COMMISSIONER OF TRADE TAXversusM/S. KUMAR PAINTS AND MILL STORES THROUGH ITS PROPRIETOR

938                      [2023]REPORTS
               SUPREME COURT    2 S.C.R. 938                  [2023] 2 S.C.R.


A                     COMMISSIONER OF TRADE TAX
                                          v.
                  M/S. KUMAR PAINTS AND MILL STORES
                        THROUGH ITS PROPRIETOR
B                         (Civil Appeal No. 5937 of 2011)
                                 MARCH 02, 2023
           [S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
             U.P. Trade Tax Act, 1948 – s. 2(e)(i) – Mixing of base paint
      with different colours, result into a new product or not – High Court
C
      held that mixture of the base paint with different colours- did not
      result in a ‘new’ product and therefore did not result from the process
      of ‘manufacture’ as defined under section 2(e)(i) of the 1948 Act –
      Revenue contended that the sale of paints which had undergone
      mixing amounted to ‘manufacture’, thereby resulting in a new
D     product, which was afresh incidence of taxation – Held: In the instant
      case, the findings based on the expert’s evidence are that the base
      paint was mixed with colouring as an additive – Both of these had
      suffered tax - The resultant article i.e., the paint of a different shade,
      did not result in a new commercial product – New product was
      nothing else but ‘paint’, and not a different article – High Court
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      did not commit any error.
            Dismissing the appeal, the Court
            HELD: 1. In Mahalaxmi Stores, this court relied on previous
      decisions such as Commissioner of Sales Tax Vs. Pio Food Packers
F     (1980) Suppl. SCC 174, and Chowgule and Company(P) Limited
      Vs. Union of India to state that the manufacturing process can
      vary, and that the process of producing every type of variation,
      or finishing of goods, would not amount to ‘manufacture’ as
      contained in the statute unless it resulted in the emergence of a
      new commercial commodity. [Para 7]
G
            2. In Sonhbadra, this court while deciding the facts of the
      case before it cited a large number of decisions rendered in the
      context of what was meant by ‘manufacture.’ This court specifically
      noticed in Union of India V. Delhi Cloth and General Mills that

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                                         938
 COMMISSIONER OF TRADE TAX v. M/S. KUMAR PAINTS AND MILL              939
            STORES THROUGH ITS PROPRIETOR


‘manufacture’ meant bringing into existence a ‘new’ substance         A
and did not mean merely to bring about some change in the
substance. In Mahalaxmi Stores, it was held that processing or
variation/finishing of goods would not per se amount to
manufacture unless it resulted in the emergence of a new
commercial commodity. The decision in Aspinwall & Co. Ltd. V.
                                                                      B
Commissioner of Income Tax, Ernakulam follows the same
principle. The court held that manufacture must be understood
in common parlance and means production of articles for use from
raw or prepared materials by giving them forms, qualities or
combination. Importantly however, it was held that if the change
made in the article resulted in a ‘new’ and ‘different’ article, it   C
would amount to ‘manufacturing’. The tipping point, or the
determinative test, therefore is that the result of the process
(amounting to ‘manufacture’) must be the emergence of a
commercially recognizable new commodity, and not mere variation
of an existing one. [Para 8][942-A-E]
                                                                      D
      State of Maharashtra v. Mahalaxmi Stores (2003) 1 SCC
      70 : [2002] 4 Suppl. SCR 292; Sonebhadra Fuels v.
      Commissioner Trade Tax, U.P., Lucknow (2006) 7 SCC
      322 : [2006] 4 Suppl. SCR 213; Commissioner of Sales
      Tax v. Pio Food Packers (1980) Suppl. SCC 174 : [1980]
      SCR 1271; Chowgule and Company(P) Limited v. Union              E
      of India (1981) 1 SCC 653 : [1981] 2 SCR 271; Union
      of India v. Delhi Cloth and General Mills (1963) Suppl.
      1 SCR 586; Aspinwall & Co. Ltd. v. Commissioner of
      Income Tax, Ernakulam (2001) 7 SCC 525 : [2001] 2
      Suppl. SCR 559 – referred to.                                   F
                      Case Law Reference
[2002] 4 Suppl. SCR 292           referred to         Para 4
[2006] 4 Suppl. SCR 213           referred to         Para 4
[1980] SCR 1271                   referred to         Para 7          G
[1981] 2 SCR 271                  referred to         Para 7
[1963] Suppl. 1 SCR 586           referred to         Para 8
[2001] 2 Suppl. SCR 559           referred to         Para 8
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940             SUPREME COURT REPORTS                            [2023] 2 S.C.R.


A           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5937
      of 2011.
            From the Judgment and Order dated 18.05.2009 of the High Court
      of Judicature at Allahabad in TTR No. 711 of 2002.
             With
B
             Civil Appeal Nos. 5938 and 5939 of 2011
            R K Raizada, Sr. Adv., Bhakti Vardhan Singh, Adv. for the
      Appellant.
            Ms. Charanya Lakshmikumaran, Ms. Apeksha Mehta, Ms. Neha
C     Choudhary, Ms. Falguni Gupta, M. P. Devanath, Ashwani Kumar,
      Ms. Iti Sharma, Puneet Sharma, Anshay Dhatwalia, Advs. for the
      Respondent.
             The Judgment of the Court was delivered by
             S. RAVINDRA BHAT, J.
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             1. The question which is urged in all these appeals is the correctness
      of the view of the High Court that the process which the product in the
      present case underwent – i.e., mixture of the base paint with different
      colours – did not result in a ‘new’ product, and therefore did not result
      from the process of ‘manufacture’ as defined under Section 2(e)(i) of
E     the U.P. Trade Tax Act, 1948 (“Act”).
             2. The facts in all these cases are that the assessees are dealers
      in inter alia paints. The Revenue contended that the sale of paints which
      had undergone mixing (through a computerised process with the aid of a
      DTS machine) amounted to ‘manufacture’, thereby resulting in a new
F     product, which was a fresh incidence of taxation. The assessee on the
      other hand contended that mixing per se did not amount to ‘manufacture’,
      and that on an application of the established principles, no new
      recognizable product or article had emerged from the process. It is a
      matter of record that both the base paint and the colourant are taxed
G     separately.
             3. The High Court on a previous occasion had accepted the
      assessees’ contentions and held that the process did not amount to
      ‘manufacture’. Upon the Revenue’s appeal in some cases, this Court
      had remitted the matter for fresh consideration after taking into account
H     expert opinion. The process was observed, and a report dated 20.01.2004
 COMMISSIONER OF TRADE TAX v. M/S. KUMAR PAINTS AND MILL                        941
   STORES THROUGH ITS PROPRIETOR [S. RAVINDRA BHAT, J.]


was issued by the Harcourt Butler Technical University, Kanpur. The             A
said report pertinently stated as follows: -
      “The base paint used in “point of Sale” tinting systems itself,
      therefore, is a paint irrespective of colourant being added to
      get a desired shade or colour. It is in the form of paint and
      possession the basic ingredients and characteristics. The                 B
      tinting does not bring new or different product into existence.
      The base paint can also be used as paint.”
       4. In the impugned order, the High Court after noticing a judgment
of this court in State of Maharashtra Vs. Mahalaxmi Stores (2003) 1
SCC 70, held that the process involved in the present case did not amount       C
to ‘manufacture’. The High Court also distinguished the ruling in
Sonebhadra Fuels Vs. Commissioner Trade Tax, U.P., Lucknow
(2006) 7 SCC 322. Therefore, the High Court allowed the revisions filed
before it.
       5. The Revenue urged that the findings in the impugned order are         D
erroneous, and relied upon Sonebhadra Fuels (supra) to argue that the
High Court was bound by this Court’s decision since it was directly on
an interpretation of the expression ‘manufacture’ in the same enactment.
In Sonebhadra Fuels, the court had considered whether coal briquettes
fell with the generic description of ‘coal’. This court held that the process
involved mixing crushed coal with suitable binders pressed in briquetting       E
press, from which regular shaped briquettes were suitably carbonised.
This process was held to amount to ‘manufacture’.
      6. The definition of ‘manufacture’ under the Act is as follows: -
      “2 (e-1). ‘manufacture’ means producing, making, mining,                  F
      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.”
       7. In Mahalaxmi Stores (supra), this court relied on previous
                                                                                G
decisions such as Commissioner of Sales Tax Vs. Pio Food Packers
(1980) Suppl. SCC 174, and Chowgule and Company(P) Limited Vs.
Union of India (1981) 1 SCC 653 to state that the manufacturing process
can vary, and that the process of producing every type of variation, or
finishing of goods, would not amount to ‘manufacture’ as contained in
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942              SUPREME COURT REPORTS                          [2023] 2 S.C.R.


A     the statute unless it resulted in the emergence of a new commercial
      commodity.
              8. In Sonhbadra, this court while deciding the facts of the case
      before it cited a large number of decisions rendered in the context of
      what was meant by ‘manufacture.’ This court specifically noticed in
B     Union of India V. Delhi Cloth and General Mills (1963) Suppl. 1 SCR
      586 that ‘manufacture’ meant bringing into existence a ‘new’ substance
      and did not mean merely to bring about some change in the substance.
      In Mahalaxmi Stores, it was held that processing or variation/finishing
      of goods would not per se amount to manufacture unless it resulted in
      the emergence of a new commercial commodity. The decision in
C     Aspinwall & Co. Ltd. V. Commissioner of Income Tax, Ernakulam
      (2001) 7 SCC 525 follows the same principle. The court held that
      manufacture must be understood in common parlance and means
      production of articles for use from raw or prepared materials by giving
      them forms, qualities or combination. Importantly however, it was held
D     that if the change made in the article resulted in a ‘new’ and ‘different’
      article, it would amount to ‘manufacturing’. The tipping point, or the
      determinative test, therefore is that the result of the process (amounting
      to ‘manufacture’) must be the emergence of a commercially
      recognizable new commodity, and not mere variation of an existing one.
E            9. In the present case, the findings based on the expert’s evidence
      are that the base paint was mixed with colouring as an additive. Both of
      these had suffered tax. The resultant article i.e., the paint of a different
      shade, did not result in a new commercial product. In common parlance,
      the new product was nothing else but ‘paint’, and not a different article.

F            10. In these circumstances, in the opinion of this Court, the High
      Court did not fall into error. The appeals therefore fail, and are hence
      dismissed. Pending application(s), if any, shall stand disposed of. There
      shall be no order as to costs.


G     Ankit Gyan                                                  Appeals dismissed.
      (Assisted by : Shloka Sah and Mahendra Yadav, LCRAs)




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