Case: Commissioner of Sales Tax, U.P., Lucknow Vs. Harbilas Rai and Sons

2. The facts stated in the statement of the case are as follows : The respondents, hereinafter referred to as the assessees, were dealers in pig bristles at Kanpur. They were assessed to sales tax for the yearThe assessees sold pig bristles at London and contended that the sales made at London were not taxable as the bristles were not manufactured goods within Explanation II(ii) to section 2(h). It is further stated in the statement of the case :"Pig bristles are plucked by Kanjars from pigs and they bring them for sale to the assessees. The assessees then get them boiled and washed with soap and other chemicals. They are then sorted out according to their sizes colours and are then tied in separate bundles of different sizes. It is in that form that they are despatched to foreign countries for sale ..... In the application made by the department it is also said that the assessees also do some cutting of the bristles. This fact is denied by the assessees. It is pointed out (to me) that both the roots and the tops of bristles are the most valuable parts and they have got a sort of tuft at the top. The roots also are rather hard. In fact, the bristles are not cut from the bodies of the pigs, ..... It is possible that if in sorting the sizes just a few ends project beyond others, they may be clipped a little only for uniformity of size. There is no actual cutting of either end."Relevant portion of section 2(h) of the Act reads as follows :"(h) Sale means, within its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration and includes forward contracts but does not include a mortgage, hypothecation, charge or pledge;Explanation I ............Explanation II.Notwithstanding anything in the Indian Sale of Goods Act, 1930, or any other law for the time being in force, the sale of anywhich are actually in Uttar Pradesh at the time when in respect thereof, the contract of sale as defined in section 4 of that Act is made,(ii) or which are produced or manufactured in Uttar Pradesh, by the producer or manufacturer thereof, shall wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in Uttar Pradesh."3. The High Court, after setting out the facts, held that the assessees were not manufacturers. Desai, C.J., observed :"All that it does to the bristles bought from Kanjars does not amount to manufacturing. It does not result in the production of a commercially different article; what is bought by it from Kanjars is bristles and what it exports for sale is also bristles. It is not possible to say that the assessee manufactures pig bristles out of pig bristles; cleaning and arranging into different groups of different sizes and different colours does not convert them into something essentially or commercially different."

Court's reasoning:
5. In our view, the word "manufacture" has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. The decision of the Madhya Pradesh High Court might perhaps be justified on the ground that a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed. In a recent case, Devi Dass Gopal Krishnan v. The State of Punjab (Civil Appeals Nos. 526, 527 and 529 of 1964; judgment delivered on April 10, 1967; 20 S.T.C. 430), this Court considered the meaning of "manufacture" in section 2(ff) of the Punjab General Sales Tax Act, 1948. Subba Rao, C.J., observed :"On the other hand, the dictionary meaning of manufacture is transform or fashion raw materials into a changed form for use. When oil is produced out of the seeds the process certainly transforms raw material into different article for use. We cannot, therefore, accept this contention.6. Now coming to Civil Appeals Nos. 39 to 43 of 1965, the first additional point raised is that when iron scrap is converted into rolled steel it does not involve the process of manufacture. It is contended that the said conversion does not involve any process of manufacture, but the scrap is made into a better marketable commodity. Before the High Court this contention was not pressed. The apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses it identity and becomes a new marketable commodity. The process is certainly one of manufacture."