1981 (10) TMI 151 - HC - VAT and Sales Tax

High Court: Siali Khalli Not Separate Goods for Tax, Upholds Annulment Decision

State of Orissa Versus Antaryami Panigrahi

State of Orissa Versus Antaryami Panigrahi - [1982] 50 STC 98 (Ori) Issues:1. Whether siali leaves pinned together as siali khalli constitute a distinct separate goods for tax liability under the Orissa Sales Tax Act, 1947Rs.2. Whether the tax levied on siali khallis prepared from siali leaves, on which purchase tax was paid, should be annulledRs.Analysis:Issue 1:The case involved the assessment of tax liability on the sale of siali khallis, which were created by pinning siali leaves together. The Additional Sales Tax Tribunal initially held that there was no substantial change in identity between siali leaves and khallis, thereby exempting the sale of khallis from tax. The Tribunal reasoned that the process of pinning the leaves did not create a new product. However, the standing counsel argued that siali leaves and khalli were distinct commercial commodities and should be taxed separately. The court referred to the Supreme Court's judgment in the case of Deputy Commissioner of Sales Tax, Ernakulam v. Pio Food Packers, emphasizing the principle of whether processing the original commodity results in a commercially different article. The court concluded that siali leaves pinned as khallis did not constitute a new commercial commodity, as they could be easily restored to their original form, similar to pineapple slices being considered the same as the original fruit.Issue 2:The second question revolved around the annulment of tax levied on siali khallis prepared from siali leaves on which purchase tax had already been paid. The court's analysis of the first issue determined that siali khallis were not distinct goods from siali leaves. Therefore, the tax levied on the sale of khallis was not justified, and the Additional Sales Tax Tribunal's decision to annul the tax was upheld. The court found that since khallis could be transformed back into individual leaves, they did not constitute a separate taxable commodity under the Orissa Sales Tax Act, 1947.In conclusion, the High Court of Orissa held that siali leaves pinned together as siali khalli did not undergo substantial change in identity to warrant separate tax liability. The court upheld the Tribunal's decision to annul the tax levied on siali khallis, as they were not considered distinct goods from siali leaves. The judgment emphasized the importance of assessing whether processing a commodity results in a commercially different product to determine tax liability under the applicable law.