1984 Supreme(Mad) 520

High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. M. N. CHANDURKAR & THE HONOURABLE MR. JUSTICE SATHIADEV
Dinod Cashew Corporation - Appellant
Versus
Deputy Commercial Tax Officer and Another - Respondent
Case No : W.P. Nos. 3968 of 1982, 4332 to 4337 of 1982, 6333 and 6432 of 1982, 9855 to 9857, 9860 to 9868, 9916, 10026 to 10030, 10158 of 1982, 111 of 1983, 4325 to 4330, 4471.... 1982 and 1507 of 1984
Decided On : 12 December 1984

Cashew kernel and cashew nut are not the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956. Cashew kernel is a commercially different commodity than cashew nut.

Headnote:

Cashew kernel and cashew nut are not the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956. Cashew kernel is a commercially different commodity than cashew nut.

Fact of the Case:

The petitioners in the several petitions export cashew Kernel after they process raw cashewnut purchased by them. The assessing officer found that the conditions of section 5(3) of the Central Act which was introduced with effect from 1st April, 1976 were satisfied and they were eligible for exemption claimed by them for the sale to foreign countries effected during the assessment year 1976-77. The taxable turnover under the said Sales Tax Act was computed only at Rs. 18, 416 and this turnover was held taxable at the rate of 4 per cent under section 3(1) of the Act. The sales tax was computed at Rs. 737. This assessment order was made on 15th May, 1979. On 26th February, 1982, a notice was sent to the assessee that the assessing officer proposed to revise the assessment for the assessment year 1976-77, as the cashew kernel which had been exported was of a different commodity than the cashewnut which was purchased by the assessee. According to the assessing officer, therefore, the condition required for invoking the benefit of section 5(3) of the Central Act was not satisfied. The notice specified that the total taxable turnover was provisionally determined as Rs. 28, 73, 343.86 and that the assessee was entitled to raise objections if any to the proposal for revising the assessment. The assessing officer then passed an order on 15th April, 1982 taking the view that petitioners had purchased raw cashewnuts (with shell) subjected them to a manufacturing process, extracted oil, and after sorting them into different grades, exported them. Therefore, the cashewnut with shell and kernel were two different and distinct commodities, which cannot be equated as "identical goods" as claimed by the assessee. Thus taking the view that what has been exported was different from what was purchased and that cashew kernel was commercially different, the authority found there was change in the identity of the goods. Consequently, the taxable turnover was determined at Rs. 28, 73, 344. This included cashew husk of the value of Rs. 8, 499, the cashewnut turnover being taxable at 5 per cent and the cashew husk turnover being taxable at 4 per cent. A demand for Rs. 20, 113 was made by the Deputy Commercial Tax Officer. A separate notice of demand under rule 18(a) of the Tamil Nadu General Sales Tax Rules, 1959, was also sent to the assessee on the same day.

Finding of the Court:

Cashew kernel and cashew nut are not the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956. Cashew kernel is a commercially different commodity than cashew nut.

Issues: Whether cashew kernel and cashew nut are the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956.

Ratio Decidendi: The test to decide whether one article has the same identity as the other even after subjecting the original article to a process is therefore well-settled. Indeed even on an earlier occasion, a similar test has been formulated by the Supreme Court in Ganesh Trading Co., Karnal v. State of Haryana. That was a case where the question was whether paddy and rice were goods of the same identity and it was contended that merely because paddy was dehusked and rice produced, there is no change in the identity of the goods. While dealing with the question whether paddy and rice were identical goods, the Supreme Court observed as follows: "Now, the question for our decision is whether it could be said that when paddy was dehusked and rice produced, its identity remained. It was true that rice was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking. It had changed its identity. Rice is not known as paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods." This decision was later followed by the Supreme Court in State of Karnataka v. B. Raghurama Shetty whereagain this question as to whether paddy retained its identity when it was dehusked and converted into rice arose for consideration. The test laid down in Ganesh Trading Co. v. State of Haryana was relied on. Therefore, the question as to whether the cashewnut retained its identity as cashewnut when it was subjected to the process of baking or roasting, shelling, pressing, pealing and so forth has necessarily to be decided on determining whether cashewnut and cashew kernel are commercially different commodities.

Final Decision: The writ petitions are dismissed.