1986 (4) TMI 302 - SC - VAT and Sales Tax

Whether goat and sheep and the meat got after slaughtering them are the same for the purpose of sales tax in the State? Held that - Appeal allowed. Here goats and sheep undergo a process, viz., slaughtering, and then comes into existence meat, hides and skin by consuming the goat in the said process, the end product being something entirely different from the original goods. The High Court was, therefore, in error in holding that goat and meat are the same and that no consumption was involved in converting goats into meat. The High Court confused the issue when it said that the meat exposed for sale is still of the goat and sheep. Nobody disputes that the meat is of the goat and of the sheep. What is to be seen is whether meat and goat are the same. The High Court fell in an error when it used the expression meat of the goat while discussing the facts of the case.

Summary

Issues:
Whether goat and sheep, and the meat obtained after slaughtering them, are considered the same goods for the purpose of sales tax in the State.

Detailed Analysis:

Issue 1: Interpretation of Section 5A(1)(a) of the Act
The core issue in this case revolved around the interpretation of Section 5A(1)(a) of the Kerala General Sales Tax Act, 1963. The section requires the presence of three elements to attract tax liability: the consumption of goods, a manufacturing process, and the production of other goods. The question was whether these elements were met when goats and sheep were slaughtered to produce meat for sale. The assessees argued that slaughtering the animals did not involve consumption, manufacture, or the production of other goods.

Issue 2: Commercial Understanding of Goods
The Court delved into the commercial understanding of goods, emphasizing that in common parlance and commercial circles, goats/sheep and mutton are distinct entities. The process of converting live animals into meat results in the creation of "other goods" different from the original animals. Consumption, in a legal sense, occurs when the animals are slaughtered and transformed into meat, implying a manufacturing process. The critical aspect was the emergence of a new product, i.e., lifeless mutton, which is categorically different from live animals.

Issue 3: Precedents and Legal Principles
The judgment referred to various legal precedents to support its reasoning. It cited cases where the transformation of raw materials into new products led to tax liability, emphasizing the creation of commercially distinct articles. The Court distinguished cases involving raw tobacco into bidis and raw hides into dressed hides, where the processed products were recognized as new and distinct commodities. The application of these principles to the present case highlighted that the conversion of goats into mutton constituted consumption and manufacture, resulting in the production of different goods.

Issue 4: Comparison with Previous Decisions
The Court contrasted the High Court's decision with previous rulings, particularly the interpretation of "meat on hoof" in a different context. It clarified that the exemption granted in a specific case did not apply to the current scenario, where the slaughtering process transformed goats and sheep into meat, hides, and skins. The judgment underscored the error in equating goats and meat, emphasizing that the end products were fundamentally disparate entities.

Conclusion:
In conclusion, the Supreme Court set aside the High Court's judgment, allowing the appeals and restoring the Tribunal's order. The Court affirmed that the slaughtering process of goats and sheep to produce meat constituted consumption, manufacture, and the creation of other goods, warranting tax liability. The decision underscored the distinction between live animals and the resulting meat, emphasizing the commercial and legal differentiation between the two entities.