TMI Blog1979 (9) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the Allababad High Court given in four sales tax references under the U.P. Sales Tax Act, 1948, hereinafter referred to as the Act. The assessee-respondent owns some tea gardens in the State of U.P. The tea-leaves grown by the respondent in his gardens are sold in the market after being processed and packed. The stand taken on his behalf before the taxing authorities was that the tea-leaves sold by the respondent are agricultural produce grown by himself and, therefore, the sales were not exigible to sales tax. The contention of the assessee was not accepted and the final revising authority made four references in respect of the four periods to the High Court on the following question of law: "Whether, on the facts and circumstances of this case, the article ceased to be an agricultural produce and whether the tea produced by the assessee would be exigible to sales tax." The High Court has answered the reference in favour of the assessee and against the revenue. Hence, these appeals by the department. Under section 3, the charging section of the Act, it was the turnover for each assessment year determined in accordance with the various provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the market. Since in their cases the proviso will not apply, the sales will be exigible to sales tax. But when the producer himself does the same or similar kind of job, then the question arises whether it can be justifiably said that he also cannot take advantage of the proviso. The primary facts as extracted by the High Court from the order of the revising authority are the following: "(1) The tea-leaves were first of all subjected to withering in shadow in rooms on a wooden floor for about 14 hours. (2) Then they were crushed by hand or foot and were then roasted for about 15 minutes. (3) Later they were roasted on mats for about 15 minutes. (4) And then they were covered by wet sheets for generating fermentation. During this process the colour of leaves was changed from green to yellowish. (5) The leaves were then subjected to grading with sieves of various sizes. Fanning machines are also used in completing the grading process. (6) The produce was then finally roasted with charcoal for obtaining suit- able flavour and colours. (7) It is this final product which was eventually sold by the assessee." The question for consideration is whether on the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law and the High Court will have jurisdiction in an appropriate reference, as in the present case it had, to decide whether the case came under the proviso to section 2(i) of the Act. Unlike many agricultural products tea-leaves are not marketable in the market fresh from the tea gardens. Nobody eats tea-leaves. It is meant to be boiled for extracting juice out of it to make tea liquor. Tea-leaves are, therefore, only fit for marketing when by a minimal process they are made fit for human consumption. Of course, the processing may stop at a particular point in order to produce inferior quality of tea and a bit more may be necessary to be done in order to make it a bit superior. But that by itself will not substantially change the character of the tea-leaves, still they will be known as tea-leaves and sold as such in the market. In my opinion, all the six processes enumerated above from the primary findings of fact recorded in the order of the revising authority were necessary for the purpose of saving the tea-leaves from perishing, making them fit for transporting and marketing them. The process applied was minimal. Withering, crushing and roasting the tea-leaves will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make them fit for human consumption, as in the case of paddy and many other commodities dehusking in the case of former and some other kind of process in regard to the latter has got to be done in order to make them marketable and fit for consumption. There are two decisions of the Madras High Court in State of Madras v. R. Saravana Pillai [1956] 7 S.T.C. 541 at 544., and N. Deviah Gowder v. Commercial Tax Officer, Coimbatore [1962] 13 S.T.C. 422., where a similar question arose with respect to arecanuts. At page 544 of the first case, which was followed in the second, occurs a passage which may be usefully quoted here: "As we have pointed out, it was common ground that there is no market in Coimbatore or elsewhere for arecanuts as they are when plucked from the trees, and it should be remembered they are gathered when they are still unripe. The proviso to section 2(i) of the Act is obviously conceived in the interests of agriculturists. It excludes from any tax liability under the Act sale of agricultural and horticultural produce, the primary condition to be satisfied being that it must be produce of the land which either belongs to the seller or of the land in which he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1965] 58 I.T.R. 612., Rayavarapu Mrityanjaya Rao v. State of Andhra Pradesh [1967] 20 S.T.C. 417. and Commissioner of Sales Tax, U.P., Lucknow v. Harbilas Rai and Sons [1968] 21 S.T.C. 17 (S.C.). Broadly speaking, these cases have been decided on application of the correct principles of law. Reliance on behalf of the revenue was placed upon a few cases. None of them supports the department's contention. I may notice only two or three of them. In Killing Valley Tea Company Ltd. v. Secretary of State A.I.R. 1921 Cal. 40., the question for consideration related to the tax liability of the Killing Valley Tea Company under the Income Tax Act, 1918. If the whole of its income was derived from agriculture, the assessee was not liable to pay income-tax. If, however, the activities of the company, which produced income, were attributable partly to agriculture and partly to its manufacturing activities, then the whole of the amount could not have been taxed under the Income Tax Act. The stand of the company was: "The actual leaf of the tea-plant, without the addition thereto of the processes above described, is of no value as a marketable commodity". On behalf of the revenue it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that only excise duty paid on the goods sold by the assessee is deductible from the gross turnover, and not the excise duty paid on raw tobacco. This case was followed by the Supreme Court in State of Madras v. Bell Mark Tobacco Co [1967] 19 S.T.C. 129 (S.C.). In the instant case, I have held that the commodity which was sold was not different from the commodity which was produced in agriculture. The view expressed by the Allahabad High Court in the judgment under appeal, which is reported in D.S. Bist Sons, Nainital v. Commissioner of Sales Tax, U.P. [1972] 30 S.T.C. 239., is on the lines of the preponderance of the views expressed by different High Courts in relation to different commodities. I approve of the same and dismiss these appeals with costs-hearing fee-one set only. PATHAK, J.- I agree that the appeals should be dismissed. But I should like to say a few words in regard to Killing Valley Tea Company Ltd. v. Secretary of State A.I.R. 1921 Cal. 40. That was a case where the Killing Valley Tea Company Ltd. had a tea plantation and after selecting and plucking the young green leaf from the tea bush by hand it was put through a process of drying and rolling. ..... 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