottles
cannot be of any general commercial use but
they will be useful only for the persons on
whose behalf and for whose benefit such
printing has been done. Therefore,
aecordixag to him the process of printing on
®
13.
the I~ii5She ‘3oort of« in the case of Namputhms° ‘
‘Quoted the Apex Court’s observation in Pia
14
The court referred to various earlier.
decisions dealing with the exp1eseio;1L ‘e._V
“manufacture”. We are unable to ‘e V’
as to how the ruling helps the Reverfiie.
the present case. We _ out that the prfmtzing on A' bring into existence' ,3 " commodity which is and its character,'
original . E-‘IeIf§ee.,u unable to
accept the eontentiofn of in this
case ” involves a
pmdess..o£ ‘
be made to a decision of
f e(e1j994j9’2 eeexo, wherein a Full Bench of the High Court
«._I~*,ieio;1;;;.__ with the expression “manufacttmh g
L ‘ease 1(19so)46 STC 63] thus:
“With each pmcess suffered, the original
commodity experiences a change. But it is
only when the change,
changes, take the commodity to the point
where commercially it: can no longer be
“T®
or a series of
e vs. State of Kemza, reported in
15
regarded as the original commodity, but
instead is recogxised as a new and
article that a manufacture can be same he .
take place ……. .. Although it has A
a degree of processing, it 31:11.15; dd
as still retaining its orig’na:=1:.’ ‘~
In the very same decision, L’
had this to say at .
“14. In the of cases
x$*itj1 the iidentity” test,
cangit be’ “its original form
(see v’of”~fheV’FirSt..St§:hedu1e) and chilli
Vdpowderd n f: .e ‘ __ different commercial
opinion, not. When
. . .. powder, they do not, in
V’ ~vviev§;ci1~’aa”ige in “substantial identity and
or “essential nature”. They may
A ‘ their natural form or used after
‘ into powder. The mere
.. ohange into the powdered form, in our view,
does not change the “essential nature” of the
commodity, as stated in Tungabhadra
Industries’ ease (1960)11 STC 82′?’ or the
substantial identity, as stated in Pic Foods’
ease (1980)46 STC 63 and Steriing Foods’
ease (1986)63 STC 239 decided by the
®
16
Supreme Court. There is only a change in
the form and no change in the
identity.» 3
14. A perusal of the aforesaid jud_gmei1tsv’ ” u
that in the ultimate process,
come out of the said or
which should be diifeieut which
have been used for in the case on
hand, the $810, cannot be
used undergo certain
31 mixture or asphalt.
That asphait which ultimately is
uforwx road can be made only by
V’ _ and that process of mixing the
make the mixture usable. Thus, there
in the end result of such nihdng.
” 15,.’ iii} the light of the aforesaid discussion, We are of
opinion that the order passed by revisional authority
V dated 15.3.2006 cannot be sustained in law. Same is
hereby set aside. Instead, the order passed by the Joint
Commissioner of Commercial Taxes (Appeals), dated
(D
17
10.2.2005 is hereby restored. The effect of restoration
thereof, results in allowing this appeal. The question,
therefore is answered in favour of the
against the Revenue.
L Sdié.
4% Iudge