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TMI Blog2005 (1) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ers on the ground that the extraction of solvent oil out of oil cake and soyabean seeds does not amount to manufacture and the resultant product, namely, deoiled sunflower cake and deoiled groundnut cake are not new commercial commodities even in commercial circles nor in common parlance. The assessing authority while computing the tax liability of the assessee for the assessment year 1993-94 has rejected the claim of the appellant and has levied purchase tax under section 6 of the Act on the ground that the oiled sunflower cake and oiled groundnut cake are consumed to bring into existence a new commercial commodity and are capable of being sold or supplied as deoiled sunflower cake and deoiled groundnut cake. The dealer, being aggrieved by the said order of assessment, wherein the assessing authority had levied purchase tax on the purchase of oiled sunflower cake and oiled groundnut cake made from unregistered dealers, had carried the matter before the first appellate authority by filing an appeal under section 20 of the KST Act. The primary ground urged in the appeal on the findings of the assessing authority on this aspect of the matter, was that the process of extraction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r oil cake and groundnut oil cake amounting to Rs. 81,39,300 from unregistered dealers is illegal and contrary to the provisions of the Act. The revisional authority being of the view that the order passed by the first appellate authority in the appellant's case is erroneous and prejudicial to the interest of the Revenue, after notice to the assessee, has set aside the order passed by the first appellate authority and has confirmed the order passed by the assessing authority in levying purchase tax on the purchase turnover of sunflower oil cake and groundnut oil cake purchased from persons other than registered dealers. To come to this conclusion, the revisional authority has relied on the amendment made to section 6 of the Act by Karnataka Amendment Act No. 8 of 1989 which is given effect to from September 8, 1998; and according to him, the condition mentioned in section 6(a) of the Act has enlarged the scope of section 6 of the Act so as to include cases where the dealer consumes goods otherwise than by way of manufacture. Further, the revisional authority has observed in his order that in view of the amendment by Act No. 8 of 1989 to section 6 of the Act, the process of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pradesh v. Modern Proteins Ltd. [1994] 95 STC 181; [1994] Suppl. 2 SCC 496, Union of India v. V. M. Salgaoncar and Bros. (P) Ltd. [1998] 4 SCC 263 and the decision of this court in the case of J. S. Auto Machine Shop v. State of Karnataka [1993] 90 STC 121 and the decision of the Supreme Court in the case of B.P. Oil Mills Ltd. v. Sales Tax Tribunal [1998] 111 STC 188. The question that requires to be considered and decided by this court is whether the sunflower oil cake and groundnut oil cake are consumed in the manufacture of other goods for sale or otherwise, or consumed otherwise to attract levy of purchase tax under section 6 of the Act? Section 6 of the Act has undergone several amendments and during the relevant assessment year, the material portion of section 6 of the Act read as under: Section 6. Levy of purchase tax under certain circumstances. Subject to the provisions of sub-section (5) of section 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods, and (i) either consumes such goods in the manufacture of other goods for sale or otherwise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, the goods purchased should have been consumed or devoured or exhausted in the process of manufacturing with the result the identity of the goods is completely lost. So long as the identity of the goods remains the same, the goods purchased and used in the manufacture of some other goods would not be said to have been consumed in the process of manufacture of other goods. In Oil Seeds, Oil Trade and Industry's Association's case [1998] 111 STC 234, a learned single Judge of this court had an occasion to consider whether rice bran and deoiled rice bran cake are one and the same or different commodities. Parties before the court had made available to the court a report of the Central Poultry Training Institute, Bangalore, in regard to rice bran and deoiled rice bran. After a detailed consideration, the court has come to the conclusion that, the deoiled rice bran cake does not lose the character of rice bran and as such the deoiled rice bran cake continues to remain the same even after oil is extracted from it and that the oil which may not be a helpful ingredient for the manufacture of the cattle feed is removed, so as to make a rice bran useful for manufacturing cattle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oiled cake but became a new and a different entity known in the commercial parlance. The court went on to make further observation that the sales tax law is intended to tax sale or supply of different commodities and not to tax the production or manufacture of particular substance out of which the commodities may have been made. As soon as a separate commercial commodity comes into existence or emerges from production or manufacture, it becomes a separately taxable entity or goods for the purpose of sales tax. When commercial goods without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they remain commercially known as same goods and cannot be taxed again in a series of sales so long as they retain their identity as goods of a particular original type. In Union of India v. V .M. Salgaoncar and Bros. (P) Ltd. [1998] 4 SCC 263; AIR 1998 SC 1367, the expression consumption came up for consideration before the apex court and in that decision, the court was pleased to explain the meaning of consumption as under: The word 'consumption' may involve in the narrow sense using the article to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be attracted when such goods are consumed in the manufacture of other goods or are consumed otherwise. A large number of case law are available on the issues which we have proposed as points at issue for our consideration and decision. We do not propose to lengthen this judgment by quoting extensively from those case law. We believe that the following summary of the relevant principles is sufficient to answer the issue. The word consume contemplates the complete exhaustion of the purchased goods. Alternatively, the conversion of a commodity into a different commercial commodity by subjecting it to some processing is consumption of the former commodity. The consumption in the true economic sense does not mean only use of goods in the production of consumer goods or final utilisation of consumer goods by consumers. It also means used up , spent , etc. The goods purchased should be consumed, the consumption should be in the process of manufacture, and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soning or finding of the revisional authority is no more a correct thinking in view of the law declared by the apex court in the case of Assistant Commissioner (Intelligence) v. Nandanam Construction Company [1999] 115 STC 427, wherein a larger Bench of the Supreme Court while interpreting a provision in the Andhra Pradesh General Sales Tax Act, 1957, which is akin to section 6 of the Karnataka Sales Tax Act, 1957, has held that the intention of the Legislature is to bring to purchase tax in either event of consumption of goods in the manufacture of other goods or consumption of goods in any other manner, i.e., once the goods are utilised, the goods cease to exist or cease to be available in the same form for sale or purchase so as to attract purchase tax . Therefore, there was no error which was prejudicial to the interest of the State revenue in the orders passed by the appellate authority and therefore, the revisional authority could not have invoked his suo motu revisional jurisdiction to revise the orders passed by the appellate authority. It is now well-settled that the power under section 22-A(1) of the Act can be exercised either by the Commissioner or Additional Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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