Siali leaves and siali khallis are not two distinct commodities, and therefore, the sale of khallis is not liable to tax as a distinct separate goods.

JUDGMENT

MISRA, C.J. - The Member, Additional Sales Tax Tribunal, Orissa, has stated this case and referred the following two questions for opinion of the court under section 24(1) of the Orissa Sales Tax Act, 1947 (hereinafter referred to as the "Act") :

"(1) Whether, on the facts and in the circumstances of the case, the Additional Sales Tax Tribunal is justified in holding that there is practically no change when siali leaves are pinned together as siali khalli and there is no substantial change in the identity to attract liability as a distinct separate goods at the point of sale under the Orissa Sales Tax Act, 1947 ?

(2) Whether, on the facts and in the circumstances of the case, the Additional Sales Tax Tribunal is justified to annual the tax levied in respect of siali khallis prepared out of siali leaves on which purchase tax has been paid ?"

2. The assessee is a registered dealer under the Act and dealt inter alia in siali leaves during the period ending 1966-67. He purchased siali leaves and paid tax on the purchased turnover. On a finding that the assessee had, after purchase of siali leaves, pinned them up and had sold them as siali khallis and thus had converted siali leaves into a new commodity, the assessing officer levied tax of 5 per cent on the sale turnover of khallis. On the assessee's appeal, the Assistant Commissioner of Sales Tax found that siali leaves and khalli were two different commodities and sales turnover thereof was liable to tax under section 5(1) of the Act. The Tribunal in second appeal by the assessee observed :

"I am convinced that there is practically no difference between siali leaves and the siali khallis. Khalli is only brought into existence by stitching the ends of the leaves by bamboo pins and by that process it is made more acceptable to the consumer. In that way there is no substantial change in the identity and no new product has been brought into existence. Hence the tax on the sale of khalli should be annulled."

3. In spite of notice the assessee does not appear.

4. The learned standing counsel contends that siali leaves and khalli are two different commercial commodities and one in not a substitute of the other. A customer in need of khallis would not accept siali leaves in satisfaction of his demand in the market. Since they are two different commercial commodities, according to the learned standing counsel, the Sales Tax Officer and the first appellate authority were right in holding that the sales turnover of khallis was liable to tax and the Additional Sales Tax Tribunal went wrong in holding that sale of khallis was exempt from a fresh set of tax as purchase tax had already been paid on it. We are of the view that the principle indicated by a Bench of three learned Judges of the Supreme Court in the case of Deputy Commissioner of Sales Tax, Ernakulam v. Pio Food Packers [1980] 46 STC 63 (SC); AIR 1980 SC 1227 had rightly indicated the guideline. The court in that case was considering whether whole pineapples when converted into canned pineapple slices constituted a different commodity. The court observed :

"6. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied : Does the processing of the original commodity bring into existence a commercially different and distinct article ? Some of the cases where it was held by this court that a different commercial article had come into existence include Anwarkhan Mehboob Co. v. State of Bombay [1960] 11 STC 698 (SC) (where raw tobacco was manufactured into bidi patti), A Hajee Abdul Shukoor & Co. v. State of Madras [1964] 15 STC 719 (SC) (raw hides and skins constituted a different commodity from dressed hides and skins with different physical properties), State of Madras v. Swasthik Tobacco Factory [1966] 17 STC 316 (SC) (raw tobacco manufactured into chewing tobacco) and Ganesh Trading Co., Karnal v. State of Haryana [1973] 32 STC 623 (SC) (paddy dehusked into rice