IMPORTANT POINT
Definition of “manufacture” in Section 2(e-1) of U.P. Trade Tax is very wide which includes processing, treating or adapting any goods.

Headnote:U.P. Trade Tax Act — Section 2(e-1) and 3-A — Definition “manufacture” was very wide which included proceeding, treating or adapting any goods — Appellant carrying business in coal and manufactured “coal briquettes” popularly known as “coal tikli” applied for exemption of sale tax claiming that coal briquettes were same commodity as coal which had already been subjected to tax — Assessing Authority rejected the claim and order was upheld in appeal as well by Tribunal — Appeal — Method of making coal briquettes was a processing, treating or adapting the coal and was a “manufacture” — Coal briquette was a different commercial commodity from coal — No reason to interfere with findings of fact.
       Held : We may mention that, as noted above, decisions construing the word manufacture in other statutes are not necessarily applicable when interpreting Section 2(e-1) of the UP Trade Tax Act. As stated above, the definition of manufacture in Section 2(e-1) of the UP Trade Tax Act is very wide, which includes processing, treating or adapting any goods. Hence, in our opinion, the expression manufacture covers within its sweep not only such activities which bring into existence a new commercial commodity different from the articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence an article different from the articles on which such activity was carried on.(Para 21)
       Learned counsel for the appellant Shri Rakesh Dwivedi submitted that coal briquettes are produced merely by using a binding material such as clay or molasses along with the coal, and hence he submitted that the identity does not change. We regret, we cannot agree with his submission. Firstly, we do not agree that the coal briquettes are the same commercial commodity as coal. In our opinion, coal is a raw material for making coal briquettes. The method of manufacturing coal briquettes has been stated above, and this certainly is a processing, treating or adapting the coal. The appellant manufactures coal briquettes by compiling the hard coke breeze mechanically with the help of cinders which is usually 5% of the total hard coke breeze. In the compilation of the hard coke breeze, 95% of the hard coke breeze, which is known as coal-dust or breeze coke is taken which is compiled with the help of clay and molasses. Hence, in our opinion, coal briquettes is a different commercial commodity from coal. Moreover, even if it is not a different commercial commodity, the process of making coal briquettes will amount to a manufacture as it is processing, treating or adapting coal. In our opinion, by the processing of coal to make coal briquette, the coal dust loses its identity. Coal briquettes and coal dust are two different commodities in substance as well as in characteristics. The coal briquettes are altogether in different shape, form and moisture as well as characteristics, as compared to coal dust. (Para 23)
       A finding of fact has been given by the Tribunal that coal dust and coal briquettes are entirely different commercial commodities and we cannot interfere with this finding of fact. The appeal is accordingly dismissed.(Para 24)

JUDGMENT

Markandey Katju, J. — Civil Appeal No. 1790 of 2005 has been filed against the judgment and order dated 25.6.2004 of the learned Single Judge of the Allahabad High Court in Trade Tax Revision No. 1261 of 2004 M/s. Sonebhadra Fuels, Ravinagar vs. Commissioner, Trade Tax, U.P., Lucknow.

Heard learned counsel for the parties.

2. The appellant is carrying on business in coal and also manufactures coal briquettes, popularly known as coal tikli.

3. The assessee applied for exemption/rebate of sales tax claiming that the coal briquettes are the same commodity as coal which had already been subjected to tax. However, his claim was rejected by the Assessing Authority vide Assessment Order dated 31.3.1999. Aggrieved, he filed an appeal which was dismissed by the Appellate Authority vide order dated 19.7.2001. His further appeal to the Tribunal was referred to a larger Bench of five members which decided against the assessee vide its order dated 16.3.2004.

4. The short argument submitted by Shri Rakesh Dwivedi, learned senior counsel for the appellant, was that coal briquettes are as same as coal and hence no liability of tax can be fastened on the sale of coal briquettes.

5. Learned counsel for the appellant submitted that Notification No. ST-II-5782 dated 7.9.1980, issued under Section 3-A of the UP Trade Tax Act provided that coal included coke in all its forms, but excluded charcoal. The same meaning was given to the word coal in the subsequent Notification No. ST-II-3685 dated 31.7.1986. In both the Notifications, the rate of tax was @ 4%. A similar meaning has been given in Notification No. ST-TIF-II-2372 dated 23.3.1998. Coal is a declared commodity under Section 14 of the Central Sales Tax Act, 1956 and the entry given in clause (i-a) reads "coal including coke in all its forms, but excluding charcoal". Learned counsel submitted that under Section 15 of the Central Sales Tax Act, tax cannot be imposed on declared goods at more than one stage. As the coal-dust has already been subjected to tax, he submitted that coal tiklies are not taxable.

6. In reply, learned counsel for the respondent submitted that coal briquettes is a different commercial commodity from coke or coal, and since coal tiklies are made from coal dust by processing or manufacturing in which the coal dust loses its original form, quality etc, it amounts to manufacture.

7. The definition of manufacture in Section 2(e-1) of the U.P. Trade Tax Act is as under:

"Manufacture means producing, making, mining, collecting, extracting, altering, ornamenting, furnishing or otherwise processing, treating or adapting any goods, but does not include such manufactures or manufacturing process as may be prescribed."

8. The above definition is very wide as held by this Court in M/s. B.P. Oil Mills Ltd. vs. Sales Tax Tribunal and others - AIR 1998 SC 3055. The definition of manufacture in Section 2(e-1) of the Act includes processing, treating or adapting any goods. Thus, the meaning of manufacture in the UP Trade Tax Act is wider than that in the Central Excise Act, 1944. A dealer will be liable to pay tax on sale of any goods he makes by processing, treating, or adapting the goods he purchased by complying with the requirements of clause (ii) of Section 3(b) of the UP Trade Tax Act.

9. In M/s. B.P. Oil Mills (supra), this Court referred to a large number of earlier rulings on this point and it is not necessary for us to refer to all of them here. We may, however, refer to the decision in Chowgule & Co. Pvt. Ltd. vs. Union of India (AIR 1981 SC 1014) where this Court observed that where any commodity is subjected to a process or treatment with a view to its development or preparation for the market it would amount to processing. The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but in each process suffered the commodity would experience a change. The Court further observed that whatever

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2006 Supreme(SC) 686

IMPORTANT POINTDefinition of “manufacture” in Section 2(e-1) of U.P. Trade Tax is very wide which includes processing, treating or adapting any goods.

Cases Referred (14)

IMPORTANT POINT
Definition of “manufacture” in Section 2(e-1) of U.P. Trade Tax is very wide which includes processing, treating or adapting any goods.