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TMI Blog1989 (9) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of participating in the auction and the payment of money, the Board knew that the participation by the appellant was to fulfil the order of the foreign buyer for coffee powder and that the same was exempt under the proviso to section 6(1) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Act') read with section 5(3) thereof as stated in article 286 of the Constitution of India. Notwithstanding this, the Board demanded sales tax at 6 per cent on the sales of coffee effected to the appellant, as it was of the view that the appellant was not entitled to exemption under section 5(3) of the Act. On 3rd February, 1982, the appellant wrote to the Board stating that what was exported to Romania in the form of powder was nothing but the seeds purchased at the auction conducted by the Board which had been ground after roasting. Therefore, the levy of sales tax was improper and unauthorised. However, the Board declined to release the coffee without payment of the price as well as the sales tax. Therefore, the appellant was obliged to pay the amount by way of sales tax but for which payment, it would not have been possible for the appellant to fulfil the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coffee powder are often understood as referring to two distinct commodities. Thus, the coffee powder exported by the appellant cannot be regarded as the commodity purchased by it at the pool auction held by the Board. 7.. Further, the benefit of exemption could be claimed only by the Board and not by the appellant because it was not a party to the assessment proceedings. This is because any claim between the assessee and a third party is totally foreign to the scheme of the provisions of the Sales Tax Act. In this view, he dismissed the writ petition. Thus, the writ appeal. 8.. Mr. V.P. Raman, the learned counsel appearing for the appellant contends, first and foremost, that the scope of exemption has not been correctly appreciated by the learned Judge. He would urge that it is true that what was purchased at the auction held by the Board was nothing more than the coffee seeds. While roasting and grinding those coffee seeds, they get powderised. On that score, it cannot be said that their identity is lost. The coffee seeds had assumed only a different form. It is not the case of the Coffee Board that the appellant had mixed the coffee powder with some other material or subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court held that the term "coffee" will include "coffee powder". Shorter Oxford DictionaryVolume I, page 203, giving the meaning of the term "coffee" takes within it the powder made by roasting and grinding the seeds. The same kind of meaning is given in the Encyclopaedia Britannica. 13.. In so far as, as stated above, the word "such" had not been used in the sub-section, the ratio of all these cases would squarely apply to the case on hand. The word "such" used in a notification relating to textiles had come up for interpretation in Kailash Nath v. State of U.P. [1957] 8 STC 358 (SC). From that it would be clear that sub-section (3) of section 5 of the Act cannot be given a meaning as has been given by the learned single Judge. 14.. With regard to maintainability, it is submitted that where the appellant was obliged to pay the sales tax under "protest" notwithstanding its clear stand that it would be exempt from payment of tax and thereafter the said amount of sales tax was debited to its account, to say that the appellant would not be entitled to refund is not sustainable in law. As a matter of fact, in identical circumstances, in Consolidated Coffee Ltd. v. Coffee Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." Yet another provision which may be usefully referred to at this juncture is the proviso to section 6(1) which reads as under: "6(1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified: Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5, is a sale in the course of export of those goods out of the territory of India." The above provisions came to be introduced by the Central Sales Tax (Amendment) Act, 1976 (Act 103 of 1976) and the basis for this is traceable to article 286(1)(b) of the Constitution which reads as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale which has occasioned the export of the goods. According to the Export Control Orders exports of certain goods can be made only by specified agencies such as the State Trading Corporation. In other cases also, manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods. Further, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was in this context, the court stated that when raw coffee seeds are roasted and ground into powder coffee, the identity of the article is not altered, but that such is not the position in relation to French coffee which is the mixture of coffee and chicory and therefore, it cannot be regarded as 'coffee'. It was also further pointed out that a person asking for coffee in the market will ordinarily expect to be supplied with coffee powder and not 'French coffee' which is quite different from coffee powder. Adopting the same approach to the instant case, it is obvious that a person asking for coffee will be further asked whether he required beans or powder, for, they are not the same. This decision also does not in any manner advance the case of the petitioner." 22.. On the contrary, we find that the above extracted observations in Deputy Commissioner of Sales Tax v. United Coffee Supply Co. Ltd. [1981] 48 STC 382 (Ker) fully support the appellant's case. We are not, however, resting our ruling on this alone. 23.. In Commissioner of Sales Tax v. Munnulal Basorelal Jain [1988] 69 STC 78 (MP), while dealing with the question as to what amounts to "manufacture" it was held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: 'Killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasteurizing, homogenizing, adding vitamin concentrates, standardising and bottling.' It was also observed: '............... there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton seed, as well as the dressed chicken, have gone through a processing stage. But neither has been "manufactured" in the normal sense of the word.' Referring to Anheuser-Busch Brewing Association v. United States 52 L Ed 336 at 338 the court said: 'Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary........ There must be transformation; a new and different article must emerge, "having a distinctive name, character, or use".' And further: 'At some point processing and manufacturing will merge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therein at page 243, the Supreme Court observed as follows: "It is in the context of these provisions of the Karnataka Act that we have to consider whether shrimps, prawns and lobsters, when subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, retain their original character and identity or become another distinct commodity. The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. It is necessary to point out that it is not every processing that brings about change in the character and identity of a commodity. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage. With each process suffered, the original commodity experiences change. But it is only when the change or a series of changes take t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in the term "coffee" was answered thus: "Learned counsel for the petitioner contended that coffee powder is something different from coffee seeds and relied upon the decision in Cotton v. Vegan and Co. [1896] AC 457 where the term 'grain' used in a particular enactment was held not to include the powdered form of the grain. Section 2 of Metage on Grain (Port of London) Act, 1872, defined grain as meaning 'corn, pulse and seeds'. It was quite clear under the terms of that enactment that powder or flour from the grain could not be grain as defined by that statute. We are of opinion that that decision cannot help the petitioner to substantiate his contention that the term 'coffee' under the Madras General Sales Tax Act will not include coffee powder. Our attention was drawn to the definition of coffee under the 1959 Act, which is as follows: 'Coffee, that is to say, any one of the forms of coffee, such as coffee beans, coffee seeds (raw or roasted) coffee powder, but not including coffee drink.' The comprehensive definition of coffee contained in the 1959 Act is no indication that the term 'coffee' used in the previous enactment should have a restricted meaning. It may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very facts stated above, the case is very clearly distinguishable and hence, the reference is out of context. Now we will refer to Shorter Oxford Dictionary-Volume I-page 205, where "coffee" is given the following meaning: "Coffee: Powder made by roasting and grinding the seeds." If this is one of the meanings and it is so commonly and commercially understood, certainly, section 5(3) would be applicable to the case on hand. 30.. Again, on referring to Encyclopaedia Britannica, we find the following: "Until coffee is roasted it has none of the flavour or taste generally associated with coffee. Roasting creates the brown colour and transforms the natural chemical constituents into others that give coffee its splendid aromatic qualities and pleasing taste." 31.. Thus, we hold that the very seeds purchased by the appellant for the purposes of fulfilling its obligations arising out of a contract with a buyer in Romania, were converted into powder and exported. As we have stated above, the very purpose of purchasing the seeds was for the purpose of export by the appellant, the appellant being a registered coffee exporter having been registered with the Coffee Board. 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was the same as the cloth sold by the petitioners and they were, therefore, entitled to the exemption under the notification." If, even after printing and processing, the cloth exported could be held to be the same and is entitled to exemption, a fortiori is the case of coffee seeds being converted into powder. Therefore, we hold that section 5(3) would apply to the sale in question. On this conclusion, the next question that would arise for consideration is: Whether the appellant is entitled to refund? 33.. The plea of the appellant for refund was turned down by the learned single Judge on the ground that the levy of sales tax was not on the appellant but only on the Board. In this case, no doubt, the appellant was taking a categoric stand, as seen from its letter dated 3rd February, 1982 addressed to the Coffee Board that the view taken by the Board that section 5(3) was not applicable to the appellant as by roasting the coffee seeds and grinding them into powder, the identity of the article was altered, is not sustainable in law. To this, the Coffee Board wrote the following reply on 17th September, 1982: "This is reference to your letter No. COFE: 1937: 82-83; GNR date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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