Important POINTS
Sales tax is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. Since separate commercial commodities emerge into existence, they become separately taxable goods or entities for the purpose of sales tax.
“Masala powder” prepared after grinding and mixing of various spices and condiments in certain proportion is commercially a different commodity and therefore liable to be taxed.

Headnote:APGST Act, 1957, First Schedule, Entry 182 -Appellant who purchased various spices from the registered dealers – produced masala powder by mixing and grinding all these spices together – claimed exemption from income tax returns on the ground that the same have already been taxed under the said Entry 182 - whether eligible for such exemption – contention of the appellant that the Entry 182 of the First Schedule to the APGST Act, 1957 should not be given a narrow interpretation. The mixtures of spices mentioned in the Entry would also amount to “spices” within the definition of Entry 182. The appellant also submitted that under VIIth Schedule to the Act, only those goods which are not specified in Ist to VIth Schedules can be taxed- CTO, Appellate Deputy Commissioner and Sales Tax Appellate Tribunal rejected his contention- Opined that the “masala powder” is not a mere mixture of some of the spices specified in Entry 182 - The Tribunal expressed that if some of the spices like Cumin Seeds (Jeera), Caraway Seeds (Shahijeera) etc. along with other materials like Salt, Coriander (Dhania) etc. which are not specified in the Entry 182 are powdered and mixed in specified and required proportion and after mixture, these spices lose their original flavour and character and as such cannot be considered as “spices” falling under Entry 182 of First Schedule – Decision of Tribunal upheld in High Court- Affirming the decision of the High Court, held that the “masala powder” prepared after grinding and mixing of various spices and condiments in certain proportion is commercially a different commodity liable to be taxed.
       Section 2(n) of the Spices Board Act, 1996.
       Facts of the Case :
       The appellant is engaged in the business of purchasing various spices like Cumin Seed (Jeera), Fenugreek Seeds (Methi), Cinnamon (Dalchini), Caraway Seeds (Shahijeera) etc. from the registered dealers in the State of Andhra Pradesh and the said items are subjected to sales tax at the point of first sale under Entry No.182 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the “APGST Act, 1957”). All the said items are called “spices”. The appellant by mixing and grinding all these spices together produces “masala powder” which is used for enhancing the taste of food.
       The appellant filed income-tax returns for the assessment years 1990-91, 1991-92, 1992-93 claiming exemption on the ground that the ingredients used for the preparation of “masala powder” have already been taxed under Entry 182 of the First Schedule to the APGST Act, 1957 and as the said ingredients are chargeable only at the first sale point, the “masala powder” is not further exigible to sales tax. The contention of the appellant was not accepted by the Commercial Taxes Officer. Being aggrieved by the order of the Commercial Taxes Officer, the appellant preferred an appeal before the Appellate Deputy Commissioner, which was rejected. Thereafter, the appellant filed an appeal to the Sales Tax Appellate Tribunal (for short the “Tribunal”). The Tribunal also rejected the appeal. The Tribunal held that the “masala powder” is not a mere mixture of some of the spices specified in Entry 182. According to the Tribunal, some of the spices like Cumin Seeds (Jeera), Caraway Seeds (Shahijeera) etc. along with other materials like Salt, Coriander (Dhania) etc. which are not specified in the Entry 182 are powdered and mixed in specified and required proportion and after mixture, these spices lose their original flavour and character and as such cannot be considered as spices falling under Entry 182 of First Schedule.
       The “masala powder” prepared after grinding and mixing of various ingredients is commercially a different commodity liable to be taxed. Item 182 of the First Schedule refers to Spices that is to say Cumin Seed (Jeera), Fenugreek Seeds (Methi), Cloves, Cinnamon, Caraway Seeds (Shahijeera), Cardamom, Dry Ginger, Aniseed (Saunf), Lakesar (Kabab Chini), Bay Leaf (Tej Patta), Poppy Seeds, Nutmeg and Mace (Javitri)”. “Masala powder” is not specified in the said exhaustive list of goods mentioned in Entry 182. It is the result of grinding or powdering of several ingredients. Some of these spices are specified in Entry 182. The Tribunal upheld the order of the Deputy Commissioner and dismissed the appeal. On appeal, the High Court upheld the order of the Tribunal.
       The appellant has preferred these appeals against the impugned judgment of the High Court.
       The Appellant contended that the Entry 182 of the First Schedule to the APGST Act, 1957 should not be given a narrow interpretation. The mixtures of spices mentioned in the Entry would also amount to “spices” within the definition of Entry 182. The appellant also submitted that under VIIth Schedule to the Act, only those goods which are not specified in Ist to VIth Schedules can be taxed.
       Learned counsel appearing for the respondents also placed reliance on a number of decisions to strengthen his arguments that mixing and grinding of different spices along with other ingredients brings about a commercially different products.
       Held : we have heard the learned counsel for the parties at length and carefully examined various judgments cited by the appellant and the respondents. It is an admitted position that the ingredients which are used in preparation of masala after grinding and mixing lose their own identity and character and a new product separately known to the commercial world comes into existence. According to the ratio in Pyare Lal Malhotra’s case (supra) that the sales tax is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. Since separate commercial commodities emerge into existence, they become separately taxable goods or entities for the purpose of sales tax. (Para 28)
       In view of the settled legal position as forcefully articulated in Pyare Lal Malhotra and Rajasthan Roller Flour Mills Association’s cases (supra), the ‘masala powder’ prepared after grinding and mixing of various spices and condiments in certain proportion is commercially a different commodity liable to be taxed.(Para 29)
       Findings of the Court :
       The ingredients which are used in preparation of masala after grinding and mixing lose their own identity and character and a new product separately known to the commercial world comes into existence.
       The “masala powder” prepared after grinding and mixing of various spices and condiments in certain proportion is commercially a different commodity liable to be taxed.

JUDGMENT

Dalveer Bhandari, J.—

1.These appeals are directed against the judgment dated 8th May, 2001 passed by the High Court of judicature, Andhra Pradesh at Hyderabad in Tax Revision Case No.89/94, Tax Revision Case No.90/94 and Writ Petition No. 32154 of 1998.

2.Brief facts which are necessary to dispose of these appeals are recapitulated as under :

3.The appellant is engaged in the business of purchasing various spices like Cumin Seed (Jeera), Fenugreek Seeds (Methi), Cinnamon (Dalchini), Caraway Seeds (Shahijeera) etc. from the registered dealers in the State of Andhra Pradesh and the said items are subjected to sales tax at the point of first sale under Entry No.182 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the “APGST Act, 1957”). All the said items are called “spices. The appellant by mixing and grinding all these spices together produces” masala powder which is used for enhancing the taste of food.

4.The appellant filed income-tax returns for the assessment years 1990-91, 1991-92, 1992-93 claiming exemption on the ground that the ingredients used for the preparation of masala powder have already been taxed under Entry 182 of the First Schedule to the APGST Act, 1957 and as the said ingredients are chargeable only at the first sale point, the “masala powder is not further exigible to sales tax. The contention of the appellant was not accepted by the Commercial Taxes Officer. Being aggrieved by the order of the Commercial Taxes Officer, the appellant preferred an appeal before the Appellate Deputy Commissioner, which was rejected. Thereafter, the appellant filed an appeal to the Sales Tax Appellate Tribunal (for short the Tribunal). The Tribunal also rejected the appeal. The Tribunal held that the “masala powder is not a mere mixture of some of the spices specified in Entry 182. According to the Tribunal, some of the spices like Cumin Seeds (Jeera), Caraway Seeds (Shahijeera) etc. along with other materials like Salt, Coriander (Dhania) etc. which are not specified in the Entry 182 are powdered and mixed in specified and required proportion and after mixture, these spices lose their original flavour and character and as such cannot be considered as” spices falling under Entry 182 of First Schedule.

5.The “masala powder prepared after grinding and mixing of various ingredients is commercially a different commodity liable to be taxed. Item 182 of the First Schedule refers to” Spices that is to say Cumin Seed (Jeera), Fenugreek Seeds (Methi), Cloves, Cinnamon, Caraway Seeds (Shahijeera), Cardamom, Dry Ginger, Aniseed (Saunf), Nakesar (Kabab Chini), Bay Leaf (Tej Patta), Poppy Seeds, Nutmeg and Mace (Javitri)”. “Masala powder is not specified in the said exhaustive list of goods mentioned in Entry 182. It is the result of grinding or powdering of several ingredients. Some of these spices are specified in Entry 182. The Tribunal upheld the order of the Deputy Commissioner and dismissed the appeal. On appeal, the High Court upheld the order of the Tribunal.

6.The appellant has preferred these appeals against the impugned judgment of the High Court and submitted that the Entry 182 of the First Schedule to the APGST Act, 1957 should not be given a narrow interpretation. The mixtures of spices mentioned in the Entry would also amount to “spices within the definition of Entry 182. The appellant also submitted that under VIIth Schedule to the Act, only those goods which are not specified in Ist to VIth Schedules can be taxed.

7.The appellant submitted that the Spices Board constituted under the Spices Board Act has declared a list of 52 items in any form including Curry Powder, Spice Oil, Oleoresins and other mixtures where spices content is pre-dominant as spices as per section 2(n) of the Spices Board Act, 1996. The appellant has set out a list of spices in Annexure” P5 along with these appeals. It is not necessary to reproduce the names and details of those spices for dec

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2007 Supreme(SC) 927

Cases Referred (13)