1986 (1) TMI 365 - HC - VAT and Sales Tax

Summary

Issues involved: Determination of liability to tax under section 5A of the Kerala General Sales Tax Act, 1963 for the purchase turnover of raw-bones converted into bone-meal for sale as fertiliser for the years 1975-76, 1976-77, 1977-78, and 1978-79.

Summary:
The tax revision cases involved a common question of whether the assessee is liable to tax under section 5A of the Kerala General Sales Tax Act, 1963, for the purchase turnover of raw-bones converted into bone-meal for sale as fertiliser. The Sales Tax Officer initiated proceedings under section 19 of the Act, claiming that the purchase turnover of raw-bones had escaped assessment. The Appellate Assistant Commissioner remanded the cases for fresh disposal, and the Sales Tax Appellate Tribunal set aside the reassessment proceedings for the years 1975-76, 1976-77, and 1977-78, but confirmed the reassessment for 1978-79 concerning the liability to tax under section 5A on the purchase turnover of raw-bones. The Deputy Commissioner of Sales Tax challenged the Tribunal's orders in revision.

The relevant section 5A(1) of the Act requires tax payment on the taxable turnover relating to the purchase of goods consumed in the manufacture of other goods for sale. The Division Bench's interpretation in Deputy Commissioner of Sales Tax v. Pio Food Packers emphasized the conditions for liability under section 5A(1)(a), focusing on "consumption," "manufacture," and "other goods." The Supreme Court affirmed this interpretation, stating that a commodity must undergo changes to be considered consumed in the manufacture of another distinct commodity.

The bone-meal manufactured from raw-bones has a different commercial identity as fertiliser, indicating consumption in the manufacturing process. Citing State of Tamil Nadu v. Subbaraj, the purchase turnover of raw-bones is deemed liable to tax under section 5A as long as the product has a distinct commercial identity. Therefore, the Court allowed the tax revision case, setting aside the Tribunal's orders and restoring the reassessment orders for 1975-76, 1976-77, and 1977-78, while maintaining the remand order for 1978-79.

The Court rejected the assessee's plea for leave to appeal to the Supreme Court, finding no substantial question of law necessitating Supreme Court intervention.