1999 (7) TMI 639 - HC - VAT and Sales Tax

Issues Involved:
1. Whether chilli powder, coriander powder, and turmeric powder are distinct goods from chilli, coriander seeds, and turmeric.

Summary:

Issue 1: Distinction between Chilli Powder, Coriander Powder, and Turmeric Powder from their Raw Forms

Mrs. K.K. USHA, J.-These tax revision cases at the instance of the assessee arise out of two orders of the Kerala Sales Tax Appellate Tribunal, Additional Bench, Kottayam. Relevant assessment years of T.R.C. Nos. 198, 209, 288 and 281 of 1994 are 1981-82, 1982-83, 1983-84 and 1984-85 respectively. Appeals in respect of these years were disposed of by the Tribunal by a common order dated November 17, 1992. T.R.C. Nos. 299 and 301 of 1994 arise out of a common order dated December 8, 1992. Relevant assessment years are 1980-81 and 1985-86.

2. The common question arising in these tax revision cases is whether chilli powder, coriander powder and turmeric powder are different and distinct goods from chilli, coriander seeds and turmeric. Following a Bench decision of this Court in Ambika Provision Stores v. State of Kerala [1987] 67 STC 170, the Tribunal held that chilli powder, coriander powder and turmeric powder are different and distinct goods from chilli, coriander seeds and turmeric. The revision petitioner/assessee contended that since [1987] 67 STC 170 (Ker) (Ambika Provision Stores v. State of Kerala) has been overruled by a Full Bench of this Court in Namputhiris Pickle Industries v. State of Kerala [1994] 92 STC 1, the findings of the Tribunal on the above issue are to be reversed. When the matter came up for consideration before a Bench of this Court the learned Government Pleader contended that the Full Bench decision is no longer good law, in view of the later decision of the Supreme Court in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408. Reliance was also placed by the learned Government Pleader on Krishna Chander Dutta (Spice) Pvt. Ltd. v. Commercial Tax Officer [1994] 93 STC 180 (SC) and Chillies Exports House Ltd. v. Commissioner of Income-tax [1997] 225 ITR 814 (SC); (1997) 5 SCC 157. In view of the above submission made by the learned Government Pleader, these tax revision cases were referred by the Bench for consideration of a larger Bench by a common order dated September 1, 1997.

3. In [1987] 67 STC 170 (Ambika Provision Stores v. State of Kerala) a Bench of this Court upheld the finding entered by the Sales Tax Appellate Tribunal that chillies and coriander and their powder are commercially distinct and different commodities. The learned Judges took the view that when chilli was turned into chilli powder and coriander into coriander powder, the original commodities underwent a change, giving rise to chilli powder and coriander powder. They can no longer be regarded as chilli and coriander. A new and distinct commodity emerged out of the manufacturing process. It was held that chilli powder and coriander powder are distinct and different from chilli and coriander, both in common parlance and in commercial circles.

4. A Full Bench of this Court in [1994] 92 STC 1 (Namputhiris Pickle Industries v. State of Kerala) overruled the above decision. In the majority judgment rendered by Chief Justice M. Jagannadha Rao (as His Lordship then was) it was held that when chillies are converted into chilli powder, they essentially and substantially remain the same commodities and are therefore not taxable under entry 27 of the First Schedule, once again when sold in the powdered form. The above conclusion was arrived at by applying the substantial identity test. It was held that when chillies are made into powder, they do not change in "substantial identity and character" or "essential nature". There is only a change in the form and no change in the substantial identity. In the dissenting judgment by K.S. Paripoornan, J. (as His Lordship then was) it was held that chilli powder is distinct and different from chilli, both in common parlance and in commercial world or circles. According to the learned Judge, it is plausible to state that the identity test is only one of the aspects to be borne in mind in evaluating whether the original commodity has ceased to be and a new commodity or goods has resulted or is produced with a

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