In Civil Appeal No. 5937 of 2011 - SC - Mixture of base paint with different colors not considered manufacturing under U.P. Trade Tax Act, affirms Supreme Court
Justice S. Ravindra Bhat & Justice Dipankar Datta [02-03-2023]

Read Order: Commissioner of Trade Tax V. M/S. Kumar Paints and Mill Stores Through Its Proprietor

Chahat Varma

New Delhi, June 6, 2023: The Supreme Court has affirmed the view that the mixture of base paint with different colors, does not give rise to a new product, and thus, does not qualify as manufacturing under Section 2(e)(i) of the Uttar Pradesh Trade Tax Act, 1948.

In the present case, the dispute revolved around whether the mixing of paints through a computerized process with a DTS machine amounted to manufacturing, thereby attracting a fresh incidence of taxation. The Revenue argued that the mixing resulted in a new product, while the assessee contended that no new recognizable product or article had emerged from the process.

In a previous instance, the High Court had agreed with the arguments put forth by the assessees and determined that the process did not constitute manufacturing. However, in certain cases where the Revenue appealed, the matter was sent back for reconsideration, after taking into account the opinion of the expert.

A report dated 20.01.2004 was issued by the Harcourt Butler Technical University, Kanpur, which stated that, “The base paint used in point of sale tinting systems itself, therefore, is a paint irrespective of colourant being added to get a desired shade or colour. It is in the form of paint and possession the basic ingredients and characteristics. The tinting does not bring new or different product into existence. The base paint can also be used as paint.”

The bench comprising of S. Ravindra Bhat and Justice Dipankar Datta referred to the case of Aspinwall & Co. Ltd. V. Commissioner of Income Tax, Ernakulam [LQ/SC/2001/1972], wherein it was held that if the change made in the article resulted in a new and different article, it would amount to manufacturing. The tipping point, or the determinative test, therefore was that the result of the process (amounting to manufacture) must be the emergence of a commercially recognizable new commodity, and not mere variation of an existing one.

The bench observed that the expert's evidence indicated that the base paint was mixed with colouring as an additive. Both of these had suffered tax. The resultant article i.e., the paint of a different shade, did not result in a new commercial product. In common parlance, the new product was nothing else but paint, and not a different article.

“In these circumstances, in the opinion of this Court, the High Court did not fall into error,” held the division bench.