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State Of Maharashtra v. Mahalaxmi Stores .
Factual and Procedural Background
This appeal challenges a Division Bench judgment of the Bombay High Court in Sales Tax Reference No. 1 of 1995 dated 22-2-1995. The Maharashtra Sales Tax Tribunal referred a question under Section 61(1) of the Bombay Sales Tax Act, 1959 concerning whether converting stone boulders into smaller-sized metal known as “gitti” amounts to “manufacture” under Section 2(17) of the Act.
The assessee purchased large stones/boulders from registered dealers and crushed them into “gitti.” Upon seeking a determination, the Deputy Commissioner of Sales Tax held this conversion to be “manufacture” under Section 2(17). On appeal, the Maharashtra Sales Tax Tribunal accepted the assessee’s contention that the process did not amount to “manufacture.” The Tribunal referred the legal question to the High Court, which, following decisions of the Supreme Court, held that the conversion of boulders into “gitti” does not constitute “manufacture.” The Revenue appealed to the Supreme Court.
Legal Issues Presented
- Whether, on the facts and circumstances of the case and on a true interpretation of Section 2(17) of the Bombay Sales Tax Act, crushing boulders to produce metal of different sizes (commonly called “gitti”) amounts to “manufacture.”
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CST v. Pio Food Packers, 1980 Supp SCC 174; (1980) 46 STC 63 | Relied upon by the High Court to support the view that the conversion of boulders into “gitti” does not amount to “manufacture.” | Not independently analyzed by the Supreme Court; noted as relied upon by the High Court while the Supreme Court upheld the High Court’s conclusion. |
| Chowgule & Co. (P) Ltd. v. Union of India, (1981) 1 SCC 653; (1981) 47 STC 124 | Relied upon by the High Court in holding that the process does not amount to “manufacture.” | Referenced as part of the High Court’s reasoning; the Supreme Court did not base its decision on this case independently. |
| Sterling Foods v. State of Karnataka, (1986) 3 SCC 469; (1986) 63 STC 239 | Relied upon by the High Court to conclude that no “manufacture” occurs. | Referenced to describe the High Court’s basis; not the primary ground for the Supreme Court’s decision. |
| CST v. Lal Kunwa Stone Crusher (P) Ltd., (2000) 3 SCC 525 | Held that crushing stone boulders into stone chips, gitti, and ballast is not “manufacture” (under a similar definition in the U.P. Sales Tax Act, 1948). | Expressly followed; the Supreme Court agreed with this view and applied it to uphold the High Court’s judgment. |
| Kher Stone Crusher v. G.M., District Industries Centre, (1990) 79 STC 149 (MP) (FB) | Referenced in contrast; in view of the present decision, it “cannot be treated as good law.” | Expressly disapproved to the extent inconsistent with the Supreme Court’s view. |
Court's Reasoning and Analysis
The Court set out the statutory definition in Section 2(17) of the Bombay Sales Tax Act, 1959, which includes “producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods,” subject to prescribed exclusions. The Court emphasized that not every variation or finishing process constitutes “manufacture”; the touchstone is whether a new commercial commodity emerges.
Applying this principle, the Court found that crushing boulders into “gitti” does not result in the emergence of a new commercial commodity and therefore does not amount to “manufacture” within Section 2(17). The Court relied on its prior decision in CST v. Lal Kunwa Stone Crusher (P) Ltd., which addressed an identical question and held that crushing boulders into chips, gitti, and ballast is not “manufacture,” noting that the relevant U.P. statutory definition was similar to the one under consideration. Agreeing with Lal Kunwa, the Court concluded there was no illegality in the High Court’s decision.
Consequently, the Court also stated that, in light of this view, the Full Bench judgment of the Madhya Pradesh High Court in Kher Stone Crusher v. G.M., District Industries Centre cannot be treated as good law.
Holding and Implications
HOLDING: DISMISSED. The civil appeal is dismissed. No costs.
Implications: The decision affirms that converting stone boulders into “gitti” does not constitute “manufacture” under Section 2(17) of the Bombay Sales Tax Act, 1959, as no new commercial commodity emerges. It upholds the High Court’s view and expressly disapproves the contrary Full Bench judgment in Kher Stone Crusher, indicating that it cannot be treated as good law. The ruling primarily affects the parties by sustaining the Tribunal/High Court outcome and does not purport to set a new principle beyond reaffirming the requirement of emergence of a new commercial commodity for “manufacture.”
Order
1. This appeal arises from the judgment of a Division Bench of the High Court at Bombay passed in Sales Tax Reference No. 1 of 1995 dated 22-2-1995.
2. The Maharashtra Sales Tax Tribunal referred the following question under Section 61(1) of the Bombay Sales Tax Act, 1959 (for short “the Act”) to the High Court:
“Whether on the facts and circumstances of the case and on a true and correct interpretation of the provision of Section 2(17) of the Bombay Sales Tax Act, was the Tribunal justified in holding that crushing of boulders resulting in metal of different sizes ordinarily known as ‘gitti’ does not amount to manufacture?”
3. The facts, insofar as they are relevant for our purpose, are as follows:
The assessee purchases big-sized stones, boulders from registered dealers and crushes them into small sizes, known as “gitti”. It approached the Commissioner of Sales Tax for determination of the question whether converting bigger size boulders into “gitti” would amount to manufacture. The Deputy Commissioner held that the process of conversion amounts to “manufacture” within the meaning of Section 2(17) of the Act. Against the order of the Deputy Commissioner, the assessee went in appeal before the Maharashtra Sales Tax Tribunal. The contention of the assessee that converting boulders into “gitti” does not involve any manufacturing process within the meaning of the Act, was accepted by the Tribunal. From that order, the aforementioned question was referred to the High Court at Bombay. Following the judgments of this Court in CST v. Pio Food Packers 1980 Supp SCC 174, (1980) 46 STC 63, Chowgule & Co. (P) Ltd. v. Union of India (1981) 1 SCC 653, (1981) 47 STC 124 and Sterling Foods v. State of Karnataka (1986) 3 SCC 469, (1986) 63 STC 239 the High Court held that the conversion of boulders into “gitti” did not amount to “manufacture”. It is this view of the High Court that is assailed in this appeal by the Revenue.
4. Section 2(17) of the Act defines the term “manufacture” and it reads thus:
“2. (17) ‘manufacture’, with all its grammatical variations and cognate expressions, means producing, making, 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;”
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 a 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.
7. In view of the judgment of this Court in Lal Kunwa Stone Crusher (P) Ltd. (2000) 3 SCC 525 with which we are in respectful agreement, we find no illegality in the impugned judgment of the High Court. In the view that we have taken, the judgment of the High Court of Madhya Pradesh in Kher Stone Crusher v. G.M, District Industries Centre (1990) 79 STC 149 (MP) (FB) cannot be treated as good law.
8. The civil appeal is, therefore, dismissed.
9. No costs.
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