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TMI Blog1993 (9) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... S.L.P. (Civil) No. 8275 of 1992, D.B.C.W.P. No. 4633, D.B.C.W.P. No. 4634, D.B.C.W.P. No. 4636 of 1990, D.B.C.W.P. No. 1641, D.B.C.W.P. No. 1646, D.B.C.W.P. No. 1647 of 1991, W.P. Nos. 3600, W.P. Nos. 3601 of 1990, C.W.J.C. No. 147 of 1986, W.P. No. 15994 of 1990 decided on September 01, 1993 C. Seetharamaiah, Senior Advocate (T.V.S.N. Chari, Advocate, With him), for the respondent in S.L.P. (Civil)No.185 of 1992. Vijay Bhojwani, Senior advocate (Indra Makwana and Sudhanshu Atreya, Advocates, With him), for the appellant in C.A. Nos. 3922 to 3925 of 1991. Ranjit Kumar, S.K. Jain and Aruneshwar Gupta, Advocates, for some of the appearing parties. M.L. Verma,Senior Advocate (T.V.S.N. chari, Advocate, for some of the appearing paeties. M.P. Jha, Advocate, for the respondent in C.A. No. 1297 of 1990. S.K. Jain, Advocate, for the respondent in C.A. Nos. 3922 to 3925 of 1991. R.N. Narasimhamoorthy, Senior Advocate (M. Veerappa and S.K. noben Singh, Advocates, With him), for the appellant in C.A. Nos. 4749 to 4801 of 1991. N.M. Kashyap, Advocate for the in C.A. Nos. 5082 to 5084 of 1991. M.P. Jha Advocate, for the respondent in C.A. Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than one stage; (b) where a tax has been levied on an intra-State sale and such goods are later sold in the course of inter-State trade or commerce, the tax levied on the intra-State sale shall be reimbursed to the person effecting the inter-State sale; (c) if a tax has been levied on the sale or purchase of paddy, and the rice derived from such paddy is sold later, the tax on sale of rice shall be reduced by the amount of tax paid on paddy; and (d) the pulses referred to in clause (via) of section 14 shall mean and include pulses whole or separated, and pulses whether with or without husk. Clause (i) (cereals), clause (via) (pulses) in section 14 and clauses (c) and (d) in section 15, it may be noted, were inserted by the Central Sales Tax (Amendment) Act 103 of 1976, with effect from September 7, 1976. Under the scheme of our Constitution, the power to levy tax on the sale of goods is vested in the States by entry 54 in List II of the Seventh Schedule but this power is subject to the limitations contained in article 286. Article 286, before its amendment by the Constitution (Sixth Amendment) Act, 1956, declared that the State Legislature shall not be competent to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ji and bran (except when any such article is sold in sealed containers)" The 1952 Act was repealed by section 16 of the Central Sales Tax Act (as originally enacted). The Act came into force on and with effect from September 1, 1957. It is a post-Sixth Amendment enactment. Section 14, as originally enacted, did not contain any clause relating to cereals-or for that matter relating to pulses. Both of them were introduced by the 1976 Amendment Act as already mentioned. Clause (i) has been set out hereinbefore. Clause (via) may now be set out: "(via) pulses; that is to say,- (i) gram or gullab gram (Cicerarietinum L.); (ii) tur or arhar (Cajanus cajan); (iii) moong or green gram (Phaseolus aureus); (iv) masur or lentil (Lens esculenta Moench, Lens culinaris Medic.); (v) urad or black gram (Phaseolus mungo); (vi) moth (Phaseolus aconitifolius Jacq); (vii) lakh or khesari (Lathyrus sativus L.)." Section 15, omitting clauses (c) and (d), may also be set out at this stage: "15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State-Every sales tax law of a State shall, in so far as it imposes or authorises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this country. Wheat is not consumed as such. It has to be ground/milled into flour before it is consumed. For certain purposes, wheat is milled into maida or suji, as the case may be. Flour, maida and suji are not commodities different from wheat. Even after being milled, they remain and continue to be wheat. They are merely different forms of wheat. The very idea behind the 1976 Amendment Act which introduced clause (i) in section 14 is to save the cereals including "wheat" from excessive or multiple taxation by the States. The idea is to make the same available to consumers without being unnecessarily loaded by the tax burden. Any interpretation placed upon the said expression "wheat " should be consistent with and should be designed to further the object underlying the provision. Since the provisions in sections 14 and 15 are beneficial in nature and are meant to provide relief to the common man, they should be construed liberally. In common parlance wheat and wheat flour are not different and are not understood to be different. Taxing the wheat as well as the flour, maida and suji treating them as different commodities would defeat the very purpose and object for achiev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Sixth Amendment, empowers Parliament to levy tax on inter-State sales/purchases of goods other than newspapers whereas entry 92 in List I relates to taxes on the sale or purchases of newspapers and on advertisements published therein. Similarly, entry 42 in List I empowers Parliament to make laws with respect to inter-State trade or commerce. Article 286, as already stated, contains certain prohibitions and restrictions upon the power of the State Legislatures to levy tax on the sale of goods. As stated by this Court in J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429 and affirmed in Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income-tax [1973] 31 STC 254; [1973] 1 SCC 46 "where the transaction is one of sale of goods as known to law, the power of the Legislature to impose a tax thereon, in our view, is plenary and unrestricted subject only to any limitation which might have been imposed by the Government of India Act or the Constitution". Article 286 represents mainly the limitations contemplated in the above passage. Clause (3) of article 286 read with sections 14 and 15 of the Act disables the State Legislatures from taxing even the intra-Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suji into the expression "wheat" in section 14(i)(iii). If the dealers' contention is correct then it should mean that rice is included in paddy-in which case it was not necessary for Parliament to mention rice separately under sub-clause (ii) of clause (i) of section 14. [The counsel for the States may probably be right when they suggest that flour, maida and suji were not separately mentioned in clause (i) of section 14 for the reason that in the year 1976 when the said clause was introduced, the volume of trade in flour, maida and suji and more particularly inter-State trade therein was at an insignificant level whereas the trade in both paddy and rice was substantial, for which reason rice was mentioned as a separate declared goods but not flour, maida or suji]. It is in this context that clause (d) of section 15 becomes relevant. Clause (via) of section 14 was introduced simultaneously with clause (i) by the 1976 Amendment Act. But while introducing clause (d) to explain the scope and content of clause (via) no such explanation or qualification was provided in the case of wheat nor were flour, maida and suji mentioned as separate commodities in section 14. Further the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable -goods or entities for purposes of sales tax. Where commercial goods, without chance of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long, as they retain their identity as goods of a particular type." We may at this stage refer to the decisions mentioned hereinabove at some detail. In Ishwari Khetan Sugar Mills (P.) Ltd. v. State of U.P. [1980] 4 SCC 136 a Constitution Bench of this Court pointed out the approach to be adopted by the courts in matters where the legislative power of the State is trenched upon by Parliament. Entry 24 of List II speaks of industries but it is made subject to the provisions of entries 7 and 52 of List I. Entry 52 of List I reads: "Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Rice is not known as paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods." The following observations of Venkataramiah, J., in Raghurama Shetty [1981] 47 STC 369 (SC) can usefully be quoted: "There is no merit in the submission made on behalf of the assessees that they had not consumed paddy when they produced rice from it by merely carrying out the process of dehusking at their mills. Consumption in the true economic sense does not mean only use of goods in the production of consumers' goods or final utilisation of consumers' goods by consumers involving activities like eating of food, drinking, of beverages, wearing of clothes or using of an automobile by its owner for domestic purposes. A manufacturer also consumes commodities which are ordinarily called raw materials when he produces semi-finished goods which have to undergo further processes of production before they can be transformed into consumers' goods. At every such intermediate stage of production, some utility or value is added to goods which are used a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce not covered by sub- At the point of first sale by 6 paise in the item (b) below. the first wholesale dealer in rupee. the State effecting the sale. Provided that a rebate of two paise in the rupee shall be allowed on the rice sold and consumed in the State in accordance with such rules as may be prescribed. (b) Rice obtained from paddy At the point of sale by the 1 paisa in the that has met tax under this first wholesale dealer in the rupee." Act. State effecting the sale. -------------------------------------------------------------------------------------- Parched rice or puffed rice were not mentioned under any of the entries in any of the Schedule to the Act. According to the scheme of the Andhra Pradesh General Sales Tax Act, as it then obtained, goods not falling in any of the Schedules to the Act were treated as general goods and were subject to multi- point tax at 4 per cent or 5 per cent, as the case may be, under section 5(1) of the Act. The High Court had taken the view that parched rice and puffed rice were different commodities and were taxable as such. The question arising for consideration before the Supreme Court was posed by the Bench in the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 14 and 15. The next decision relied upon by the High Courts is in Tungabhadra Industries Ltd v. Commercial Tax Officer [1960] 11 STC 827 (SC). The question arose under the Madras General Sales Tax Act and the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. Rule 18(2) provided for deduction of the tax paid by a manufacturer on purchase of groundnut and/or kernel from out of the tax paid by him on the sale of oil derived therefrom. It would be appropriate to set out rule 18: "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 groundnut and/or kernel, purchased by him and converted into oil and cake if he has paid the tax to the State on such purchases: Provided that the amount for which the oil is sold is included in his net turnover: Provided further that the amount of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (ff) of section 2 of the Act offends section 15 of the Central Sales Tax Act, 1956 (as it then stood), which imposed a restriction on the State not to tax the same goods at more than one stage. The contention was rejected holding that the goods purchased and the goods sold, viz., oil-seeds and oil derived from such seeds are not identical goods. The manufacturing process, it is stated, changes the identity of the goods. The relevant paragraph reads thus: "Then it is contended that while section 15 of the Central Sales Tax Act, 1956 (Act 74 of 1956) imposes a restriction on the State not to tax at more than one stage, the amending Act by introducing the definition of 'purchase' enables the State to tax the same goods at the purchase point and at the sale point. But this argument misses the point that goods purchased and the goods sold are not identical ones. Manufacture changes the identity. Therefore, the same goods are not taxed at two stages." Clause (vi) of section 14, as it stood at the relevant time, i.e., prior to the Central Sales Tax (Amendment) Act, 1972, read as follows: "(vi) Oil-seeds, that is to say, seeds yielding non-volatile oils used for human consumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce that can be drawn from the particular arrangement of the entries in the notifications. We must derive the intent from a contextual scheme." This was so held following the earlier decision of this Court in Porritts Spencer (Asia) Ltd. v. State of Haryana [1978] 42 STC 433. The decision of this Court in Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 is of no help to the dealers. That was a case where the question was where the pineapple is processed and cut into pineapple slices for the purpose of being sold in sealed cans, whether there is a consumption of original pineapple fruit for the purpose of manufacture of slices. It was held that no such manufacture was involved though a certain degree of processing was involved. It was held that by cutting the pineapple into slices and thereafter canning it, on adding sugar to preserve it, did not change the identity nor did it bring into existence different goods. However, so far as pineapple jam and pineapple squash were concerned, it was conceded by the dealer himself that they were different goods. Strong reliance is placed by the learned counsel for the dealers on the decision of this Court in State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1989] 73 STC 228 (SC); [1989] 1 SCC 724 where it was held that leather splits (cuts and scraps of leather left after cutting out the sizes) are nothing but leather. Certain decisions of High Courts have been brought to our notice by counsel for both sides. We do not think that it would be of any help on the question at issue since those decisions turned upon the particular language of the relevant enactments and the scheme of entries therein. For the above reasons, we hold that flour, maida and suji derived from wheat are not "wheat" within the meaning of section 14(i)(iii) of the Central Sales Tax Act. Flour, maida and suji are different and distinct goods from wheat. In other words, flour, maida and suji are not declared goods. Learned counsel for the dealers repeatedly emphasised that flour, maida and suji are commodities of daily use by a large segment of the population of this country and that our opinion may add to the burden on the common man. This submission would have carried some force if all the High Courts in the country had taken one uniform view and we proposed to upset it. As we shall presently point out, there is no such unanimity, nor can it be said that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gram with or without husk. The decision was mainly influenced by the decision of this Court in Alladi Venkateswarlu [1978] 41 STC 394 (SC). In the Rajasthan High Court too, there does not appear to have been any decision one way or the other till the decision under appeal in Civil Appeals Nos. 3922-25 of 1991. The decision under appeal was rendered in August, 1991. The Rajasthan High Court has held that flour, maida and suji being goods different from wheat are not declared goods. In the Patna High Court too, there does not appear to be any decision on the question until the one now under appeal, which was rendered in April, 1989. The Patna High Court has taken the view that they are same goods. In fact, this decision was referred with approval by the Karnataka High Court but was dissented from by the Rajasthan High Court. We have been informed that recently the Madras High Court has taken the same view as the Andhra Pradesh High Court and that a special leave petition has been filed against it in this Court. It is obvious that if Parliament proposes to treat flour, maida and suji also as declared goods, it can always say so, by effecting necessary amendments. We, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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