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TMI Blog1964 (3) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... ns have no applications to the facts of the present case because of the Supreme Court decision in Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool[1960] 11 S.T.C. 827; A.I.R. 1961 S.C. 412., wherein their Lordships of the Supreme Court at page 417 observed as under: "Both the Tribunal as well as the High Court have pointed out that except for its keeping quality without rancidity and ease of packing and transport without leakage, hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil. There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly we consider that hydrogenated oil still continues to be 'groundnut oil' notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil. In our opinion, the assessee-company was entitled to the benefit of the deduction of the purchase price of the kernel or groundnut, under rule 18(2), whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as follows: "2. (ff) 'purchase', with all its grammatical or cognate expressions, means the acquisition of goods other than sugarcane, foodgrains and pulses for use in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge: Provided that nothing in this definition shall apply in relation to a dealer who exercises his option under sub-clause (i) of clause (i) or to section 14 or to clause (d) of sub-clause (1) of section 23; 4.. (1) Subject to the provisions of sections 5 and 6, every dealer except one dealing exclusively in goods declared tax-free under section 6 whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the coming into force of this Act and purchases made after the commencement of the East Punjab General Sales Tax (Amendment) Act, 1958: Provided that the tax shall not be payable on sales involved in the execution of a contract which is shown to the satisfaction of the Assessing Authority to have been entered into before the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, including the ground that the amended Acts were ultra vires the Constitution. All the contentions of the petitioner-company were rejected by the Assessing Authority and it directed the company to file purchase tax return for the purpose of assessing the company to the same. It is against this order that the present petition under Article 226 of the Constitution has been filed. This petition came up for hearing before me on the 10th April, 1963, and in view of the importance of the question involved, I referred the same to a Division Bench and that is how the matter has been placed before us. It may be mentioned that a large number of grounds were raised in the petition, but all of them have now been dropped and the only contention raised before us is that no purchase tax is leviable because the conversion of oil into vanaspati does not amount to manufacture within the meaning of section 2(ff) of the Act as it stood at the relevant time after its amendment in the year 1958 and before its amendment in the year 1959. As already stated the disputed period is between 1st April, 1959, and 31st March, 1960, and the tax is sought to be imposed in view of the definition in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an American case in East Texas Motor Freight Lines v. Frozen Food Express100 Law. Ed. 917., wherein the question that fell for determination was whether a chicken that had been killed and dressed is still a chicken. It was held by the learned Judges in that case that the removal of feathers and entrails did not involve any process of manufacture and that a killed chicken minus its feathers and entrails was as such a live chicken. Tek Chand, J., who agreed with the learned Chief Justice in Raghbir Chand's case[1960] 11 S.T.C. 149., after noticing the definition of "manufacture" in the Corpus Juris Secundum, observed as follows: "The learned Advocate-General has drawn our attention to the meaning given to the word 'manufacture' and other cognate expressions by the lexicographers. Etymologically 'manufacture' is a compound word from Latin 'manu' meaning 'hand' and 'facere' which means 'made'. In its primary sense, 'manufacture' is the action or process of making by hand. In the modern sense, 'manufacture' is fashioning of a raw or wrought material by manual or mechanical manipulation, resulting in its transformation. The primary meaning of the word 'manufacture' in the sense of 'm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of manual labour by which one object is changed into another for selling it. It is unnecessary in this case to go into, or consider, the etymological meaning of the word 'manufacture' as the legislative intent in the statute which concerns us is even otherwise fairly obvious. The petitioner has, apart from making the general averment in the writ petition that conversion of old ornaments into silver, gold or bullion by removing alloy does not amount to manufacture, not shown as to what is the precise process, so that it may be determined whether or not it amounts in law to 'manufacture' within section 2(ff). Even removal of alloy from old ornaments so as to convert them into bullion might well involve a process of manufacture and it is difficult to hold as a matter of law that it is not so in the instant case." Learned counsel for the petitioner-company basing himself on the above two decisions and also on the decision of the Supreme Court in Tungabhadra Industries Limited v. Commercial Tax Officer[1960] 11 S.T.C. 827; A.I.R. 1961 S.C. 412., contended that the purchase of oil in the present case was not liable to purchase tax as it has been held by their Lordships of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question must be from groundnut and secondly the commodity must be 'oil'. That the hydrogenated oil sold by the appellants was out of groundnut not being in dispute, the only point is whether it continues to be oil even after hydrogenation. Oil is a chemical compound of glycerine with fatty acids or rather a glyceride of a mixture of fatty acids-principally oleic, linoleic, stearic and palmitic-the proportion of the particular fat varying in the case of the oil from different oil-seeds and it remains a glyceride 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 essential 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 on the addition by way of 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il still continues to be 'groundnut oil' notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil. In our opinion, the assessee-company was entitled to the benefit of the deduction of the purchase price of the kernel or groundnut, under rule 18(2), which went into the manufacture of the hydrogenated groundnut oil from the sale turnover of such oil." It will be apparent from the aforesaid observations of their Lordships that what they were considering was whether groundnut oil ceased to be groundnut oil because it had been subjected to the process of hydrogenation. The question that has been agitated before us was not the question that fell for determination before their Lordships. On the other hand, there is another decision of the Supreme Court reported as Union of India v. Delhi Cloth and General Mills Co. Ltd.A.I.R. 1963 S.C. 791., wherein the question that fell for determination was whether in the case of manufacture of vanaspati the refined oil that is a concomitant for its manufacture could be taxed to excise duty. While dealing with the question it was ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to excise duty under the Central Excises and Salt Act. The latter decision of the Supreme Court in Delhi Cloth and General Mills Co. A.I.R. 1963 S.C. 791., however, clearly lays down that excise duty was leviable on vegetable ghee because it was the result of manufacture. In any case, this is implicit from that judgment. The question that falls for determination in the present case is whether for the purposes of the East Punjab General Sales Tax Act the conversion of oil into vegetable ghee amounts to "manufacture" of vegetable ghee. In our view, it does, and lot of assistance can be derived from the Supreme Court decision in Delhi Cloth and General Mills Co.'s case A.I.R. 1963 S.C. 791. Moreover, the substance that is produced is a new substance known to the trade apart from oil. If anybody goes to buy groundnut oil in the market he will be given the oil in the liquid form Nobody will give him vegetable ghee manufactured from groundnut oil. He will have to specifically ask for vanaspati ghee and if he wants vanaspati ghee produced from groundnut oil he will have to say vanaspati ghee produced from groundnut oil. Thus it will be apparent that in trade circles as well as to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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