JUDGMENT Rajesh Kumar, J.
1. The present revision under Section 11 of the U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order passed by the Full Bench of Trade Tax Tribunal dated 21st November, 1998.
2. Brief facts of the case are that the applicant has established a new unit for the manufacturing of all kinds of commercial and educational register, exercise book, flat files and printing material. Unit of the applicant has been recognized as a new unit under Section 4-A of the Act and the Divisional Level Committee granted exemption for the period of seven years from the date of first sale i.e. from 08.06.1987 and issued an eligibility certificate. In the eligibility certificate the manufactured goods was stated as, commercial and educational register, exercise book, flat files and printing material. The applicant also claimed that it was involved in the manufacturing of cut size paper and exemption in respect thereof should also be allowed for which review application was moved, which was rejected on the ground that the conversion of desired cut size of paper from the big size of paper did not involve manufacturing. Applicant filed appeal before the Tribunal, which has been rejected by the impugned order.
3. Heard learned Counsel for the parties.
4. Question involved for consideration is whether process of cutting of paper into desired size of paper which is normally sold in the market in the name of type paper, duplicate paper etc amounts to manufacturing process and the applicant is entitled for exemption under Section 4-A of the Act on such cut size of paper which is claimed to be manufactured product.
5. Learned counsel for the applicant submitted that by the process of cutting the desired size of paper is obtained which is sold in the market as a type paper, duplicate paper etc which is commercially known as different good than paper out of which they have been obtained and thus, process of cutting amounts to manufacturing and cut size paper is a final product on which the applicant is entitled for exemption under Section 4-A of the Act. In support of his contention, he relied upon the decisions of this Court and the Apex Court in the case of Shree Ammonia Chemicals (P) Ltd., Kanpur v. Commissioner of Trade Tax reported in 2000 UPTC 14, Ashirwad Ispat Udyog and Ors. v. State Level Committee and Ors. reported in 1999 UPTC 93, Coal Products India, Varanasi v. State of U.P. and Ors. reported in 1991 UPTC 841, CST v. S/S Kederul Sehat Dawakhana, Sambhal, Moradabad reported in 1984 UPTC 224 and Pappu Sweets & Biscuits, etc., v. CTT reported in 1998 UPTC 1086.
6. Learned Standing Counsel submitted that the product is a paper which before us cutting was a paper and after cutting also remains paper and merely because big size of paper has been cut into a desired size of the paper as per requirement of the customer, the paper remains paper and no new commercial commodity come into being. He submitted that mere cutting does not amount to manufacture, in support of his contention he relied upon the decision of this Court in the case of Ashok Kumar and Co., Varanasi v. Commissioner of Trade Tax reported in 1997 UPTC 766 and the decision of the Apex Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra reported in 1976 UPTC 282.
7. Having heard the learned Counsel for the parties, I do not find any substance in the argument of the learned Counsel for the applicant. Mere converting the big size of paper into the desired size of paper by the process of cutting paper remains the same and no commercial commodity comes into being and process of cutting does not amount to manufacturing.
Section 2(e-1) defines "manufacture" as follows:
"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 processes as may be prescribed;
8. In the case of Ashok Kumar and Co., Varanasi v. Commissioner of Trade Tax (supra) and in the case of State of Tamil Nadu v. Pyare Lal Malhotra (supra), this Court and the Apex Court held that mere process of cutting does not amount to manufacturing.
9. This Court in the case of Ashok Kumar and Co., Varanasi v. Commissioner of Trade Tax (supra) held as follows.
Further, if items purchased as iron steel scrap from the railways are cut to smaller sizesfor facility of transport etc., the activity would not amount to manufacture. It is anomalous to say that the dealer was manufacturing scrap out of scrap. As held by the Hon'ble Supreme Court in State of Tamil Nadu v. P.L. Malhotra 1976 UPTC 282 where commercial goods without change of their identity as such goods are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. Iron and steel including scrap issubjected to single point tax and the definition of manufacture' as quoted above cannot be so extended that cutting thescrap of rails into smaller pieces may be treated as manufacturing scrap.
10. In the case of CST v. National Industries Corporation process of repacking of grease in small container has been held not amounting to manufacture within the definition of Section 2(e-1) of the Act. This Court held that in the process of packing of grease the commodity has not been subjected to any manual, mechanical, chemical, electrical or any other like operation which be called any art of process for producing preparing for making any article. The constituant and identity of the commodity has remained the same and it has not been put to any process or manufacture whatsoever.
11. In the case of Sterling Foods v. The State of Karnataka and Anr., reported in 63 STC, 239 dealer was involved in purchasing of shrimps, prawns and lobsters and have exported them after processing them by cutting head and tails, peeling, deveining, cleaning and freezing them. Apex Court held that by the reasons of aforesaid process identity of the goods remained same and the commodity subjected to the processing retained its original character and identity. Shrimps, prawns and lobsters are held commercially the same commodity as raw shrimps, prawns and lobsters.
12. In the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers, reported in 46 STC, 63, pineapple was processed into pineapple slices for being sold in sealed cans. Apex Court held that although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it and in the circumstances of the case held process does not amount to manufacture.
13. In the case of State of Maharashtra v. Shive Dutt & Sons, reported in 84 STC, 497, dealer was involved in immersing plates in electrolyte and charging the batteries for substantial period before resale. Apex Court considered the definition of the manufacture under Section 2(17) of Bombay Sales Tax Rules, which is a kin to the definition of the manufacture under U.P. Trade Tax Act. Apex Court held as follows:
The mere fact that the words used in the definition of "manufacture" are very wide should not lead us to so widely interpret them as to render the provision practically meaningless and so as to treat the goods sold as different merely because some slight additions or changes are made in the goods which are purchased before they are sold. It is true that under the section it is not necessary that there should be "manufacture" in the sense that a new commodity has been brought into existence as would have been required if that words is interpreted in its literal sense. But, at the same time, the section should be so interpreted to mean only such of the various processes referred to in the definition and applied to the goods as are of such a character as to have an impact on the nature of the goods.
In other words, though the words used by the statute, namely, "processed or altered in any manner after such purchase" were very wide, the court read down the scope of this expression and considered that, for the purposes of the definition, there should be some alteration in the nature or character of the goods. In our opinion, the interpretation of Section 2(17) calls for a like limitation on the words used by the statute. As we have already pointed out, that if a very wide interpretation is given, it may lead to impractical consequences.
14. In the case of Krishna Chander Dutta (Spice) Pvt. Ltd. v. Commercial Tax Officer and Ors., reported in 93 STC, 180, dealer was involved in converting whole turmeric and pepper into pepper powder and turmeric powder. Apex Court held that both whole turmeric and pepper and powdered turmeric and pepper are the same commodity.
15. In the case of CST v. Lal Kunwa Stone Crusher (P.) Ltd., reported in 118 STC, 287. Apex Court held that stone bounders and gitti are same commodity though by size they may be different. Apex Court laid down the following principle:
The purpose of sales tax is to levy tax on sale of goods of each variety and not the sale of the substance out of which they may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods for purposes of sale tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing, they may remain commercially the same goods which cannot be taxed again, in a series of sale, so long as they retain their identity as goods of a particular type.
16. In the case of Hansraj and Sons v. State of Jammu and Kashmir and Ors., reported in 128 SIC, 203, process of dry fruits has been held not amounting to manufacture.
17. In the case of State of Maharashtra v. Mahalaxmi Stores, reported in 2002 STI (SC), 97, Apex Court held that crushing of boulders into small sizes, known as a gitti does not amount to manufacture within the definition of Section 2(17) of Bombay Sales Tax Act. Apex Court held as follows:
The contention of the assessee that converting boulders into gitti does not include any manufacturing process within the meaning of the Act, was accepted by the Tribunal. From the order, the aforementioned was referred to the High Court or Bombay. Following the judgment of Deputy Commissioner of Sales Tax v. Pio Food Packers reported in 1981 UTC, 667 (SC), Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers reported in 46 STC, 63, Chowgule & Co. Pvt. Ltd. and Anr. v. Union of India and Ors. reported in 1981 UPTC, 702, Sterling Foods v. State of Karnataka and Anr. reported in 1986 UPTC, 1236, 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.
Section 2(17) of the Act defines the term "manufacture" and it reads thus:
Manufacture with all the grammatical variations and cognate expressions means producing, making, extracting, alternating, ornamenting, finishing or otherwise processing, treating or adapting any goods but does not include such manufacture or manufacturing processes as may be prescribed.
From a perusal of the definition, extracted above, it is clear that the processes of producing, making, extracting, alternating, 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 new commercial commodity. In the instance case, the very nature of the activity does not result in manufacture because no new commercial commodity comes into existence.
18. Perusal of the definition of Section 2(e-1) of the Act shows that the process of cutting is not being included within the definition of manufacture. Thus the process of cutting cannot be said to be a process of manufacturing. As stated above by the process of cutting from big size and converting big size paper into small size of paper no new commodity comes into being. Paper remains paper. After cutting, paper does not loose its identity of paper, it does not undergo any physical chemical or any kind of change. The constituent and identity remains the same. Thus process of cutting and conversion of big size of paper into small size of paper does not come under any of the process mentioned in the definition of manufacture under Section 2(e-1) of the Act.
19. The decisions cited by the learned Counsel for the applicant-referred hereinabove are not applicable to the present case. They are based on their own facts and are distinguishable.
20. The decision cited by the learned Counsel for the applicant in the case of Shree Ammonia Chemicals (P) Ltd., Kanpur v. Commissioner of Trade Tax (supra) is not much helpful to the applicant and is squarely distinguishable from the fact of the present case. In the said case, ammonia gas transferred from big tanker to small cylinder has been held to be a technical process established at huge costs for transferring a dangerous commodity from big tanker to a smeller one and on this peculiar activity, it has been held that it was not the commodity having a definite market conies into being by the special process and the exemption has been eligible.
21. In the case of CST v. S/S Kaderul Sehat Dawakhana, Sambhal (supra), the Division Bench of this Court though held that the expression 'manufacture' covers within its sweep not only such activities carried on by a person 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 article on which such activity was carried on, for example, where an activity by way of ornamenting of goods is carried on, the ornamented goods may not be goods commercially different from the goods which had been subject to ornamentation. In the said case, the dealer was mixing various ingredients (Kirana and Herbs) in the preparation of Hakims prescription, they in fact prepared or made a pharmaceutical preparation as contemplated by item No. 55 of the First Schedule of the Act. It has been held that in any case they had by so mixing the ingredients adapted such ingredients for specific use by the patient for whom the pharmaceutical preparation had been prepared. Activity of the dealer in preparing such medicine/pharmaceutical preparation, therefore, was held manufacturing activity.
22. In the case of Ashirwad Ispat Udyog and Ors. v. State Level Committee and Ors. (supra), the case before Apex Court was that the dealer purchased iron and steel scrap in the shape of defective angles, flats, channels, tubes and coils and cut down it for the purpose of rolling mill and forging part, gear and pinion manufacturers, with the help of shearing machines and glass cutting. On a consideration of the definition of manufacture under Section 2(j) of the Madhya Pradesh Sales Tax Act. The Apex Court held that manufacture has been defined as including a process or manner of producing, collecting, extracting, preparing or making any goods. There can be no doubt whatsoever that "collecting" goods does not result in the production of a new article. The Apex Court held that when the Legislature creates such definition with this object this Court do not derive powers to restrict the definition of manufacture for grant of benefits to new industrial units. In view of its discussion, the Board of Revensue held that, inspite of the fact that the raw materials more or less retained their identity and no new product came into existence, the process and manner of the appellants' activity would amount to a process of "manufacture" within the meaning of that word in the said Act.
23. In the case of Coal Product India, Varanasi v. State of U.P. (supra), the Division Bench of this Court held that the word "manufacture" as defined in Section 2(e-1) is very wide, which includes even collecting, extracting, altering, finishing...etc. In the said case, the unit was involved in the manufacturing of Hard-Coke from another variety of Coke, both covered under Section 14 of the Central Sales Tax Act. Division Bench of this Court held that for the taxation purposes commodities failing under the same entry would not be relevant consideration while considering an application under Section 4-A of the U.P. Sales Tax Act for the grant of exemption.
24. In the case of pappu Sweets & Buscuits v. CTT (supra), dealer was involved in the manufacture of toffee. Sweetmeat was one of the items, mentioned in a prohibitory list of exemption under Section 4-A of the Act. Question for consideration before the Apex Court was whether toffee was a sweetmeat. In the context of the case, Apex Court held that the toffee was not a sweetmeat.
25. For the reasons stated above, revision has no merit and is, accordingly, dismissed.