TaxTMI 
TaxTMI 
2011 (8) TMI 595
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.... up for hearing and final disposal. The respondent is a registered dealer under the Maharashtra Value Added Tax Act, 2002 ("the Act"). The respondent purchases spices such as fennel seeds, sesame seeds, oil seeds, cumin, cloves, cardamom, black pepper and dried ginger which are then subjected to a process of manufacture. The final product is sold in pouches as mukhwas or a mouth freshener. Literally speaking, the word "mukhwas" is comprised of two elements : "mukh" being mouth and "was" being fragrance. The respondent moved the Commissioner of Sales Tax under section 56, seeking a determination of three issues:- (i) Whether the process of preparing a mouth freshener by mixing fried spices with salt, sugar and other like material amounts to a manufacturing process under section 2(15)? (ii) Whether the purchases of spices from registered dealers and the sale of mukhwas amounts to a resale under section 2(22)? and (iii) What would be the appropriate classification of the final product, namely, "mukhwas" in the Schedule to the Act and what would be the appropriate rate of tax? The Commissioner by his order dated May 22, 2006, came to the ....
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....bstances to produce a commercially distinct article which cannot be regarded as spices; (iii) Entry 91 of the Schedule C which comprehends within its purview, spices of all varieties and forms must nonetheless comprehend products which in common parlance are regarded as spices and would not include mouth fresheners manufactured by the respondent. The products, in the present case, involve inter alia the process of roasting and frying which the respondent has now conceded, involves a manufacturing process. On the other hand, counsel appearing on behalf of the respondent while submitting that admittedly the process engaged in by the respondent does involve manufacture and as a result of which a separate commercially distinct commodity comes into existence, stated that:- (i) Entry 91 of the Schedule C comprehends spices in all its varieties and forms; (ii) Notwithstanding the involvement of a manufacturing process, the final product continues to retain the description of spices; (iii) The relevant entries in the Value Added Tax Act are wider in their connotation than under the Bombay Sales Tax Act, 1959. Entry 91 of Schedule C, s....
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....hener. 8. Jiragoli Sp. mouth freshener:- The applicant purchases cumin seed, black pepper, sunth, dry mango, sat nimbu. Proportionate quantum of the above materials is mixed with sugar and the processed product is then sold as a mouth freshener. 9. Orangevati mouth freshener:- The applicant purchases cumin seed, black pepper, sunth, dry mango, gulkand, cassia and clove. Proportionate quantum of the above material is mixed with black salt and permitted flavours. The product is then sold as a mouth freshener. 10. Culcutta Mitha Pan mouth freshener:- The applicant purchases betel leaves, sweetened rose petals, fennel seeds, cardamom, cloves, sandal flavour, silver foil. The above materials are mixed proportionately and the final product is sold as a mouth freshener." Entry 91 of the Schedule C to the Maharashtra Value Added Tax Act, 2002, was at the material time to the following effect:- Act Spices-entry Description of goods Rate of tax MVAT Act C91 (effective during 01.04.2005 to 30.04.2005) Spices of all varieties and forms including cumin seed, aniseed, turmeric and dry chillies. 4% C91 (effective during 01.05.2005 to 31.03.2....
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....nunciated in an earlier judgment of four judges of the court in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC) ; [1976] 1 SCC 834, which was reiterated in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408 (SC) ; [1994] Supp 1 SCC 413. The principle of law as enunciated in the earlier decision was thus (page 325 in 37 STC):- " ...Sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type." In the context of the case which came up for consideration in A. P. Products v. State of A. P. [2007] 8 VST 373 (SC), the Supreme Court held t....
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....ise to a separate commercial commodity altogether which could be taxed separately. . ." Apart from the abovementioned decisions of the Supreme Court, there is a judgment of a Division Bench of the Gujarat High Court in Acharyaashree Mahaprabhujini Ranavaswala Bethak Mandir Trust, Godhra v. General Manager and Deputy Industries Commissioner, Jamnagar [1991] 1 GLR 563, to which a reference has been made on behalf of the Revenue during the course of the submission. The petitioner manufactured Dhana-Dal which according to it, was used as mukhwas or a mouth freshener in a small quantity. The issue was as to whether the petitioner was entitled to the benefit of an exemption notification. The case of the Revenue was that the petitioner was a spice mill and was, therefore, outside the purview of the exemption. Mr. Justice SB. Majmudar (as His Lordship then was), while delivering the judgment of the Gujarat High Court cited with approval the decision of T. K.Basu, J. sitting as a learned single judge at the Calcutta High Court in Netai Mohan Saha v. State of West Bengal [1983] 52 STC 329 (Cal), in which the learned judge had held that "spices are nothing but an ingredient which adds....
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....d forms". The character of the final product does not partake of the character of the individual ingredient. Though spices are used as ingredients, the manufactured article is not a spice or spices. Though entry 91 of Schedule C comprehends within its purview spices of all varieties and forms, the entry applies to a product which retains its essential character of being a spice. Having regard to the law laid down by the Supreme Court in the two judgments in Jalani Enterprises [2011] 39 VST 421 (SC) and A. P. Products [2007] 8 VST 373 (SC), we are of the view that the final products of the respondent noted earlier do not fall within the purview of entry 91 of Schedule C. The counsel appearing on behalf of the respondent, however, sought to place reliance upon the judgment of the Supreme Court in State of Gujarat v. Sakarwala Brothers [1967] 19 STC 24 (SC). In that case, in the reference which was made by the Tribunal before the Gujarat High Court, the questions of law were whether the sales of patasa, harda and alechidana (small lumps of sugar) were exempt from the payment of sales tax leviable under the Bombay Sales Tax Act, 1959 as adapted to the State of Gujarat by virtue....