Summary
The Revenue contended that paint dealers who mixed tax-paid base paint with tax-paid colourants through a computerised tinting machine 'manufactured' a new product under Section 2(e-1) of the U.P. Trade Tax Act, 1948, attracting a fresh incidence of tax. On remand from the Supreme Court an expert report of Harcourt Butler Technical University found that tinting does not bring a new product into existence, and the Allahabad High Court held there was no manufacture. The Supreme Court dismissed the Revenue's appeals: the determinative test is the emergence of a commercially recognisable new commodity rather than a variation of an existing one, and paint of a different shade remains paint in common parlance; Sonebhadra Fuels, where coal briquettes emerged from a distinct process, does not assist the Revenue.
Issues
- Whether mixing base paint with colourants to produce paint of a desired shade amounts to 'manufacture' within Section 2(e-1) of the U.P. Trade Tax Act, 1948 so as to attract a fresh incidence of tax.
Provisions considered
- Section 2(e-1), U.P. Trade Tax Act, 1948Though the definition includes altering, finishing or otherwise processing goods, following Delhi Cloth and General Mills, Mahalaxmi Stores and Aspinwall, processing or variation amounts to manufacture only if a new and different commercial commodity emerges; tinted paint is not a different article from paint. (¶¶ 6, 7, 8, 9)
Held
- The expert evidence established that the base paint is itself paint, the colourant only produces a desired shade, and both inputs had already suffered tax; the resultant article is in common parlance nothing but paint, so no new commercial product emerged and the High Court did not fall into error. (¶¶ 3, 9, 10)
Result
Appeals dismissed with no order as to costs; Allahabad High Court judgment dated 18.05.2009 in TTR No. 711 of 2002 and connected revisions, holding that tinting of paint is not manufacture, affirmed.