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TMI Blog1979 (9) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and the Rules framed thereunder, which was chargeable to sales tax. The definition of "turnover" given in section 2(i) of the Act at the relevant time stood as follows: " 'Turnover' means the aggregate amount for which goods are supplied or distributed by way of sale (or are sold), or the aggregate amount for which goods are bought, whichever is greater, by a dealer, either directly or through another, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 aforesaid it can be justifiably held in law that the leaves lost their character of being an agricultural produce and became something different. It should be remembered that almost every kind of agricultural produce has to undergo some kind of processing or treatment by the agriculturist himself in his farm or elsewhere in order to bring them to a condition of non-perishability and to make them transportable and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, 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 be surely necessary for preserving them. The process of fermentation or final roasting with charcoal for obtaining suitable flavour or colour and also the process of grading them with sieves were all within the region of minimal process and, at no point of time, it crossed that limit and robbed the tea-leaves, the agricultural produce, of their character of being and continuing as such substantially. In my opinion, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atore [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 has an interest as specified by section 2(i). To restrict that concession to sale of arecanuts, for instance, only if those arecanuts are sold in the state in which they are immediately on being gathered from the trees, would render the statutory exclusion meaningless." I approve of this decision. There are two decisions of the Bombay High Court given in relation to the question of sugarcane being converted into jaggery. They a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 contended "that the manufacturing processes carried out in a modern tea factory, with scientific appliances and up-to-date machinery, are different from those ordinarily employed by a cultivator to render the produce raised by him fit to be taken to market". The High Court held "that the process in its entirety cannot be appropriately described as agriculture. The earlier part of the operation when the tea bush is planted and the yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llahabad 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. The income-tax department alleged that the process actually applied to the dry leaf was a manufacturing process carried out in a modern tea factory with scientific appliances and the latest machinery. The Calcutta High Court, on a consideration of the respective cases of the parties, observed that the entire process could not be described as agriculture, and that the process applied to the tea-leaf after it had been plucked was a manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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