Commissioner of Trade Tax Vs Kumar Paints And Mill Stores (Supreme Court of India)
Summary: The Supreme Court, in Commissioner of Trade Tax Vs M/s. Kumar Paints and Mill Stores, held that mixing base paint with different colourants through a computerised DTS machine does not amount to manufacture under the U.P. Trade Tax Act, 1948, where the process does not result in a new commercially recognisable commodity. The Revenue contended that tinting base paint produced a new taxable product, while the assessee argued that the resulting material continued to be paint. Both the base paint and colourants had already suffered tax. The Court examined the distinction between manufacturing and processing activities and the requirement that a commercially different product must emerge.
The Supreme Court considered the expert report dated 20 January 2004 issued by Harcourt Butler Technical University, Kanpur, which established that base paint possessed the essential characteristics of paint even before colourants were added. The tinting process merely changed the shade and did not create a different product. The Court considered State of Maharashtra Vs Mahalaxmi Stores, Commissioner of Sales Tax Vs Pio Food Packers, Chowgule and Company (P) Limited Vs Union of India and Union of India Vs Delhi Cloth and General Mills while examining the legal test for determining whether manufacture has occurred. It distinguished Sonebhadra Fuels Vs Commissioner Trade Tax, where conversion of coal into briquettes constituted manufacture because of the nature of the process and resultant commodity.
