Case Note & Summary
The applicant, M/s In Bloom, a florist and decorator, prepared bouquets from fresh natural flowers. To ascertain the tax liability, the applicant applied to the Commissioner of Sales Tax on 22 January 1996, seeking determination of the rate of tax on 'fresh flowers bouquets'. The Commissioner passed an order declaring that 'bouquet of fresh flowers' is covered by residuary entry CII152 and liable to sales tax at 13 paise in a rupee, subject to exemption under notification entry J3 under Section 41 of the Bombay Sales Tax Act, 1959. The applicant contended that the bouquet should be classified under Schedule Entry A36 (Natural flowers) and thus exempt from tax under Section 5 of the Act. Aggrieved, the applicant appealed to the Sales Tax Tribunal, which upheld the Commissioner's order. The Tribunal then referred two substantial questions of law to the High Court under Section 61(1) of the BST Act: (a) whether the bouquet of fresh flowers is covered by Schedule Entry A36 or Residuary Entry CII152; and (b) whether the activity of preparing bouquets constitutes 'manufacture' under Section 2(17) of the Act. The High Court, after hearing both sides, answered both questions in favor of the Revenue. The court held that a bouquet of fresh flowers is not 'natural flowers' as understood in common parlance or under Schedule Entry A36, but is a distinct commercial product falling under the residuary entry. Further, the process of preparing bouquets from natural flowers amounts to 'manufacture' as it brings into existence a commercially different product. The reference was disposed of accordingly.
Headnote
A) Sales Tax - Classification of Goods - Schedule Entry A36 vs Residuary Entry CII152 - Bombay Sales Tax Act, 1959 - The court considered whether 'bouquet of fresh flowers' falls under Schedule Entry A36 pertaining to 'Natural flowers' or under Residuary Entry CII152. The Tribunal held that bouquet is not covered by Entry A36 but by Residuary Entry CII152, liable to tax at 13%. The High Court upheld this view, reasoning that a bouquet is a commercially different product from natural flowers. (Paras 2-6)
B) Sales Tax - Manufacture - Section 2(17) Bombay Sales Tax Act, 1959 - The court examined whether the activity of preparing bouquets from natural flowers amounts to 'manufacture'. The Tribunal held that it brings into existence a commercially different product, thus constituting manufacture. The High Court agreed, noting that the process of arranging flowers into a bouquet results in a distinct article known in the market as a bouquet. (Paras 2-6)
Issue of Consideration
Whether bouquet of fresh flowers is covered under Schedule Entry A36 (Natural flowers) or Residuary Entry CII152 under the Bombay Sales Tax Act, 1959; and whether preparing bouquets from natural flowers constitutes 'manufacture' under Section 2(17) of the Act.
Final Decision
The High Court answered both questions in the affirmative, holding that bouquet of fresh flowers is not covered by Schedule Entry A36 but by Residuary Entry CII152, and that the activity of preparing bouquets constitutes manufacture under Section 2(17) of the Bombay Sales Tax Act, 1959. The reference was disposed of accordingly.
Law Points
- Interpretation of Schedule Entry A36
- Natural flowers
- Bouquet of fresh flowers
- Residuary entry CII152
- Manufacture under Section 2(17)
- Bombay Sales Tax Act
- 1959
Case Details
2010 LawText (BOM) (07) 97
Sales Tax Reference No. 4 of 2006 in Reference Application No. 88 of 2002
V. C. Daga, S. J. Kathawalla
P. V. Surte for the Applicant, V. A. Sonpal for the Respondent
The Commissioner of Sales Tax, Maharashtra State
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Nature of Litigation
Sales tax reference under Section 61(1) of the Bombay Sales Tax Act, 1959, seeking determination of tax rate on bouquet of fresh flowers and whether its preparation constitutes manufacture.
Remedy Sought
The applicant sought a declaration that bouquet of fresh flowers is covered under Schedule Entry A36 (Natural flowers) and exempt from tax, or alternatively, that it is not liable to tax at 13% under residuary entry.
Filing Reason
The Commissioner of Sales Tax classified bouquet of fresh flowers under residuary entry CII152 at 13% tax, which the applicant disputed.
Previous Decisions
The Commissioner passed an order on the applicant's application dated 22 January 1996, holding that bouquet of fresh flowers is covered by residuary entry CII152. The Tribunal upheld that order on appeal.
Issues
Whether bouquet of fresh flowers is covered by Schedule Entry A36 (Natural flowers) or Residuary Entry CII152 under the Bombay Sales Tax Act, 1959.
Whether the activity of preparing bouquets from natural flowers constitutes 'manufacture' under Section 2(17) of the Bombay Sales Tax Act, 1959.
Submissions/Arguments
The applicant argued that bouquet of fresh flowers is essentially natural flowers and should be classified under Schedule Entry A36, which is exempt from tax under Section 5.
The respondent argued that bouquet is a commercially different product from natural flowers, falling under residuary entry CII152, and its preparation amounts to manufacture.
Ratio Decidendi
A bouquet of fresh flowers is a commercially distinct product from natural flowers and thus falls under the residuary entry, not the specific entry for natural flowers. The process of arranging flowers into a bouquet brings into existence a new and distinct article, amounting to 'manufacture' under Section 2(17) of the Bombay Sales Tax Act, 1959.
Judgment Excerpts
Whether, on facts and circumstances of the case and on a true and correct interpretation of Schedule entry A36 appended to the Bombay Sales Tax Act, 1959, the Tribunal was legally justified in holding that the ‘Bouquet of fresh flowers’ is not covered by the said schedule entry A36 pertaining to ‘ Natural flowers’ but it is covered by the Residuary Schedule entry CII152 and hence liable to tax @ 13% ?
Whether, on facts and circumstances of the case and on a true and correct interpretation of Section 2(17) of the Bombay Sales Tax Act, 1959, the Tribunal was legally justified in holding that the activity of preparing bouquets from the natural flowers brings into existence commercially a different product and hence is a ‘manufacture’?
Procedural History
The applicant applied to the Commissioner of Sales Tax on 22 January 1996 for determination of tax rate on fresh flowers bouquets. The Commissioner passed an order classifying it under residuary entry CII152. The applicant appealed to the Sales Tax Tribunal, which upheld the Commissioner's order. The Tribunal then referred two questions of law to the High Court under Section 61(1) of the BST Act, leading to the present reference.
Acts & Sections
- Bombay Sales Tax Act, 1959: 2(17), 5, 41, 61(1)
