The Allahabad High court, in Commissioner, Commercial Tax v. S/S Laxmi Wires Industrial Area, held that the process of manufacture of Steel wires using Steel Rode attracts tax liability under the provisions of UP Trade Tax Act since the process results in a new product.
Earlier, the Appellate Tribunal, relying on the circular dated 04.03.2002, issued by the Sales Tax Commissioner held that when steel rod is used to manufacture steel wires, then the product so manufactured would not be liable to be taxed under the provisions of the U.P. Trade Tax Act, as tax has already been paid upon purchase of steel rod.
Before the High Court, the department relied on the Apex Court decision in the case of M/s. Bansal Wire Industries Ltd. & Another Vs. State of U.P. and others and wherein it was held that once by process of manufacture a new commodity comes into existence, the same shall be liable to be taxed under the provisions of U.P. Trade Tax Act, and would not be exempted.
Justice Ashwani Kumar Misra observed that admittedly, steel wire is a distinct commodity brought into existence pursuant to manufacturing process undertaken. Following the above Apex Court ruling, the bench quashed the order of the Tribunal and held that since a new commodity has come into existence pursuant to manufacturing activity, Tribunal was not justified in relying the circular to hold that tax is not payable upon such commodity, on the ground that tax was paid upon the rod used for manufacturing.
Read the full text of the Judgment below.
