1992 (7) TMI 301 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the State of Kerala can levy sales tax on the purchase of raw cashewnuts under the Kerala General Sales Tax Act, 1963.
2. Whether the export of cashew kernels derived from purchased raw cashewnuts constitutes the export of "those goods" under section 5(3) of the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Levy of Sales Tax on Raw Cashewnuts
The primary issue was whether the State of Kerala is entitled to levy sales tax on the purchases of raw cashewnuts made by the petitioners, from which cashew kernels are extracted and exported. The court noted that the purchases of cashewnuts with shell are liable to sales tax under section 5 of the Kerala General Sales Tax Act, 1963, read with entry 31 of Schedule 1. The relevant entries are:
- "Item 31. Cashewnut with shell: At the point of last purchase in the State by a dealer who is liable to tax under section 5."
- "Item 32. Cashew kernel: At the point of first sale in the State by a dealer who is liable to tax under section 5."

Issue 2: Export of "Those Goods" Under Section 5(3) of the Central Sales Tax Act
The court examined whether the export of cashew kernels obtained from raw cashewnuts purchased by the petitioners amounts to the export of "those goods" as per section 5(3) of the Central Sales Tax Act, 1956. This section states:
- "Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India, shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export."

Points of Consideration:
1. Principles of Construction: The court reviewed various principles of construction applicable to words or entries in statutes dealing with sales tax, including the "common parlance" test, "commercial parlance" test, and "substantial identity" test.
2. Appropriate Test for Section 5(3): The court determined that the appropriate test for construing the words "any goods" and "those goods" in section 5(3) is the "substantial identity" test. This test examines whether the goods purchased and the goods exported are substantially the same in identity and are not different and distinct in character or use.
3. Binding Nature of Previous Judgments: The court considered whether the judgment of S.R. Das, J. (as he then was) in Shanmugha Vilas Cashew-nut Factory's case [1953] 4 STC 205 (SC) applied a different test and whether it remains binding. The court held that the principles stated in Pio Food Packers' case [1980] 46 STC 63 (SC) and Sterling Foods' case [1986] 63 STC 239 (SC) are more recent and relevant, but judicial discipline required adherence to the earlier judgment of Das, J.

Conclusion:
The Full Bench concluded that the State of Kerala is entitled to levy sales tax on the purchases of raw cashewnuts. The court held that raw cashewnuts and cashew kernels are commercially different commodities, and thus, the export of cashew kernels does not constitute the export of "those goods" under section 5(3) of the Central Sales Tax Act, 1956. Consequently, the petitioners are not entitled to exemption from sales tax under section 5(3).

Separate Judgment by P. Krishnamoorthy, J.:
P. Krishnamoorthy, J., agreed with the ultimate order but differed on certain conclusions. He emphasized the commercial identity test and held that raw cashewnuts and cashew kernels are different commercial commodities. He also noted that the Supreme Court's decision in Shanmugha Vilas' case remains binding under article 141 of the Constitution of India.

Order of the Court:
The petitions were dismissed. The court granted a certificate under article 134-A read with article 133 of the Constitution of India, acknowledging that the cases involve substantial questions of law of general importance needing a decision by the Supreme Court of India.