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TMI Blog1997 (11) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... as registered as a new industrial unit with the Directorate of Commerce and Industries. The Joint Director (ID) of the Department of Industries and Commerce, Government of Karnataka, granted a certificate dated June 5, 1993, inter alia, certifying that the industrial unit of the petitioner was eligible for 100 per cent sales tax exemption on sale of finished goods for a period of five years from the date of commencement of its commercial production, i.e., May 6, 1993. This certificate was granted by the Joint Director in terms of the statutory notification dated June 21, 1991 issued under section 8A of the Act as being the competent authority. 4.. It appears that keeping in view the said eligibility certificate, the petitioner-company filed monthly statements of its sales as required under section 12-B of the Act for the months of April to August, 1994, inter alia, claiming 100 per cent tax exemption on the turnover representing the sales of packaged tea produced at its Dharwad unit. But, as noticed above, the said claim has been negatived by the authorities under the Act as also the Tribunal on the ground that, under the notification dated June 21, 1991, exemption can be claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first notification enlists the thrust sector industries. Item (d) of this annexure, which is relevant for the present purpose, reads thus: (d) Agro-food processing, agro-based (including high-tech packaging units, cold storages, green houses, tissue culture laboratory, bio-fertilisers, compost, growth regulators and seed production units) and bio-technology industries. 9.. I have made a specific reference to the above entry because one of the questions debated at the Bar is as to whether the industrial unit of the petitioner can be categorised as falling under thrust sector ; being an agro-food processing and/or agro-based high-tech packaging industrial unit. Re: Second notification: 10.. Subsequently, the State Government issued another notification dated June 21, 1991 with specific reference to section 8A of the Act. This notification to the extent it is relevant for the present purposes reads thus: Notification No. FD 239 CSL 90(I), dated the 19th June, 1991 Karnataka Gazette, Dated 21st June, 1991. S.O. No. 1371.-In exercise of the powers conferred by sub-section (1) of section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to such restrictions and conditions as may be specified in the notification. Accordingly, in the said statutory notification the State Government has laid down a procedure to be followed for claiming exemption envisaged therein. 12.. Under the above referred second notification issued under section 8A of the Act, exemption has been granted in respect of the tax payable under the Act on sale of goods manufactured by new industrial units to the extent provided in the table appended to the said notification. Under clause (b) of the Explanation I of the said notification read with clause (a) thereof a new industrial unit has been defined to mean a tiny, small-scale, or medium scale industrial unit which is registered as such with the Directorate of Industries and Commerce or the Ministry of Industries, Government of India and which has been certified to be eligible for exemption under the said notification by the authorities mentioned in clauses (a) and (b) of para (1) under Procedure set out in the said notification, which has already been reproduced above. 13.. In the present case, keeping in view the aforesaid statutory provisions, the respondent-Joint Director (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rules and notifications made thereunder, has not been empowered to either sit in appeal over the eligibility certificate granted by the Industries Department nor is competent to ignore the same. In support of his submissions, he has placed reliance in the cases of Kumar Fuels v. State of Uttat Pradesh [1986] 63 STC 467 (All.), P.P.P. Industries v. Commissioner of Industries [1994] 92 STC 110 (AP), Commissioner of Sales Tax v. Madhya Bharat Paper Ltd. [1996] 103 STC 142 (MP) and in the case of Maurya Timbers v. State of Haryana [1997] 104 STC 243 (P H). In these cases, the four High Courts, namely of Allahabad, Andhra Pradesh, Madhya Pradesh and Punjab and Haryana, Keeping in view the schemes contained under the notification like the one under consideration, have consistently taken the view that the sales tax authorities are bound by the eligibility certificates granted by the competent authorities. Mr. Salve, in support of his contention, also relied on the judgment of the Supreme Court in the case of Auto Tractors Ltd. v. Collector of Customs AIR 1989 SC 1065. The appellant before the Supreme Court was a company manufacturing tractors and for that purpose it imported certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chart. The factual aspects of operation described by him have not been disputed by the respondent at any stage including before the Tribunal. Therefore, the same has to be taken as a fact for the present purposes. 19.. It has been stated in the affidavit that the petitioner s unit at Dharwad is equipped with sophisticated blend drum and supporting systems as per the engineering drawings and details set out in annexure B appended thereto. The blending equipments and systems had the capacity of producing about 25 tonnes of blended teas per shift and through blending operations, different kinds and varieties of original garden teas were transformed into a homogeneous lot of finely blended teas having consistent characteristics in respect of their flavour, aroma, colour, strength, taste and appearance. It has further been stated therein that various kinds of foreign matter such as wooden chips, nails/ferrous particles, cotton threads, jute fibres, foils, etc., are completely separated and eliminated with the help of series of stationary/vibratory sifters and magnetic separators. Similarly, unwanted particles like dust particles/fluffs are sucked and removed mechanically from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uter have been installed to determine the acceptability or rejection of a particular lot of packet teas manufactured at the factory. 22.. After so describing the operations involved in the industrial unit, he has further stated that the factory set up by the petitioner-company at Dharwad to manufacture blended packet tea is one of the most modern tea factory that he had come across. He had disclosed that the factory has generated direct and indirect employment for more than 100 persons in the industrially backward region of Dharwad in North Karnataka. 23.. For the above uncontroverted affidavit, it is clear that the original garden teas of different flavour, taste and colour are blended in defined proportion through sophisticated mechanical process and the same is weighed through electromechanical weighers and is filled and sealed in pack cartons or pouches in a synchronised manner. It is this packet of the blended tea which is the final product of the industrial unit which is marketed. It is also not in dispute that the said process of blending and packaging lead to value addition to the blended garden tea and it is this value of the packaged tea which forms the measure for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sales Tax, Lucknow v. D.S. Bist Sons [1979] 44 STC 392 (SC) at page 396 ; AIR 1980 SC 169, para 7, it has been held by the Supreme Court that despite withering, crushing and roasting the tea leaves retain their character of being and continuing as an agricultural produce. 29.. In the case of Chowgule Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 ; AIR 1981 SC 1014, it has been held by the Supreme Court that though the blending of different qualities of ore possessing differing chemical and physical composition so as to produce ore of contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore out of different specifications blended together, the operation of blending would amount to processing of ore. For the same very reason, it can conveniently be held that the blending of different kinds and varieties of tea to provide a balance in terms of flavour, strength and colour is only a processing of the tea to suit the demands of a particular class of consumers. Mere blending of the tea by itself cannot be characterised as manufacturing of a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification by providing procedure for effectuating the industrial policy envisaged under the first notification. It is a matter of record that there was absolutely no change in the policy decision of the Government in respect of grant of incentives to new industrial undertakings as originally devised and according to which sales tax exemption was ensured and promised on the sale of output of the industries mentioned in the said notification which covers the industrial unit of the petitioner as discussed above. Re: Aspect (c): 33.. From the above discussions, now it has become absolutely clear and beyond any spell of doubt that the State Government, under its industrial policy under consideration, had all intentions of granting sales tax exemption in respect of the output of the new industrial units covered by its policy notifications and not necessarily only in respect of goods manufactured but the draftsman of the second notification replaced the word output by goods manufactured and the notification so drafted entered the statute book escaping attention of the policymakers and thus, gave rise to a major legal controversy, which on application of a little care could hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und by the letter of the Act, but will take care that its plain meaning is carried out. It is our duty , said Tindal, C.J., in Everett v. Wells [1841] 2 M. and G. 269, 277, Cf. R. v. Dowling [1857] 8 E and B 605. neither to add to nor to take away a statute, unless we see good grounds for thinking that the Legislature intended something which it has failed precisely to express . Thus, in Chancellor of Oxford v. Bishop of Coventry [1615] 10 Co. Rap. 53b, it was resolved that when the description of a corporation in an Act of Parliament is such that the true corporation intended is apparent.... though the name of the corporation is not precisely followed, yet the Act of Parliament shall take effect . 38.. Maxwell in his celebrated commentary on The Interpretation of Statutes , 12th Edition, after noticing various decisions has opined that: Mere clerical errors, or slips in drafting, will sometimes be corrected. On reference to the Arabert [(1963) p. 102], he had said that: Where a word appears in a consolidating statute but was not to be found in the Acts consolidated, the court may treat it as inserted per incuriam. 39.. In R. v. Wilcock (1845) 7 Q.B. 317, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of his submission, he has relied upon some of the judgments of the Supreme Court of India and United States and the High Courts, particularly, referring to the judgments in the case of Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC); AIR 1980 SC 1227 regarding converting fresh pineapple by removing the inedible part, etc., to be sold as canned pineapple, Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827 (SC); AIR 1961 SC 412 regarding hydrogenation of groundnut oil, Commissioner of Sales Tax v. Harbilas Rai and Sons [1968] 21 STC 17 (SC) regarding pig bristles-washing-chemical processing-grading-packing, State of Maharashtra v. Shiv Datt Sons [1992] 84 STC 497 (SC); AIR 1992 SC 692, regarding charging of dry batteries, State of Maharashtra v. Central Provinces, Manganese Ore Co. Ltd. [1977] 39 STC 340 (SC) ; AIR 1977 SC 879 regarding blending of manganese ore, Nilgiri Ceylon Tea Supplying Company v. State of Bombay [1959] 10 STC 500 (SC), regarding blending of tea, Commissioner of Sales Tax v. Dr. Sukh Deo [1969] 23 STC 385 (SC) ; AIR 1969 SC 499, regarding preparation of medicines by druggist, East Texas Motor Freight Lines v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r connected with, the textile trade as to the commercial identity of the commodities before and after the processing-placed before the court in a subsequent case. These opinions are, of course, relevant and would be amongst the various factors to be taken into account in deciding the question. On a consideration of the matter, we are persuaded to think that the view taken in the Empire Industries case [1987] 64 STC 42 (SC); [1986] 162 ITR 846 (SC); [1985] Supp 1 SCR 292; AIR 1989 SC 662 that grey fabric after it undergoes the various processes of bleaching, dyeing, sizing, printing, finishing, etc., emerges as a commercially different commodity with its own price structure, custom and other commercial incidents and that there was in that sense a manufacture within the meaning of section 2(f), even as unamended, is an eminently plausible view and is not shown to suffer from any fallacy. 48.. The pronouncement of law by the five-Judges Bench of the Supreme Court in Ujagar Print s case [1989] 74 STC 401; AIR 1989 SC 516 is obviously indicative of a more liberal, appropriately deviated and widening judicial concept of the word manufacture . In the said case, keeping in view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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