Case: Hindustan Lever Ltd Vs. State Of Karnataka

the context of exemption notifications under the Sales Tax Act. As can be seen from paragraph 26 of the aforesaid judgment, the questions involved in that case were entirely different. Also, the test of what is “manufacture” was borrowed from the Central Excise Act as can be seen from paragraph 48 of the judgment. The High Court points to a new dimension to the word “manufacture” in the context of excise which would therefore include within it packing material as well in order that the goods be made marketable. This, as we have seen above, cannot be done in the context of the Entry Tax Act. 17. In Tata Engineering & Locomotive Co. Ltd. (TELCO) v. State of Bihar, (1994) 6 SCC 479 , this Court had to deal with a notification issued by the State of Bihar in the context of sales tax. The expression “raw material” and “input” was used in the notification. This Court held, following J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. S.T.O., (1965) 1 SCR 900 , that the expression “in the manufacture of goods” would normally encompass the entire process carried on by the dealer of converting raw materials into finished products. The precise question before this Court was whether products finished in themselves, such as tyres, tubes, batteries, etc., when purchased by the appellant for use in the manufacture of vehicles, could be said to be inputs. This Court held that as a vehicle cannot be operative without tyres, tubes, and batteries, obviously they were inputs in the sense of the dictionary meaning of what is “put in”. Both the fact situation and the ratio of this judgment are far removed from the facts in the present case inasmuch as it is nobody’s case that without the packing material manufactured tea cannot be said to exist as a finished product, it being “moveable property” and therefore “goods” under the Karnataka Entry Tax Act. This judgment is also therefore of no avail to the appellant. 18. M/s. Star Paper Mills Ltd. v. CCE, Meerut, (1989) 4 SCC 724 , is an excise case in which an exemption Notification exempted goods used as component parts in manufacture of any goods on which excise duty was leviable. This judgment defines the word “component” to mean a constituent part. In this context, it was held that paper core is a component part of paper delivered to the customer in rolls, but not in sheets as it was not necessary for manufacture of paper sheets. This case would have no application to the facts of the present case. It is obvious that packing material used to pack a product complete in itself, cannot possibly be included in the word “component” as it is not a constituent part of manufactured tea. 19. Three other judgments under the Central Excise Act were cited. The first of them, CCE v. M/s. Eastend Paper Industries Ltd., (1989) 4 SCC 244 , was concerned with the marketability aspect of central excise which, as has been held by us above, would not apply in the context of the Entry Tax Act. In that judgment, paper wrapping was held to be essential to make the concerned goods marketable. The second of these judgments CCE v. Ballarpur Industries Limited, (1989) 4 SCC 566 , again concerned a completely different fact situation. The question in that case was whether an admitted input, Sodium Sulphate, in the manufacture of paper, would not be construed to be a raw material only by reason that in the course of chemical reactions Sodium Sulphate is consumed and burnt up. This Court held that consumption and burning up would make no difference, as an ‘input’ need not always manifest itself in the final product. And in H.M.M. Ltd. V. CCE, (1994) 6 SCC 594 , it was held that a screw cap on a bottle containing Horlicks was a component part of Horlicks, it being an essential ingredient to complete the process of manufacture to make Horlicks marketable. This judgment again will not apply for the same reason indicated above, namely, that marketability is not relevant for the purpose of the Entry Tax Act. 20. M/s. J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, (1965) 1 SCR 900 , is a judgment in which Section 8 of the Central Sales Tax Act was pressed into aid on behalf of the appellant. In this case, the question was whether drawing materials, photographic materials etc. could be comprehended within the expression “in the manufacture of goods for sale” within the meaning of section 8(3)(b) of the Central Sales Tax Act, 1956. In order to determine whether such materials would qualify as such, this Court held that where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or process of goods would be commercially inexpedient, goods required in that process would fall within the expression “in the manufacture of goods”. What has been said about the excise cases squarely applies here. The expression used in Section 8 of the Central Sales Tax Act is not “in the manufacture of goods”, but “in the manufacture of goods for sale”, bringing in the element of marketability. 21. It only remains to deal with the argument made on behalf of the appellant based on the Tea Marketing Control Order. Needless to add, a manufacturer for the purpose of the said Order is specifically a person who produces value added products commercially known as tea. The context of the said definition is for the purpose of registering manufacturers or producers and buyers of tea, having relevance therefore to the sale aspect of tea. As has already been held by us, the context of entry tax being different, we are afraid this argument also does not avail the appellant.22. We are, therefore, of the view that the High Court was correct in following its own earlier Division Bench judgment in the Nestle case.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]there is no such Explanation II contained in the exemption notification dated 31.3.1993. This being the case, if we were to accept the case of the appellants, they would be liable to tax at the rate of 1% under the 1998 notification but would not be exempt under the 1993 notification, thus rendering the same packing material liable to tax at the rate of 2% in the case of the Dharwad unit and 1% in the case of all other units. This would lead to an anomalous situation which can best be avoided by not accepting the argument on behalf of the appellants.14. Equally, the argument based on Section 5A of the Karnataka Sales Tax Act is fallacious in that it is only for the purpose ofat packing materials are included, and forms a separate scheme of taxation under the Sales Tax statute. We cannot accede to the argument that de hors the context of the Entry Tax Act, we should accept that industrial inputs include packing materials and that therefore, by parity of reasoning,under the Entry Tax Act should also include packing material. This argument has therefore correctly been turned down by the High Court of Karnataka in the Nestle case.It only remains to deal with the argument made on behalf of the appellant based on the Tea Marketing Control Order. Needless to add, a manufacturer for the purpose of the said Order is specifically a person who produces value added products commercially known as tea. The context of the said definition is for the purpose of registering manufacturers or producers and buyers of tea, having relevance therefore to the sale aspect of tea. As has already been held by us, the context of entry tax being different, we are afraid this argument also does not avail the appellant.22. We are, therefore, of the view that the High Court was correct in following its own earlier Division Bench judgment in the Nestle case.