1. Purchase of paddy for husking and sale of rice — liability for purchase tax under Section 5-A, Kerala General Sales Tax Act. (Para 1 )
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1997 Supreme(SC) 532
SUPREME COURT OF INDIA
A.M Ahmadi, C.J.I., K S Paripoornan, S P Kurdukar, JJ.
RAJA PROVISION STORES, APPELLANT
VERSUS
APPELLATE TRIBUNAL (SALES TAX), TRIVANDRUM, RESPONDENT.
Civil Appeal No. 1220 of 1980, decided on March 20, 1997.
Paddy and rice are distinct commodities in ordinary parlance. The process of dehusking paddy to produce rice changes the identity of the goods, meaning rice constitutes 'other goods,' and the purchase of paddy for this purpose attracts purchase tax.
Headnote:(A) General Sales Tax Act - Section 5-A - Purchase of paddy for production of rice - Whether rice produced by milling paddy represents "other goods" - Rice and paddy are two distinct and different commodities, distinct in nature and character - Dehusking paddy results in a change in the identity of the goods - Assessee liable to pay purchase tax on the goods purchased from the market. (Para 1)
Facts of the case:
The appellant carries on the business of buying paddy and, after getting it husked, sells the rice. The question arose whether such activity makes the appellant liable to pay tax under the relevant provision of the state sales tax act.
Findings of Court:
The court held that rice and paddy are distinct commodities in ordinary parlance and that the process of milling paddy into rice involves a change in the identity of the goods.
Issues: Whether a person who buys paddy and sells the rice produced after husking is liable to pay tax under Section 5-A of the General Sales Tax Act.
Ratio Decidendi: Since rice is distinct in nature and character from paddy and the process of dehusking changes the identity of the goods, the production of rice from paddy constitutes the production of "other goods," making the purchaser of paddy liable for purchase tax.
Result: Appeal dismissed.
Legal Category Hierarchy
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tax law
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sales tax
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purchase tax
- process of manufacture (Para 1)
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purchase tax
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sales tax
Table of Contents
2. Whether rice produced from paddy represents other goods due to a change in identity or if the process of manufacture attracts purchase tax. (Para 1 )
3. Rice and paddy are distinct commodities in nature and character; dehusking paddy creates a change in the identity of the goods. (Para 1 )
4. The production of rice from paddy involves a process of manufacture that changes the identity of the goods, rendering the purchase of paddy taxable. (Para 1 )
5. Appeal dismissed. (Para 2 )
6. Does the conversion of paddy into rice constitute a change in the identity of the goods?
Yes. Rice and paddy are distinct commodities in ordinary parlance and differ in nature and character. Therefore, when paddy is dehusked to produce rice, the identity of the goods changes. (Para 1 )
7. Is the purchase of paddy for the purpose of producing rice taxable under Section 5-A of the Kerala General Sales Tax Act?
Yes. Since milling paddy into rice is a process of manufacture that produces other goods distinct from paddy, the assessee is liable to pay purchase tax on the paddy purchased. (Para 1 )
8. Does the ruling in State of Orissa v. Titaghur Paper Mills Co. Ltd. override the principle that rice and paddy are distinct commodities?
No. The court held that the decision in the Titaghur Paper Mills case was not directly on the point and did not depart from the view that rice and paddy are distinct commodities. (Para 1 )
ORDER
1. The short question which arises in this appeal is whether the appellant who carries on business of buying paddy and after getting it husked sells the rice becomes liable to pay tax under Section 5-A of the Kerala General Sales Tax Act. This question came up for consideration before the High Court of Kerala in N. Narayanan Nambiyar v. State of Kerala [(1979) 44 STC 191 (Ker)]. In that case, the High Court held that a process of manufacture was involved in the production of rice by milling paddy and hence rice so produced represents "other goods" within the meaning of the said provision since rice is distinct in nature and character from paddy. In Ganesh Trading Co. V. State of Haryana [(1974) 3 SCC 620 : 1974 SCC (Tax) 100 : (1973) 32 STC 623] a Division Bench of this Court held that even though rice is produced out of paddy, paddy does not continue to be paddy even after dehusking. Rice and paddy are two different things in ordinary parlance. Therefore, when paddy is dehusked and rice is produced there has been a change in the identity of the goods. This Court, therefore, took the view that the assessee is liable to pay tax on the goods purchased from the market. The same view was expressed by a three-Judge Bench of this Court in State of Karnataka v. B. Raghurama Shetty [(1981) 2 SCC 564 : 1981 SCC (Tax) 134 : (1981) 47 STC 369] following the decision in Ganesh Trading Co. 2 It is thus clear from this decision that rice and paddy are two distinct and different a commodities, distinct in nature and character and, therefore, the assessee on the purchase of paddy becomes liable to pay purchase tax. The learned counsel for the assessee tried to place reliance on the decision of this Court in State of Orissa V. Titaghur Paper Mills Co. Ltd. [1985 Supp SCC 280 : 1985 SCC (Tax) 538 (1985) 60 STC 213] with a view to persuade us to hold that the view expressed in the aforesaid two cases is not the correct view. We are afraid that we cannot agree with the learned counsel for the assessee in this behalf. The two decisions referred to earlier are directly on the point whereas the decision on which the counsel relies is not and cannot be taken to have departed from the view taken in the aforesaid two cases.
2. For the above reasons, we see no merit in the appeal and dismiss the same with no order as to costs.
