1985 (2) TMI 228 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the turnover of bread and biscuits for the assessment year 1980-81 is liable to tax.
2. Interpretation of Notification No. S.T. II-5025/X-6(12)-79 dated 30th June, 1979.
3. Application of the principle of ejusdem generis.
4. Difference between "processing" and "manufacture."

Issue-wise Detailed Analysis:

1. Liability of Tax on Turnover of Bread and Biscuits:
The primary issue is whether the turnover of bread and biscuits for the assessment year 1980-81 is subject to tax. The assessee claimed exemption under Notification No. S.T. II-5025/X-6(12)-79, asserting that the manufacture and sale of bread and biscuits were exempted. However, the assessing officer disagreed, leading to a series of appeals. The Tribunal ultimately upheld the view that the manufacture of bread and biscuits was not exempted under the said notification, thus making the turnover liable to tax.

2. Interpretation of Notification No. S.T. II-5025/X-6(12)-79:
The notification in question provided exemptions for various items, specifically mentioning "processing of cereals and pulses." The assessee argued that the manufacture of bread and biscuits fell under this category, as it involved processing cereals. The Tribunal, however, interpreted the notification to mean that only activities like thrashing, sifting, and cleaning of cereals were exempt, not the manufacture of bread and biscuits. The court agreed with this interpretation, noting that the specific words preceding "processing" in the Hindi version of the notification indicated a narrower scope.

3. Application of the Principle of Ejusdem Generis:
The principle of ejusdem generis was central to the court's interpretation. This principle suggests that when general words follow specific words, the general words should be interpreted in the context of the specific ones. In this case, "thrashing, sifting, and cleaning" were specific processes listed before the general term "processing" in the Hindi version of the notification. The court held that these specific terms limited the scope of "processing" to similar activities, excluding the manufacture of bread and biscuits.

4. Difference between "Processing" and "Manufacture":
The court examined whether "processing" could be equated with "manufacture." Citing the Supreme Court's decision in Union of India v. Delhi Cloth Mills, the court noted that "manufacture" involves creating a new substance, whereas "processing" merely changes a substance without necessarily creating something new. The court also referenced the case of Additional Commissioner of Income-tax, Kanpur v. Farrukhabad Cold Storage (P.) Ltd., which distinguished between processing and manufacturing. The court concluded that the term "processing" in the notification did not include manufacturing, thus the manufacture of bread and biscuits did not qualify for exemption.

Conclusion:
The court dismissed the revision, holding that the turnover of bread and biscuits was liable to tax. The interpretation of the notification, guided by the principle of ejusdem generis, and the distinction between processing and manufacturing, led to the conclusion that the assessee was not entitled to the claimed exemption. The parties were ordered to bear their own costs.