TMI Blog1972 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... State trade or commerce.-(1) Every dealer, who in the course of inter-State trade or commerce (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3);............. shall be liable to pay tax under this Act, which shall be three per cent. of his turnover............... (3) The goods referred to in clause (b) of sub-section (1)......... (b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power .................... Rules have been framed as contemplated by sub-section (3) of the section quoted above; and the Rules are the Central Sales Tax (Registraation and Turnover) Rules, 1957. The relevant rule is rule 13, and it reads: "13. Prescription of goods for certain purposes-The goods referred to in clause (b) of sub-section (3) of section 8, which a registered dealer may purchase, shall be go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is already a Division Bench ruling of this Court, our normal inclination is to follow that decision and dismiss this revision case. But, the counsel for the petitioner has brought to our notice the decision of Ramaprasada Rao, J., of the Madras High Court in The Anglo-American Direct Tea Trading Company Ltd. v. The Assistant Commercial Tax Officer, Srirangam Division, Srirangam[1972] 29 S.T.C. 123., in a similar case taking a different view. That naturally compels us to consider the question more closely and decide which of the two decisions lays down the correct legal position. In the Madras decision also, the learned Judge has held that the cultivation or growing of tea leaves is an integral part of manufacturing tea as was held by the Division Bench of this Court. Thereafter, the learned judge has considered rule 13 and has concluded his reasoning thus: "It is therefore clear that if on a fair understanding of the nature of business of a dealer one comes to a reasonable conclusion that the intermediate goods, which are required for one of the processes in the composite activity, is essential for the ultimate manufacture or processing of the finished product, then it would fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the certificate, but the equipment necessary to maintain a hospital would not be includible in the certificate. Similarly, the Supreme Court has held that "stationery" was not "intended for use in the manufacture or processing of goods for sale or for mining operations" and was not, therefore, includible in the certificate. The next decision of the Supreme Court, J.K. Cotton Spinning Weaving Mills Co. case[1965] 16 S.T.C. 563 (S.C.). , throws more light on the question we have to decide in this case. The Supreme Court has held in that case that the process of designing, though might be distinct from the actual process of turning out finished goods (cotton textiles, tiles and other commodities), should still be included in the expression "in the manufacture of goods". In the opinion of the Supreme Court, the expression "in the manufacture" took in within its compass all processes which were directly related to the actual production. In the opinion of the Supreme Court, drawing and photographic materials falling within the description of goods intended for use as "equipment" in the process of designing, which was directly related to the actual production of goods and without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules; and that they are not therefore entitled to the benefits of section 8(1) by virtue of their being included in section 8(3)(b) of the Central Sales Tax Act. In this view, we prefer to follow the Division Bench ruling of our Court, and we dismiss the revision case. However, we pass no order regarding costs. Petition dismissed. Appendix [The judgment of the Division Bench of the Kerala High Court consisting of T. S. KRISHNAMOORTHY IYER and P. UNNIKRISHNA KURUP, JJ., in The Travancore Tea Estates Co. Ltd. v. The State of Kerala (Tax Revision Case No. 46 of 1969) delivered on 8th April, 1971, is printed below: ] THE TRAVANCORE TEA ESTATES Co. LTD. v. THE STATE OF KERALA The judgment of the court was delivered by UNNIKRISHNA KURUP, J-The assessee-revision petitioner, Travancore Tea Estates Company Limited, is a company incorporated in Great Britain having its registered office in London and carrying on the business of tea planting in India at Vandiperiyar in Peermade Taluk in Kerala State. The assessee, who will hereinafter be referred to as the company, owns as many as eight tea estates in Peermade Taluk, and to manufacture tea grown in those estates the company mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng materials for installing and housing tea machinery and equipments, (3) Building materials, iron and hose-pipes and sanitary fittings for use in estates and estate factories, (4) Weighing and measuring and packing equipments for use in tea estates, and (5) All other articles and things for use in manufacture and processing for sale of tea. 2.. It was urged by the learned counsel for the company that the business of the company was growing and manufacturing tea, that the growing of tea is an integral part of manufacture and that growing and manufacturing tea constitutes one integrated process. According to the learned counsel, the manufacture of tea commences from the stage of growing tea for producing green leaves and the Tribunal was, therefore, not justified in holding that the company is entitled to purchase at concessional rate of tax only such goods as are intended by him in the manufacture and processing of tea. The counsel relied on the ruling of the Supreme Court in J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. The Sales Tax Officer[1965] 16 S.T.C. 563 (S.C.). 3.. To fully appreciate the contention of the learned counsel for the company it is necessary to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the sales tax registration certificate, which was refused by the authorities below, is "fertilisers, chemicals, weedicides, insecticides, etc.", which are stated to be for use in the cultivation of tea leaves. According to the learned (1) [1965] 16 S.T.C. 563 (S.C.). counsel for the company, the growing and manufacturing of tea constituted one integrated process and, therefore, the items of goods used for growing tea should be deemed to be goods intended for use "in the manufactureof tea within the meaning of section 8(3)(b). This contention was negatived by the Tribunal as in its view "the Legislature has not included production by agriculture as one of the operations for which goods can be purchased under section 8 of the Central Sales Tax Act-, and merely because agricultural process of the company is connected with the processing and manufacture, production of tea leaves do not form part of the manufacture and processing of tea. We are of the view that this reasoning of the Tribunal is not correct. In J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer(1), it has been held that the expression "in the manufacture of goodsin section 8(3)(b) normally enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot fall within the category of raw material or processing material or machinery, etc. The learned counsel for the company sought to contend that fertilisers, chemicals, etc., would come within the category of stores mentioned in section 8(3)(b) and that as such it is eligible for specification in the certificate. We are unable to agree with this sub.mission. The word "stores" in the context in which it appears in rule 13 has to be necessarily goods intended for use in the manufacture or processing of goods for sale and it is not possible to hold that fertilisers, chemicals, weedicides, insecticides, etc., can come within this category. They are not in any way directly connected with the manufacturing or processing of tea. As pointed out earlier, the expression "in the manufacture" can take within its compass only processes which are directly related to the actual production. As such the claim for inclusion of this item in the sales tax registration certificate cannot be supported. 6.. So far as items Nos. 2, 3 and 4 are concerned, the decision in J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer(1), makes it clear that building materials like lime and cement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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