TMI Blog1993 (1) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... 88] 68 STC 446. 2.. It is initially necessary to state the facts of the case before us. The writ petitioner is a partnership firm dealing in pickles and other items like chilli powder, coriander powder, turmeric powder, sambar powder, etc. The firm purchases chillies from the local market paying the first point sales tax at 8 per cent and it then produces chilli powder from such tax-borne stocks. As the petitioner had doubts about the liability to tax in respect of the sales of chilli powder, the petitioner applied under section 59A on July 1, 1982, as per exhibit PI for clarification of his doubts on two questions as follows: "(i) Whether the sale of chilli powder produced out of chillies which has suffered tax under item 27 of the First Schedule to the Kerala General Sales Tax Act, is again exigible to tax under the said Act, and if so at what rate? (ii) Whether the sale of curry powder made by blending of different spices powders is taxable if the spices used for making the curry powders have suffered tax under Schedule I of the Kerala General Sales Tax Act and if so, at what rate?" In other words, the questions were in two parts: (1) Are chilli powder and chilli (al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r respectively purchased after levy of tax at 8 per cent under entry 27 of the First Schedule. It was contended there that both chillies and coriander which had suffered tax, do not lose their identity and do not become commercially different commodities justifying fresh imposition of tax when these respective commodities are turned into powder and the powder is sold. The said contention of the assessee was rejected and it was held that when chilli powder or coriander powder was produced from chilli or coriander respectively, a "new and distinct commodity emerged out of manufacturing process" and that the said commodities are taxable again under entry 27 at 8 per cent. The Bench followed Sri Siddhi Vinayaka Coconut Co v. State of Andhra Pradesh [1974] 34 STC 103 (SC), Ganesh Trading Co. v. State of Haryana [1973] 32 STC 623 (SC) and the Full Bench decision of this Court in Achamma Sebastian v. State of Kerala [1967] 20 STC 483. 6.. The question then arose in Deputy Commissioner of Sales Tax v. Rani Food Products [1988] 68 STC 446 (Ker) before a Division Bench as to the taxability of sambar powder, meat masala, pickle powder, etc., in the context of entry 27 of the First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from chillies, will chilli powder still come under item 27 is not free from doubt. It is desirable that an authoritative pronouncement is given by a larger Bench." That is how the matter has come before this Full Bench. 8.. The point naturally arises whether the decision in Ambika Provision Stores' case [1987] 67 STC 170 (Ker) is correctly decided and also whether there is any conflict between that case and the decision in Rani Food Products' case [1988] 68 STC 446 (Ker) and the order of review in the latter case. 9. As the entire matter is open, we shall examine the question untrammelled by the abovesaid two judgments of this Court. 10.. Recently, this very Full Bench had occasion to consider the various principles of interpretation applicable to words and entries in various sales tax statutes. That was in O.P. No. 10598 of 1989 and T.R.C. No. 203 of 1989 dated July 21, 1992*. There the matter, no doubt, arose under section 5(3) of the Central Sales Tax Act but the main point was whether raw cashewnuts and cashew kernel extracted therefrom were the same commodities commercially or were different commodities. The judgments of the Supreme Court laying down the common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed there may be several stages of processing and perhaps different kinds of processing at each stage. The Supreme Court observed: "With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognised as a new and distinct article that a manufacture can be said to take place........... Although it has undergone a degree of processing, it must be regarded as still retaining its original identity." After posing the question: "does the processing of the original commodity bring into existence a commercially different and distinct article?", Pathak, J., (as he then was) referred to two leading American cases. The first one is Anheuser-Busch Brewing Association v. United States (1907) 207 US 556; 52 L Ed 336 where it was observed: "At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'." There, as pointed out in an earlier Full Bench decision referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were then washed and freezed, there was no distinct change in the character or substantial identity of the goods. 13.. We may also point out that even earlier, "rice " was held to include "parched rice" and "puffed rice" in Alladi Venkateswarlu v. Government of Andhra Pradesh [1978] 41 STC 394 (SC). In State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 (SC), timber and "sized and dressed timber" were held to be the same commodity. Much earlier, in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827 (SC), it was held that even "hydrogenated oil" or "vanaspathi" were not different from "groundnut oil". It was observed that even though by refinement and hydrogenation, the viscous liquid became "semi-solid" liquid, the "essential nature" of the commodity had not changed. The addition of hydrogen atoms was, it was observed, made to make the groundnut oil more stable, thus improving its quality and utility. It was stated "..................... neither mere absorption of other matter, nor inter-molecular changes necessarily affect the identity of a substance as ordinarily understood... It would undoubtedly be very bad groundnut oil but still it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though different in form from the parent substance, they are nothing but wheat in substance for purposes of the sales tax law. They followed the decision in Dhanbad Flour Mills v. State of Bihar [1989] 75 STC 47 of the Patna High Court, where a similar view was taken. 16.. Following the decisions of the Supreme Court referred to above, which now have emphasised the essential nature or the substantial identity tests, and the decisions of the High Courts above referred to, we hold that when chillies are converted into chilli powder, they essentially and substantially remain the same commodities and are therefore not taxable under entry 27 of the First Schedule, once again when sold in the powdered form. We accordingly overrule Ambika Provision Stores v. State of Kerala [1987] 67 STC 170. To the extent that Ambika Provision Stores' case [1987] 67 STC 170 is accepted in Rani Food Products' case (C.M.P. No. 5651 of 1988 decided on 13th September, 1988) the latter is also overruled to that extent. We also hold that exhibit P2 clarification of the Government that chillies in the powdered form are again taxable and that too under entry 27 of the First Schedule to the Act is clearly erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government in exhibit P2 to the extent that the curry powder is taxable is accepted but we do not agree that entry 27 of the First Schedule is applicable to the curry powder. The mixture is liable to tax only as general goods. To the extent of liability of the mixture to sales tax, exhibit P2 is correct and to the extent of rate of tax on the mixture, it is wrong. 21.. In the result, we overrule Ambika Provision Stores' case [1987] 67 STC 170 and its acceptance in Rani Food Products' case (C.M.P. No. 5651 of 1988 decided on September 13, 1988). As to the curry powder mixture's taxability and as to the rate of tax applicable thereto, we accept Rani Food Products' case [1988] 68 STC 446. The writ petition is allowed quashing exhibit P2 in part as stated above. No costs. K.S. PARIPOORNAN, J.-With great respect to My Lord the Chief Justice, I am of the view that the original petition should be dismissed. I was a party to the decisions in Ambika Provision Stores' case [1987] 67 STC 170 and also in Rani Food Products' case [1988] 68 STC 446. So, I am of the view that the entire matter should be reviewed briefly to bring out clearly the matters decided in those cases and the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us that even if chilli powder can be taxed again, it cannot be taxed as spices falling under entry 27 of the First Schedule, but only under some other entry or as general goods. 26.. An identical question came up before a Bench of this Court in Ambika Provision Stores v. State of Kerala [1987] 67 STC 170. In the said case, the Sales Tax Appellate Tribunal had found that chillies and coriander as well as their powders are commercially distinct and different commodities. This Court held that the processing of the original commodities, viz., chilli and coriander, into chilli powder and coriander powder brought into existence a commercially distinct and different commodity which were again taxable as spices, falling under entry 27 of the First Schedule to the Kerala General Sales Tax Act. The said decision will squarely apply to the instant case also. But it is contended that a later Bench has taken a different view in Deputy Commissioner of Sales Tax v. Rani Food Products [1988] 68 STC 446 and in view of the conflict of Bench decisions, the matter requires reconsideration. That is the reason why the Division Bench, which heard the matter originally, referred this case to a Full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent multi-point. It should be noticed that in the later Division Bench case [Rani Food Products' case [1988] 68 STC 446 (Ker)], the question arose whether the curry powders consisting of a mixture of powders of chilli and coriander will fall within the entry "spices" and the court held that it will not be so. A mixture of the powders will be a distinct and different commodity and will not be taken in by the word "spices". In the above perspective there is no conflict between the two Bench decisions [Ambika Provision Stores' case [1987] 67 STC 170 (Ker) and Rani Food Products' case [1988] 68 STC 446 (Ker)]. 29.. It was argued that when chilli powder is produced from tax-borne chillies, it continues to be the same commodity and bears the same identity and since chillies were taxed at the first point of sale, the chilli powder produced out of such chillies should not be taxed again. In advancing the above plea, counsel for the assessee submitted that the Supreme Court of India has, in recent times, laid down a new test known as "identity test" and in that perspective the identity of the goods is not lost when chilli powder is produced out of chillies purchased. Heavy reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case [1961] 12 STC 286 (SC) was followed by another Constitution Bench in Motipur Zamindary Co. (Private) Ltd. v. State o Bihar [1962] 13 STC 1. 31.. A Constitution Bench of the Supreme Court in Sri Siddhi Vinayaka Coconut Co. v. State of Andhra Pradesh [1974] 34 STC 103 at page 110 observed thus: "This Court has in a number of cases held that the same commodity at different stages could be treated and taxed as commercially different articles. In A. Hajee Abdul Shukoor and Co. v. State of Madras [1964] 15 STC 719 (SC); [1964] 8 SCR 217, this Court held that 'hides and skins in the untanned Condition are undoubtedly different as articles of merchandise than tanned hides and skins' and pointed out that 'the fact that certain articles are mentioned under the same heading in a statute or the Constitution does not mean that they all constitute one commodity'. We may also refer to the decisions in Jagannath v. Union of India [1962] 2 SCR 118, where tobacco in the whole leaf and tobacco in the broken leaf were treated as two different commodities, East India Tobacco Co. v. State of Andhra Pradesh [1962] 13 STC 529 (SC); [1963] 1 SCR 404 where Virginia tobacco and country tobacco wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court held that though chappal is an article consisting of a division of strap moulding and rubber soles, it is commercially distinct from those parts or ingredients and has an identity of its own as a well-known variety of footwear. The court observed that strap and the sole sold as chappal is a different entity and has a new identity. The straps and soles have separate commercial identity of their own, quite distinct from that of a chappal. The Supreme Court of India declined to grant special leave from the said decision (S.L.P. No. 143 of 1968). 32.. Applying the ratio laid down by the Constitution Bench of the Supreme Court in the various decisions, Shanmugha Vilas Cashew-nut Factory's case [1953] 4 STC 205 at page 247, Anwarkhan Mehboob Co.'s case [1960] 11 STC 698, Hajee Abdul Shukoor Co.'s case [1964] 15 STC 719, Jagannath's case AIR 1962 SC 148, Sri Siddhi Vinayaka Coconut Co.'s case [1974] 34 STC 103, etc., I hold that "chilli powder" is distinct and different from "chilli", both in common parlance and in commercial world or circles. It may be, "chilli" is taxed as spices coming under entry 27. But, when "chilli powder" produced out of the chilli so purchased, a diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Abdul Shukoor and Co.'s case [1964] 15 STC 719, Jagannath's case AIR 1962 SC 148 and Sri Siddhi Vinayaka Coconut Co.'s case [1974] 34 STC 103. Later Bench decisions of the Supreme Court in Ganesh Trading Co.'s case [1973] 32 STC 623, Venkataraman's case [1970] 25 STC 196 and other cases (I need not multiply authorities and so I do not refer to all of them) have laid down the law only in conformity with the decisions of the Constitution Benches referred to earlier. 35.. I am of the view that the decisions pressed into service by the assessee's counsel can be explained or distinguished. The said decisions turned on their own facts in the context of relevant statutory provisions. In those cases, a minimal process or fashioning was employed, to preserve "the goods"-the commodity concerned from decay for over a period of time, and to make them marketable. In such cases, the goods or the commodity was preserved, or still remained intact. There was no change in identity. It was so, in substance too. No new or distinct or different commodity, as understood in common parlance or in the commercial world, ever emerged. That may be the basic reason for the court to reach the conclusion, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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