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TMI Blog1986 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... nd lobsters. This question which falls for determination in the present appeal arising out of the following facts. 2. The appellants are a partnership firm carrying on business as dealers in shrimps, prawns and lobsters and other sea food products. The appellants are registered as a dealer both under the Karnataka Sales Tax 1957 and the Central Sales Tax Act 1956. The appellants in the course of their business purchase shrimps, prawns and lobsters locally for the purpose of complying with orders for export and they cut the heads and tails of the shrimps, prawns and lobsters purchased by them, peel, devein and clean them and after freezing and packing them in cartons, they export them to foreign buyers outside India under prior contracts of sale. The appellants filed their statement of monthly turn-over for the month of April, 1982 before the Assistant Commissioner of Commercial Taxes, Mangalore and in this statement of monthly turn-over, they claimed total exemption from tax in respect of the purchase turn-over of shrimps, prawns and lobsters on the ground that the same had been purchased in the course of export. The appellants relied on sub-section (3) of Section 5 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act 1956 that in order to attract the applicability of that provision, it is necessary that the goods which are purchased by an assessee for the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The words "those goods" in this sub-section are clearly referable to "any goods" mentioned in the preceding part of the sub-section and it is therefore obvious that the goods purchased by the assessee and the goods exported by him must be the same. If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export. The question which therefore arises for consideration is as to what happens when shrimps, prawns and lobsters purchased by the assessee are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing before export. Do they cease to be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shrimps, prawns and lobsters, provided they were last purchases within the State. 6. It is in the context of these provisions of the Karnataka Act that we have to consider whether shrimps, prawns and lobsters, when subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, retain their original character and identity or become another distinct commodity. The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. It is necessary to point out that it is not every processing that brings about change in the character and identity of a commodity. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage. With each process suffered, the original commodity experiences change. But it is only when the change or a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Frozen Food Express - 100 L.Ed. 917 where the question was whether dressed and frozen chicken was a commercially distinct article from the original chicken. The Supreme Court held that it was not a commercially distinct article but was commercially and in common parlance the same article as chicken. The Supreme Court pointed out : "Killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasturising, homogenizing, adding vitamin concentrates, standardising and bottling". and proceeded to add in words clear and explicit : ".......there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cottonseed in the field and cottonseed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cottonseed, as well as the dressed chicken, have gone through a processing stage. But neither has been "manufactured" in the normal sense of the word." If dressed and frozen chicken is not a commercially distinct article from the original chicken, it must follow on a process of analogical reasoning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the last purchases of processed or frozen shrimps, prawns and cocktails in the State should not be exigible to State sales tax under Entry 13a. The State Legislature was not at all concerned with the question as to whether processed or frozen shrimps, prawns and lobsters are commercially the same commodity as raw shrimps, prawns and lobsters or are a different commodity and merely because the State Legislature made a distinction between the two for the purpose of determining exigibility to State sales tax, it cannot be said that in commercial parlance or according to popular sense, processed or frozen shrimps, prawns and lobsters and recognised as different commodity distinct from raw shrimps, prawns and lobsters. The question whether raw shrimps, prawns and lobsters after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by the State Legislature for the purpose of exigibility to State sales tax because even where the commodity is the same in the eyes of the persons dealing in it the State Legislature may make a classification for determining liability to sales tax. This question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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