TaxTMI 
TaxTMI 
TaxTMI 
2003 (3) TMI 677
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..... They are either proprietary concerns, or partnership firms or private limited companies. However, all the appellants are small-scale industrial units registered as such with the Industries Department concerned. They have also taken out registration both under the Kerala General Sales Tax Act, 1963 (for short, "the Act") and under the Central Sales Tax Act, 1956. They are also assessees on the files of the respective Sales Tax Officers having jurisdiction over their business places. 3.. According to the appellants, they are small-scale industrial units registered with the Industries Department and are engaged in the business of manufacture and sale of mineral water/packaged drinking water. According to them, the sales turnover of their product is entitled to exemption from payment of sales tax for a period of seven years under S.R.O. No. 1729 of 1993 issued under section 10 of the Act. Reported in [2002] 128 STC 216. 4.. The appellant in W.A. No. 1075 of 2002 started commercial production on January 10, 1998 and as such it claimed exemption from payment of sales tax under the Notification S.R.O. No. 1729 of 1993 for the period from January 10, 1998 till January 9, 2005. Its ca....
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....t the application was initially considered by the District Level Committee and later placed before the State Level Committee for consideration and the matter is pending. According to the appellant in view of the circular dated January 23, 1999 (exhibit P4) no relief can be expected from the said authorities. It is stated that no final assessments under the Act have been made on the appellant. In view of the said clarification, the appellant has filed writ petition, O.P. No. 4430 of 1999. 6.. The appellant in W.A. No. 1082 of 2002 started commercial production on June 11, 1998 and as such they claimed exemption from payment of sales tax for the period up to June 10, 2005. Their capital investment on fixed assets came to Rs. 12,39,721. The District Level Committee considered their application dated May 22, 2001 and issued proceedings dated June 6, 2001 (exhibit P4). The exemption claimed on the sales turnover of mineral water was denied but exemption to the tune of Rs. 42,250 on hot and cold water dispensers was granted for the period from June 11, 1998 to June 10, 2005. This order was communicated to the appellant on October 10, 2001. The appellant filed an appeal against the said ....
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....ants' case is that they are engaged in the manufacture and sale of mineral water. They had also set out the process employed by them on ground water in the manufacture of mineral water. According to them by the process so employed, a totally different commodity, viz., mineral water emerged. The appellants, thus, contended that the process so employed constitutes "manufacture" as defined in the Notification S.R.O. No. 1729 of 1993. The appellants in W.A. Nos. 1075 and 1089 of 2002 have advanced a further contention that the eligibility certificate issued by the competent authority, viz., District Level Committee has not been cancelled in accordance with law and, therefore, the exemption available as per the eligibility certificate is still in force. Yet another contention was also raised that the appellants have also manufactured bottles for filling it with mineral water and, therefore, the turnover of bottles is also entitled to exemption from payment of sales tax under the notification. The learned single Judge, after detailed examination of the matter, rejected all the contentions of the appellants and the writ petitions were dismissed. Hence these appeals by the petitioners. 10....
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....s of the same goods, sawing, garbling processing one form of goods into another form of the same goods by mixing with chemicals or gas, fumigation or any other process applied for preserving the goods in good condition or for easy transportation. The process of producing desiccated coconut out of coconut (chemical treatment of rubber wood and production of dressed or tanned hides out of raw hides) shall be deemed to be 'manufacture' for the purpose of this notification." The following processes shall not be deemed to be "manufacture" for the purpose of this notification: (a) Crushing copra and producing coconut oil and coconut oil cake. (b) Converting timber logs into timber sizes. (c) Crushing rubble into small metal pieces. (d) Converting sodium silicate into liquid silicate. (e) Tyre-retreading. (f) Cutting granite or marble slabs into smaller pieces and or polishing them. (g) Such other processes as may be notified by Government in this behalf. (h) Conversion of rubber latex into centrifugal latex, raw rubber sheet, ammoniated latex, crepe rubber, crumb rubber, or any other item falling under entry 110 of the First Schedule to the Kerala General Sales Tax Act, 1963 or....
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.... Act whereas water is taxable as an item falling under the residuary entry. It is also their contention that the production of mineral water is treated as manufacture and the manufactured product-mineral water-is an excisable commodity liable to excise duty under Chapter 22, item No. 22.01 and 22.02 of the Central Excise Tariff Act, 1985. They have also alleged that certain other industrial units doing identical line of business were granted sales tax exemption under S.R.O. No. 1729 of 1993 and the denial of the same benefits to the appellants is discriminatory and violative of articles 14, 19(1)(g) and 301 of the Constitution of India. 13.. The respondents have filed a counter-affidavit in O.P. No. 31415 of 1999 which is the subject-matter of Writ Appeal No. 1089 of 2002 wherein they have taken the stand that the term "manufacture" for the purpose of the notification is defined as production of goods commercially different from the raw material used and will not include packing of goods, polishing, cleaning, grading, drying, blending or mixing different varieties of the same goods by mixing with chemicals or gas, fumigation or any other process applied for preserving the goods in....
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....f the same goods by mixing with chemicals or gas, fumigation or any other process applied for preserving the goods in good condition or for easy transportation. It is also clarified that the process of producing desiccated coconut shall be deemed to be "manufacture " for the purpose of this notification. It further specifies certain other process which shall not be deemed to be manufacture for the purpose of this notification. One such process mentioned is crushing copra and producing coconut oil and coconut oil cake. Nobody will deny that in common parlance copra, coconut oil and coconut oil cake are totally different commercial commodities. Yet for the purpose of this notification it is stated that the process employed in converting copra into coconut oil and coconut oil cake will not fall within the definition of manufacture for the purpose of this notification. Thus, it would be clear that the definition of "manufacture" in the notification is an artificial definition solely for the purpose of grant of exemption from payment of sales tax under the notification. However, it has to be noted that the main part of the definition of the term "manufacture" speaks of the use of raw ma....
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....c exchequer were being provided with a view to encourage units engaged in the manufacture or production of goods and not to help those units which merely engaged themselves in some sort of processing whereunder the goods remain essentially the same goods even after the said process. It was also observed that even if a process is adopted, the test is the same, viz., whether different goods emerge as a result of application of such process. 17.. It is a well accepted principle that resort to the dictionary meaning or the popular meaning of an expression used in the taxing statute can be made only when there is no definition of that word in the said statute. In the instant case the Notification S.R.O. No. 1729 of 1993 itself defines the word "manufacture" for the purpose of the said notification and therefore there is no need to resort to the dictionary meaning or to the meaning of that word as judicially decided. 18.. In a case where there is no definition of the word "manufacture" in a taxing statute the test to be applied for determining the meaning of the word "manufacture" is by now settled by a series of decisions of the Supreme Court. The classic passage occurring in the deci....
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.... essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity." The Supreme Court then posed the question thus: "Does the processing of the original commodity bring into existence a commercially different and distinct article?" After referring to the earlier decisions of the Supreme Court on this issue it was held that there is no essential difference between the pineapple fruit and the canned pineapple slices. It was also observed that: "The dealer and the consumer regard both as pineapple. The only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling. The additional sweetness in the canned pineapple arises from the sugar added as a preservative. On a total impression, it seems to us, the pineapple slices must be held to possess the same identity as the original pineapple fruit." The Supreme Court referred to the contention for the rev....
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....t it recognised in the trade as a new and distinct commodity. This Court speaking through one of us (Pathak, J.) pointed out: 'Commonly, manufacture is the end-result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place'. The test that is required to be applied is: does the processing of the original commodity bring into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of ore possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that....
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....notification. In Chandausi Chemicals v. Commissioner, Sales Tax, Uttar Pradesh [1981] 47 STC 436 the Allahabad High Court considered the question as to whether water for injection is covered by the expression "distilled water" occurring in the explanation to section 4(a) of the U.P. Sales Tax Act, 1948, and is not exempted from sales tax as water. The Allahabad High Court after referring to the British Pharmaceutical Code, 1973 dealing with water for injection held that water for injection is sterilised distilled water and it is intended for parenteral administration and in other sterile products and therefore it is covered by expression distilled water. In Commissioner of Sales Tax v. Oil Processors Private Limited [1998] 108 STC 44 the Bombay High Court considered the question as to whether conversion of used waste lubricating oil into usable lubricating oil will amount to manufacture and as to whether a new commodity is emerged. The Bombay High considered the question with reference to the principles laid down by the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827, State of Maharashtra v. Shiv Datt & Sons [1992] 84 STC 497, Chowgule & Co.....
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....y Commissioner of Sales Tax did not accept the contention of the assessee as he was of the opinion that the lubricating oil obtained as a result of the processing of the re-refining undertaken by the assessee was a new and different commercial commodity and in that view of the matter, the process undertaken by the assessee amounted to manufacture. The assessee took up the matter before the Tribunal and contended that no new or different commercial commodity emerged as a result of the process applied by it to the used lubricating oil for removing impurities to make it reusable, because despite the removal of impurities, lubricating oil continued to be lubricating oil. Revenue, on the other hand, contended that the process undertaken by the assessee being quite elaborate, as a result of which the lubricating oil which had became unusable after use became fit for re-user, it amounted to manufacture. The Tribunal did not accept the contention of the revenue. According to the Tribunal despite the process undertaken by the assessee the lubricating oil remained lubricating oil. At the instance of the revenue the matter was taken up before the High Court and contended that the process unde....
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....re can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity. (iii) Where the commodity retains a continuing substantial identity through the processing stage, it cannot be said that it has been manufactured." Thereafter the Bombay High Court applied the aforesaid principles to the facts of the assessee's case as follows: "Applying the above principles to the facts of the present case, it is abundantly clear that the process undertaken by the assessee on the used lubricating oil to make the same fit for reuse as lubricating oil cannot be regarded as a process of 'manufacture'. Nothing was manufactured as a result of the process. Lubricating oil remained lubricating oil even after processing, with the only difference that on removal of impurities, etc., by the process undertaken by the assessee it became fit for reuse as lubricating oil. Both before and after the processing, it was regarded as 'lubricating oil'. That being so, in our opinion, the Tribunal was fully justified in holding that the activity of converting the used waste lubricating oil into usable lubricating oil is not a refining process and as such not covered....
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....border-line cases where either conclusion with equal justification may be reached. Insistence on any sharp or intrinsic distinction between 'processing' and 'manufacture', we are afraid, results in an oversimplification of both and tends to blur their interdependence in cases such as the present one." The Supreme Court then referred to the decision in Commissioner of Sales Tax v. Harbilas Raji and Sons [1968] 21 STC 17 where it was held that the word 'manufacture' has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. The test laid down by this Court is that the article which comes into being must be commercially different from the one from which it is made or manufactured. The Supreme Court on the basis of the aforesaid decisions held that in view of the admitted position the green husk is soaked into saltish sea water for days together and after decomposition, on being subjected to beating either by manual or mechanical process, fibre is produced in the process, which is a distinct commodity known....
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....ds used in the definition of 'manufacture' are very wide should not lead us to so widely interpret them as to render the provision practically meaningless and so as to treat the goods sold as different merely because some slight additions or changes are made in the goods which are purchased before they are sold. It is true that under the section it is not necessary that there should be 'manufacture' in the sense that a new commodity has been brought into existence as would have been required if that word is interpreted in its literal sense. But, at the same time, the section should be so interpreted to mean only such of the various processes referred to in the definition and applied to the goods as are of such a character as to have an impact on the nature of the goods." The Supreme Court held that the recharged batteries sold by the respondents were not a different commodity from the dry batteries purchased by them from the manufacturers. It was observed that even before the dry batteries were manufactured the plates were immersed in the electrolyte and completely charged and were kept immersed in the electrolyte, that only, before the goods were actually delivered to the dealers....
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....characteristic appearance as well as the semi-solid condition which it attains; in the language of the chemist, an intermolecular or configurational chemical change takes place which results in the hardening of the oil; though it continues to be the same edible fat that it was before the hardening, and its nutritional properties continue to be the same, it has acquired new properties in that the tendency to rancidity is greatly removed, is easier to keep and to transport; both the Tribunal as well as the learned Judges of the High Court held that the hydrogenated oil (or vanaspati) ceased to be groundnut oil by reason of the chemical changes which took place and which resulted in the acquisition of new properties including the loss of its fluidity and they held that vanaspati or hydrogenated oil was not groundnut oil but a product of groundnut oil manufactured out of groundnut oil and therefore not entitled to the benefit of the deduction under rule 18(2). The Supreme Court observed that if the removal of impurities by a process of sedimentation does not render groundnut oil any the less so, it follows that even the process of refining, by the application of chemical methods for re....
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....undnut oil and if so it does not seem to accord with logic that when the quality of the oil is improved in that its resistance to the natural processes of deterioration through oxidation is increased, it should be held not to be oil." It was further observed that: "Both the Tribunal as well as the High Court have pointed out that except for its keeping quality without rancidity and ease of packing and transport without leakage, hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil. There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly we consider that hydrogenated oil still continues to be "groundnut oil" notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil. In our opinion, the assessee-company was entitled to the benefit of the deduction of the purchase price of the kernel or groundnut, under rule 18(2), which went into the manufactur....
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....(as Fe) mg/1 (not more than) -0.3 Nitrate (as No) mg/1 (not more than) -45 Residual Free Chlorine mg/1 (not more than) -0.2 Fluoride (as F) mg/1 (not more than) -1.5 Mercury (as Hg) mg/1 (not more than) -0.001 Cadmium (as Cd) mg/1 (not more than) -0.01 Arsenic (as As) mg/1 (not more than) -0.05 Cyanide -absent Lead (as Pb) mg/1 (not more than) -0.05 Mineral oil -absent Chromium (as Cr) mg/1 (not more than) -0.05 Chlorides (as Cl) mg/1 (not more than) 200 Sulphates (SO) mg/1 (not more than) 250 Alkalinity (as HCO) mg/1 (not more than) 600 Yeast & mould count -absent E.coli -absent Salmonella and Shigella -absent Clostridium Welchil, C, Botulinum -absent Bacillus cirrus -absent Vibre cholerae and V. Parahaemolyticus -absent (Note. -Without prejudice to the standards laid down in this appendix, whenever water is used in the manufacture or preparation of any article of food such water shall be free from micro-organism likely to cause disease and also free from chemical constituents which may impair health)." None of the appellants has a case that the product sold by them previously as "mineral water", and now as "packaged drinking water" conforms to the....
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....sions relied on by the appellants for completion sake. The counsel appearing for the appellants relied on the decision of the Allahabad High Court in Goel Industries (Pvt.) Ltd. v. Commissioner of Sales Tax [1971] 28 STC 729, the decision of the Jammu and Kashmir High Court in Glacier Cold Storage & Ice Mills v. Assessing Authority, Sales Tax [1974] 34 STC 426, the decisions of the Supreme Court in Chillies Exports House Ltd. v. Commissioner of Income-tax [1997] 225 ITR 814; (1997) 5 SCC 157, Nagar Mahapalika v. Prem Nath Monga Bottlers Pvt. Ltd. (1996) 4 KTR 297 and in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408 (SC); (1993) KLJ (Tax Cases) 599, the decisions of this Court in State of Kerala v. Abraham (2002) 3 KLT 22 (SN) (Case No. 31), Deputy Commissioner (Law), Board of Revenue (Taxes), Ernakulam v. Excel Rubber Industries, Ernakulam (1998) 6 KTR 289 and in Ernakulam Regl. Co-operative Milk Producers Union Ltd. v. State of Kerala (2001) 9 KTR 459 and the decision of the Bombay High Court in Commissioner of Sales Tax v. Indian Oil Corporation Ltd. [1978] 41 STC 471. 26.. In Goel Industries (Pvt.) Ltd.'s case [1971] 28 STC 729 mentioned above....
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....ction 14(i)(iii) of the Central Sales Tax Act, 1956 as they are different goods from wheat. The Supreme Court in Nagar Mahapalika's case (1996) 4 KTR 297 mentioned above was concerned with the question as to whether empty bottles can be subjected to levy of entry tax. The respondents claimed that the said empty bottles are covered by the exemption contained in the notification and in entry 13 of the second part of the said notification which readsempty milk cans, mineral water bottles, kerosene oil tins and drums, gas cylinders, wine bottles, and drums and gunny bags if imported for being refilled with the commodities for which they are in ordinary use. In that case the Supreme Court observed that while they agree with the learned counsel for the appellant-corporation that mineral water and aerated water/cold drinks are different and distinct articles, whether in common parlance or in the commercial parlance they are not inclined to interfere in the matter in view of the findings recorded by the High Court that mineral water as we know today was not known in commercial circles and therefore when the notification used the expression mineral water, it meant aerated water or the cold ....
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....case [1980] 46 STC 63 and Jagannath Cotton Company's case [1995] 99 STC 83 discussed above any process employed is not sufficient to constitute "manufacture" and what is required is that as a result of the various processes employed to the raw material used, a totally distinct and different commercial commodity having a distinctive name, character or use must emerge. In other words, if notwithstanding all the process employed on the raw material used if the substantial identity continues to exist it cannot be said that manufacture took place and a distinct and different commercial commodity had emerged. It is also relevant to note here that the definition of "manufacture" in the notification S.R.O. No. 1729 of 1993 did not stop by saying "the use of raw materials and production of goods commercially different from the raw material used". It further states that the end products emerged as a result of the process specified below the expressions extracted above and the processes specifically excluded as clauses (a) to (h) thereunder will not satisfy the definition of manufacture in the notification. Thus, the idea is very clear that the Government intended to give the benefit of exemp....
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....jurisdiction then also such eligibility certificate will be infirm and non est. In the instant case, it must be noted that the appellants claimed before the Industries Department as well as before the competent authority under the notification that their product is mineral water. In fact the product which is produced by the appellants is not mineral water at all and that is the reason why they have changed the name of the product when standards have been prescribed for mineral water in the Prevention of Food Adulteration Act and the Rules. From this it is clear that though the product is named as "mineral water" it is not mineral water and by the use of the name mineral water the appellants were trying to mislead the authorities for the purpose of getting exemption. In other words the appellants had given the name mineral water without the product being mineral water. According to us, this misrepresentation on the part of the appellants vitiates the entire proceedings and consequently the appellants cannot get the benefit of the eligibility certificate erroneously issued. 30.. We have perused the common judgment of the learned single Judge. We find that the learned single Judge ha....