In a recent pronouncement, the Supreme Court delineated that the scope of ‘manufacture’ as defined in Section 2(e)(1) of the U.P. Trade Tax Act, 1948 does not encompass blending and packaging of tea.
The bench, comprised of Justice B.V. Nagarathna and Justice Ujjal Bhuyan, distinguished their judgment from the precedent set by a three-judge bench in Chowgule & Co. Private Limited and Anr. vs. Union of India and Others. They held that the mere mixing of different types of tea for marketing purposes, without creating a distinct type of tea, does not constitute a manufacturing process.
Background
The respondent-assessee engaged in blending and packaging tea for sale but did not conduct any processing or manufacturing within the ambit of Section 2(e)(1) of the U.P. Trade Tax Act, 1948. As the blended tea remained the same product and did not qualify as a new commodity, it did not meet the definition of ‘manufacture.’
The relevant definition in Section 2(e)(1) of the U.P. Trade Tax Act, 1948 reads:
“2.(e-1) ‘manufacture’ means producing, making, mining, collecting, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods; but does not include such manufacture or manufacturing processes as may be prescribed;”
The Commissioner of Trade Tax, UP, sought revision before the Allahabad High Court, posing questions on whether blending and packing of tea constituted manufacturing and referring to the decision in Chowgule & Co. Pvt. Ltd. Vs Union of India.
High Court Decision
The Allahabad High Court, answering in favor of the assessee, declared that blending tea did not result in the manufacture of a new commercial commodity, as the tea remained unchanged.
Supreme Court Verdict
The Supreme Court emphasized that the definition of ‘manufacture’ in Section 2(e)(1) of the U.P. Trade Tax Act, 1948 is exhaustive and not expansive, lacking the term ‘includes,’ signifying a strict interpretation.
Citing State of Maharashtra vs. M/s Shiv Datt and Sons and Others, the court asserted the need to interpret the words “processed or altered in any manner after such purchase” restrictively to avoid impractical consequences.
The bench differentiated its decision from Chowgule & Co. Private Limited and Anr., highlighting the distinction between blending tea, as in the present case, and the specific ore contraction process in Chowgule & Co. Private Limited.
Ultimately, the court ruled that blending different types of tea for marketing purposes, without creating a specific type of tea, does not fall within the purview of ‘manufacture’ under the Act. Consequently, the appeals filed by the Commissioner of Trade Tax, UP, were dismissed.
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