1988 (3) TMI 60 - SC - VAT and Sales Tax

Whether assessee were entitled to the benefit of Section 5(3) of the Central Sales tax Act, 1956? Held that - The High Court was right on the facts found by the Tribunal in this case that frozen frog legs is same as fresh frog legs, the process was only to prevent decomposition. What was purchased and exported was one and the same commodity. The frozen frog legs did not undergo any material change in character. The identity of the frog legs remained unchanged as such. In that view of the matter the Tribunal held that the assessee was entitled to the benefit of Section 5(3) of the aforesaid Act,. Appeal dismissed.

Summary

Issues:
- Interpretation of Section 5(3) of the Central Sales Tax Act, 1956 regarding the tax exemption for processed goods.
- Determination of whether processed frog legs retain their original identity for taxation purposes.
- Comparison of previous judgments regarding processed goods and tax exemptions.

Analysis:

The case involved an appeal against the High Court of Kerala's judgment regarding the tax revision case filed by the Sales-tax authority. The appellant, an assessee, had purchased fresh frog legs, processed them by removing the skin, washing, removing dirt, and freezing them to prevent decomposition before export. The appellant claimed tax exemption under Section 5(3) of the Central Sales Tax Act, 1956.

The Tribunal found that the processed frog legs retained their original identity and character, concluding that the frozen frog legs were the same commodity as the fresh frog legs purchased. The High Court upheld this view, leading to the current appeal. The Supreme Court referred to a previous judgment in M/s. Sterling Foods v. State of Karnataka, where processed shrimps, prawns, and lobsters were considered the same commodity as the raw products after undergoing processing.

The Court emphasized that not all processing changes the character and identity of a commodity. It stated that a commodity becomes distinct only when the processing results in a new and different product recognized commercially as such. Applying this test, the Court found that frozen frog legs were the same as fresh frog legs, with the processing only aimed at preventing decomposition.

The appellant relied on a previous judgment, Deputy Commissioner of Sales Tax v. A.B. Ismail, which involved the sale of meat, hides, and skin obtained after slaughtering goats and sheep. The Court differentiated this case from the current one, highlighting that the processed frog legs remained essentially the same commodity before and after processing.

In conclusion, the Supreme Court upheld the High Court's decision, stating that frozen frog legs were not a different commodity from fresh frog legs for taxation purposes. The appeal was dismissed, with no order as to costs.

This judgment clarifies the interpretation of tax exemptions under Section 5(3) of the Central Sales Tax Act, emphasizing that processed goods retain their original identity unless they become commercially distinct products. The Court's analysis of previous judgments provides a comprehensive framework for determining the tax treatment of processed commodities based on their commercial recognition and identity.