1994 Supreme(SC) 483

SUPREME COURT OF INDIA
K. Ramaswamy and N. Venkatachala, JJ.
Civil Appeal Nos. 389 of 1988 and 1620 of 1990
Decided On: 26.04.1994
State of A.P. and Ors. Appellants
Vs.
Modern Proteins Ltd. Respondent

Headnote:

Andhra Pradesh General Sales Tax Act,1957 - Essential Commodities Act - Rules 2(b),2(c),9,9(5),9(6) - sections 3, 20(2), 9(2),14 - U.P. Sales Tax Act, 1948 - Section 3A(2) - Computing Tax liability - Kurnool determined tax liability in respect of respondents net turnover under C.S T. at per cent on groundnut protein flour - On appeal Asstt Commissioner concluded that it is deoiled cake within entry of first schedule to Act exigible to sales tax at per cent at point of first sale in State - Dy Commissioner exercising suo motu power under section 20(2) and Section 9(2) of Act revised Appellate Order and that groundnut protein flour is not deoiled cake and affirmed order of C.T.O - On further revision to Section T.A.T tribunal upheld order of Dy Commissioner - In revision to High Court division bench by impugned order T.R.C of that deoiled groundnut cake can be both edible as well as inedible and in either case it would fall under entry - It s immaterial whether groundnut cake is in small pieces in shape or big flat cake pieces - Groundnut flour is not different and distinct commercial product from deoiled groundnut cake - Therefore it is exigible to sales tax under entry of schedule - Question therefore is whether groundnut protein flour is a deoiled cake within entry of Schedule of Act - Process of manufactory and resultant product has already been stated - Its substance bears reiteration that groundnut seeds obtained after process of decortication is of a high grade quality rich in proteins but free from harmful materials processed in expellar and outcome are of groundnut oil and groundnut oil cake - Groundnut oil cake again is pressed through solvent in which food hexane is sprayed resultantly groundnut oil and groundnut deoiled cakes are obtained - Deoiled groundnut cake again is granuled by grinding and is subjected to heat and steam treatment under controlled and regulated condition to ensure removal of solvent and brought into a uniform composition - Colouring or flavouring agents are added to this flour which is named as groundnut protein flour - This is edible flour fit for human consumption - Groundnut cake and deoiled cake are of animal feed - This will be apparent from order which regulates not only of production but also sale by licence and products should conform to standards prescribed in respective Schedule Rule 2(b) defines deoiled meal to mean residual material left over when oil is extracted by a solvent from any oil-bearing material while edible flour is defined in Rule 2(c) to mean ground material prepared from deoiled meal which is derived from oil cake obtained either by single pressing of good quality edible oilseeds or as a result of direct extraction of oil from such - Rule 3 regulates their production by a licence and Rule 9 regulates sales thereof - Sub-rule (5) of Rule 9 provides that no person shall manufacture stock for sale or sell or offer for sale deoiled meal unless in case of meal intended for use as livestock feed such deoiled meal conforms to standards of quality for appropriate deoiled meal specified in Fourth Schedule - Similarly Sub-rule (6) of Rule 9 is with regard to edible groundnut flour - Clause (iv) therein provides that edible flour conforms standards of quality specified in Fifth Schedule quality content and percentage of respective deoiled meal and edible groundnut flour have been prescribed in Schedule and Schedule respectively details of which are not necessary to specify in this judgment since across bar there is no dispute regarding differences enumerated therein - Held, Court was to consider whether metal takes within its ambit fabricated forms of metal all kinds of metals including minerals ores metals alloys and sheets - This court that metal was used Under section 3A(2) of U.P Sales Tax Act in its primary sense i.e in form in which it is marketable as primary commodity and that primary form and forms fabricated from primary form cbnstitute two distinct commodities marketable as such and must be regarded as different commercial commodities - In Atul Glass Industries Ltd. v. Collector of Central Excise entry in schedule to Excise Act came up for consideration - Question was whether glass includes glass mirror or glassware in schedule of Excise Act - This Court applied functional test and that original glass sheet as a result of process through which it undergoes a complete transformation when it emerges a glass mirror is completely different from original glass sheet - It was therefore that a glass mirror cannot be regarded as a glassware - In Dy Commissioner of Sales Tax v Coco Fibres question was whether coconut fibre is a separate entity from coconut husk - This Court laid test essential point to remember is whether something is brought into existence which is different from that originally existing in sense that thing produced is by itself a commercial commodity and is capable as such of being sold or supplied - It is not necessary that stuff or material of original article must lose its character or identity or it should become transformed in its basic and essential properties - Test is whether article which comes into being must be a commercially different from one from which it is made or manufactured - In that case it was that coconut fibre is a separate entity from coconut husk in commercial parlance - In State of Tamilnadu v P.L Malhotra at this Court that purpose of enumeration in a statute dealing with sales tax at a single point in a series of sales would very naturally be to indicate types of goods each of which would constitute a separate class for a series of sales - Otherwise listing itself loses all meaning and would be without any purpose behind it - Ratio therein would not apply to sales tax and common parlance principle is to be applied - Equally word petro chemical which includes yarn or nylon as a finishing product from petro chemical decided in bears no relevance on facts of case - Case of v Commercial Tax Officer also does not help assessee - In notification issued for purpose of sales tax it included both black pepper and black pepper powder - Consequently this Court while considering that both black pepper as well as black pepper powder is used as a commercial product and levy of separate tax was illegal - Case of Telangana Steel Industries Ltd v State of A.P and Ors also is of no assistance to assessee - In that case also this Court referred to Modem Candle Works v Commissioner of Taxes Assam wherein as they were then considered decisions involving edible articles and non-edible articles - High Court of Assam that whether there has been addition of external agents thereby making it a commodity different and distinct and whether there has been a process of transformation of such a nature and extent as to have resulted in production of a new article as commodity understood in market where it is dealt with - When these tests have been satisfied court that commodity was exigible to sales tax - If commodity did not result in a new article nature duration and transformation of original commodity would be immaterial - In Telangana Steels case whether iron wires are separate commercial goods from wire rods from which they were produced this Court did not decide that question but however concluded that notification did not allow taxing of same commodity at a series of sales but only at a single point sales tax - In that view this Court that levy of sales tax at more than one stage on same goods was illegal - Appeals Allowed