M. K. Mukherjee, J. - (1.) The appellant carries on business in manufacture and sale of oils at Agra in the State of Uttar Pradesh (U.P.). As a part of their business they purchase crude oil of different varieties, such as linseed-oil, castor-oil, mustard-oil and, after refining, sell as refined oil. The refinement is brought about by first treating the oil with alkali to remove the acid contents, then bleaching it with absorbent cotton or activated carbon and lastly deodorising it with steam.
(2.) To ascertain whether they were liable to pay tax on the sale of refined oil as they had already paid tax for purchase of the crude oil and, if so, what would be the rate thereof, the appellant approached the Commissioner of Sales Tax, U. P. invoking the provisions of Section 35 of the U.P. Trade Tax Act, 1948 ('Act' for short). By his order dated June 19, 1985, the Commissioner held that the appellant was liable to pay sales tax notwithstanding the fact that they had paid tax on the purchase of the crude oil and that the rate of tax would be 4%. Assailing the order of the Commissioner the appellant preferred an appeal before the Sales Tax Tribunal which was dismissed. They then approached the Allahabad High Court by filing a petition under Article 226 of the Constitution of India which was also dismissed. Hence this appeal by special leave.
(3.) Mr. Swarup, the learned counsel appearing for the appellant, firstly submitted that they were not liable to pay tax on the sale of refined oil for even after refinement it continues to retain its basic character as oil. According to Mr. Swarup, mere processing of the crude oil for its conversion to refined oil, cannot be said to be 'manufacture' of new goods so as to make the appellant liable for tax thereupon under Section 3(3)(b)(iii) of the Act. In support of his contention he relied upon the judgments of this Court in "M/s. Tungabhadra Industries Ltd. v. The Commercial Tax Officer, Kurnool, (1961) 2 SCR 14 ; M/s. Sterling Foods v. State of Karnataka, (1986) 3 SCC 469 and State of Maharashtra v. M/s. Shiv Datt and Sons, (1993) 1 Suppl. SCC 222 .";