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TMI Blog1960 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ALA AYYANGAR N. JJ. D. Narasaraju, Advocate-General for the State of Andhra Pradesh (T.V.R. Tatachari, D. Venkatappayya Sastri and T.M. Sen, Advocates, with him), for the respondent. A.V. Viswanatha Sastri, Senior Advocate (M. Ranganatha Sastri and M.S.K. Sastri, Advocates, with him), for the appellant. -------------------------------------------------- The Judgment of the Court was delivered by RAJAGOPALA AYYANGAR, J.- This appeal on a certificate under Article 133, of the Constitution granted by the High Court of Andhra Pradesh raises for consideration principally question whether hardened or hydrogenated groundnut oil (commonly called Vanaspati) is "groundnut oil" within the meaning of rule of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. Tungabhadra Industries Ltd.- the appellant in this appeal-had a factory of considerable size at Kurnool in the State of Andhra Pradesh. The company purchases groundnuts and groundnut kernels within the State and manufactures groundnut oil and also refined oil as well as hydrogenated oil all of which it sells. The appeal is concerned with the assessment to sales tax of this company for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in clauses (a) to (a) shall, subject to the conditions specified therein, be deducted from the gross turnover of a dealer ". Clause (k) of this rule reads: "(k) in the case of a registered manufacturer of groundnut oil and cake, the amount which he is entitled to deduct from his gross turnover under rule 18 subject to the conditions specified in that rule". [This rule was amended by a notification dated November 9, 1951, by the addition of the words "(other than refined groundnut oil)" after the words "groundnut oil", but this modification of the rule is not relevant to the present case which is concerned with the assessment of a period anterior to the modification]. Rule 18 referred to here reads, to quote only the material words: "18. (1) Any dealer who manufactures groundnut oil and cake from groundnut and/or kernel purchased by him may, on application to the assessing authority having jurisdiction over the area in which he carries on his business, be registered as a manufacturer of groundnut oil and cake. (2) Every such registered manufacturer of groundnut oil will be entitled to a deduction under clause (k) of sub-rule (1) of rule 5 equal to the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the sale of refined oil but rejected it in so far as it related to the sales of hydrogenated oil. The matter was thereafter brought up before the High Court of Andhra Pradesh by a Tax Revision Case filed under section 13-B(1) of the Act and the learned Judges upheld the view of the Tribunal and disallowed the claim of the appellant to the deduction claimed in regard to the sales turnover of hydrogenated oil. They granted the certificate under Article 133 which has enabled the appellant to file an appeal to this Court. The claim of the appellant to the deduction under rule 18(2) on the sales of refined groundnut oil is no longer in dispute. The ground upon which both the Tribunal as well as the High Court decided against the allowance of the deduction in respect of the sales of hydrogenated oil, while upholding the appellant's case as regards refined oil may be briefly stated thus: The exemption or deduction from the sale turnover under rule 18(2), is on its terms applicable only to the sale of the oil in the form in which it is when extracted out of the kernel. When raw groundnut oil is converted into refined oil, there is no doubt processing, but this consists merely in remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(2) which were designed to afford relief against what would amount practically to double taxation of the same assessee both when he purchased and when he sold the goods, required that the appellant's claim should be allowed. (2) Hydrogenated groundnut oil was no less groundnut oil than either refined or even unrefined oil. The fact that the quality of the oil had been improved does not negative its continuing to be oil and the materials before the departmental authorities and the Court established that it continued to be oil and was nothing more. The argument based on the reason of the rule cannot carry the appellant far, since in the present case it is an exemption from tax which he invokes and of which he seeks the benefit. If the words of the rule are insufficient to cover the case, the reason behind the rule cannot be availed of to obtain the relief. Nor could it be said to be a case of double taxation of the same goods at the purchase and sale points which is forbidden by section 3(5) of the Act. If the view adopted by the learned Judges of the High Court that hydrogenated groundnut oil is not "groundnut oil" but a product of groundnut oil were correct, learn- ed counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if this physical process was gone through, the oil that was decanted from the sediment, which it contained when it issues out of the expresser, ceased to be "groundnut oil" for the purposes of the rule. If the removal of impurities by a process of sedimentation does not render groundnut oil any the less so, it follows that even the process of refining, by the application of chemical methods for removing impurities in the oil, would not detract from the resulting oil being "groundnut oil" for the purpose of the rule. It may be mentioned that processes have been discovered by which even on extraction from the oil mill, the oil issues without any trace of free fatty acids. It could hardly be contended that if such processes were adopted what comes out of the expresser is not groundnut oil. The submission of the learned Advocate-General based on a contention that the Tribunal and the learned Judges of the High Court erred in holding that even refined groundnut oil was "groundnut oil" for the purpose of the rule, must be rejected. The next question is whether if beyond the process of refinement of the oil, the oil is hardened, again by the use of chemical processes it is rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it remains a glycride of fatty acids even after the hardening process, though the relative proportion of the different types of fatty acids undergoes a slight change. In its essen- tial nature therefore no change has occurred and it remains an oil-a glyceride of fatty acids-that it was when it issued out of the press. In our opinion, the learned Judges of the High Court laid an undue emphasis of the addition by way of the absorption of the hydrogen atoms in the process of hardening and on the consequent inter-molecular changes in the oil. The addition of the hydrogen atoms was effected in order to saturate a portion of the oleic and linoleic constituents of the oil and render the oil more stable thus improving its quality and utility. But neither mere absorption of other matter, nor inter- molecular changes necessarily affect the identity of a substance as ordinarily understood. Thus for instance there are absorptions of matter and inter-molecular changes which deteriorate the quality or utility of the oil and it might be interesting to see if such additions and alterations could be taken to render it any the less "oil". Groundnut oil when it issues out of the expresser normally c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er point which is involved in the appeal relates to the claim of the appellant-company to a deduction in respect of the freight- charges included in the price of the commodity. Under rule 5(1)(g) of the Turnover and Assessment Rules, in determining the net turnover of a dealer he is entitled to have deducted from his gross turnover "all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold: (i) freight; (ii) ................................ " The appellant claimed exemption on a sum of Rs. 3,88,377-13-3 on the ground that it represented the freight in respect of the goods sold by the appellant, asserting that they had been charged for separately. The assessing officer rejected the claim and this rejection was upheld by the departmental authorities and by the High Court in revision. It would be seen that in order to claim the benefit of this exemption the freight should (i) have been specified and charged for by the dealer separately, and (ii) the same should not have been included in the price of the goods sold. The leaned Judges of the High Court held that neither of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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