2007 (7) TMI 3 - SC - VAT and Sales Tax

Manufacture Appellant contended that the ingredient used for the manufacture of masala powder are chargeable only at the first sale point, the masala powder is not further not exigible to sales tax Held that the masala powder is amount to manufacture and liable to sales tax

Issues Involved:
1. Taxability of 'masala powder' under the Andhra Pradesh General Sales Tax Act, 1957.
2. Interpretation of 'manufacture' under the APGST Act, 1957.
3. Applicability of previous judicial precedents to the current case.

Issue-wise Detailed Analysis:

1. Taxability of 'masala powder' under the Andhra Pradesh General Sales Tax Act, 1957:
The appellant argued that 'masala powder' should be exempt from sales tax as the ingredients used (spices like Cumin Seed, Fenugreek Seeds, etc.) were already taxed under Entry 182 of the First Schedule to the APGST Act, 1957, which taxes spices at the point of first sale. The Tribunal and the High Court rejected this argument, holding that 'masala powder' is a commercially different commodity from the individual spices listed in Entry 182. The Supreme Court upheld this view, emphasizing that 'masala powder' is not merely a mixture of spices but a new product resulting from grinding and mixing various ingredients, some of which are not specified in Entry 182.

2. Interpretation of 'manufacture' under the APGST Act, 1957:
The appellant contended that the process of making 'masala powder' does not constitute 'manufacture' as it involves only simple grinding and mixing, without any chemical or mechanical transformation. The appellant relied on the definition of 'manufacture' from previous judgments, such as Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s. PIO Food Packers, where the Court held that mere change in form (like slicing and canning pineapple) does not amount to manufacture. However, the respondents and the Court referred to other precedents where the transformation of raw materials into a new product (e.g., converting paddy into rice, or wheat into flour) was deemed to constitute manufacture. The Court concluded that 'masala powder' is a new product with a distinct commercial identity, thus falling under the definition of 'manufacture'.

3. Applicability of previous judicial precedents to the current case:
The appellant cited several cases to support their argument that 'masala powder' should not be considered a new product for tax purposes. These included:
- Alladi Venkateswarlu & Others v. Govt. of Andhra Pradesh & Another, where parched rice and puffed rice were considered as rice.
- Tungabhadra Industries Ltd. v. The Commercial Tax Officer, where hydrogenated oil was still considered as oil.
- M/s. Crane Betel Nut Powder Works v. Commissioner of Customs and Central Excise, where sweetened betel nut was not considered a new product.

Conversely, the respondents cited cases like:
- Babu Ram Jagdish Kumar & Co. v. State of Punjab & Others, where rice produced from paddy was considered a different product.
- Sales Tax Commissioner v. Dhameja Home Industries, Indore, where 'Garam Masala' was considered a new product.
- Deputy Commissioner of Sales Tax v. Rani Food Products, where sambar powder and meat masala were not considered spices under the relevant tax entry.
- Rajasthan Roller Flour Mills Association v. State of Rajasthan & Others, where flour, maida, and suji were considered different from wheat.

The Court favored the respondents' precedents, emphasizing that the transformation of ingredients into 'masala powder' results in a new, commercially distinct product, thus subject to sales tax.

Conclusion:
The Supreme Court dismissed the appeals, holding that 'masala powder' is a commercially different commodity from the individual spices listed in Entry 182 and is therefore liable to be taxed under the APGST Act, 1957. The Court directed the parties to bear their own costs.

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