Agricultural produce status remains unchanged where processing only makes tea marketable, preserving the sales tax exemption.

Tea grown by a cultivator remained agricultural produce despite drying, heating, grading, roasting and packing, because the processing was directed only to making the leaves marketable and did not convert them into a commercially different commodity. Applying the principle that ordinary processing by a cultivator does not destroy the essential character of agricultural produce, the HC held that the sale proceeds continued to fall within the sales tax exemption under the U.P. Sales Tax Act. The court treated the additional grading, roasting and packing as marketability-enhancing steps, not manufacturing, and answered the issue in favour of the assessee.

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Issues: Whether tea grown by the assessee, after being subjected to drying, heating, grading, roasting and packing, continued to be agricultural produce so as to remain exempt from sales tax under the U.P. Sales Tax Act.

Analysis: The exemption under the sales tax law extended to sale proceeds of agricultural produce grown by the assessee. The decisive inquiry was whether the processing carried out merely rendered the produce fit for market or whether it transformed the commodity into something commercially different. The Court applied the principle, reflected in the income-tax concept of agricultural income, that ordinary processing undertaken by a cultivator to make produce saleable does not alter its essential character. Tea leaves, though green and perishable when plucked, require processing to become saleable tea. The further grading, roasting and packing were held not to amount to manufacturing or to change the nature of the commodity; they only improved marketability and facilitated sale.

Conclusion: Tea processed and packed by the assessee remained agricultural produce, and its sale proceeds were not liable to sales tax. The question was answered in the negative, in favour of the assessee.

Ratio Decidendi: Agricultural produce does not cease to be such merely because the cultivator subjects it to ordinary or even refined processing that is necessary to make it marketable, so long as the essential nature of the produce remains unchanged.

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