Hydrogenated groundnut oil is 'groundnut oil' within the meaning of R. 18(2) of the Turnover and Assessment Rules, 1939.

Judgment

AYYANGAR, J. : This appeal on a certificate under Art. 133 of the Constitution granted by the High Court of Andhra Pradesh raises for consideration principally the question whether hardened or hydrogenated groundnut oil (commonly called Vanaspati) is "groundnut oil" within the meaning of Rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939.

2. Tungabhadra Industries Ltd. -the appellant in this appeal-has a factory of considerable size at Kurnool in the State of Andhra Pradesh. The company purchases groundnuts and groundnut kernels within the State and manufactures groundnut oil and also refined oil as well as hydrogenated oil all of which it sells. The appeal is concerned with the assessment to sales-tax of this company for the year 1949-50.

3. Section 3 of the Madras General Sales-tax Act, 1939 enacts :

"3. (1) Subject to the provisions of this Act,-

(a) every dealer shall pay for each year a tax on his total turnover for such year; and

(b) the tax shall be calculated at the rate of three pies for every rupee in such turnover.

2. ........... .......... ..........

3. ........... .......... ..........

4. For the purposes of this section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed :

Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly.

5. The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such installments, if any, as may be prescribed :

Provided that-

(i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed;

(ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in cl. (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him".

Rules were made by virtue inter alia of these provisions entitled "The Madras General Sales-tax Turnover and Assessment Rules, 1939". Of these, those relevant to the present context are Rules 4 and 5. Rule 4 reads.

"4. (1) Save as provided in sub-rule (2) the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by the dealer.

2. In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by the dealer-

(a) groundnut-"

4. The result of the combined operation of S. 4 (1) and (2) in the case of those who purchased groundnut and having crushed them sold the oil obtained was, that they had to pay tax on both their purchases of groundnut and their sales of oil produced therefrom. This was considered by the rule making authority to be an unfair burden and relief was accordingly provided by Rules 5 and 18 of the same rules, the material portions of which ran:

"5. (1) The tax or taxes under S. 3.............shall be levied on the net turnover of a dealer. In determining the net turnover the amounts specified in cls. (a) to (1) shall, subject to the conditions specified therein, be deducted from the gross turnover of a dealer".

Clause (k) of this rule reads :

"(k) in the case of a registered manufacturer of groundnut oil and cake, the amount which he is entitled to deduct from his gross turnover under R. 18 subject to the conditions specified in that rule"

(This rule was amended by a notification dated November 9, 1951, by the addition of the words "(other than refined groundnut oil)" after the word "groundnut oil" but this modification of the rule is not relevant to the present case which is concerned with the assessment of a period anterior to the modification).

Rule 18 referred to here reads, to quote only the material words :

"18. (1) Any dealer who manufacturers groundnut oil and cake from groundnut and/or kernel purchased by him may, on application to the assessing aut