Kerala High Court
Supersonic Industrial Complex vs Deputy Commissioner Of Sales Tax (Law) on 11 October, 2001
Equivalent citations: [2003]130STC69(KER)
Author: P.K. Balasubramanyan
Bench: P.K. Balasubramanyan, C.N. Ramachandran Nair
JUDGMENT P.K. Balasubramanyan, J.
1. Revision-petitioner, the assessee, is a dealer engaged in centrifuging field latex and in its sale. The assessee admittedly collects field latex and subjects to centrifuging process. For the assessment year 1990-91 the assessee filed its return showing a total turnover of Rs, 3,33,55,427 and claiming exemption for Rs. 2,88,75,566 covered by form 25 declarations in terms of Rule 32(14) of the Kerala General Sales Tax Rules, 1963. The form No. 25 declaration related to the sale of centrifuged latex. The assessment was completed fixing a total turnover of Rs, 6,16,56,666 and the taxable turnover as Rs. 3,27,81,100 allowing exemption for the turn-over of Rs. 2,88,75,566 covered by form No. 25 declarations. The addition of Rs. 2,67,35,431 to the total turnover returned by the assessee was in view of the purchase turnover of raw rubber latex by the assessee since the assessee was liable to tax on the purchase value of raw rubber latex used for centrifuging. The assessing authority relied on a decision of this Court in Padinjarekkara Agencies Ltd, v. Assistant Commissioner (1996) 2 KLT 641, in support of the addition. The contention of the assessee that the said decision was not appli-cable, was overruled by the assessing authority.
2. The assessee went up in appeal before the Deputy Commis-sioner (Appeals), A.I.T. and S.T., Ernakulam. It was contended on behalf of the assessee that centrifuged latex being a last purchase of the taxable commodity, the inclusion of its sale value in the turnover was against law. It was also contended that both rubber latex and the centrifuged latex fell under sub-clause (a) of entry No. 110 of the First Schedule to the Kerala General Sales Tax Act, 1963 and hence both of them should be taken as one commodity liable to tax at one point only. Since the assessee had gold the centrifuged latex locally and filed declarations in form No. 25, the assessee was not liable to pay tax since the assessee was not the last purchaser in the State. The Deputy Commissioner (Appeals) noticed that during the relevant year 1990-91, the relevant entry was item No. 161 of the First Schedule to the Kerala General Sales Tax Act. The Deputy Commissioner accepted the argument that since both raw rubber latex and centri-fuged latex fell under sub-clause (a) of entry 161 of the First Schedule, they are taxable at the point of last purchase within the State and since the assessee did not purchase centrifuged latex and purchased only raw rubber latex, the inclusion of sale value of centrifuged latex in the total turnover of the assessee was illegal. The Deputy Commissioner therefore directed the assessing authority to delete the sale value of centrifuged latex from the total turnover. But the Deputy Commissioner (Appeals) held that the assessee had liability to pay tax in respect of the purchase turnover of raw rubber latex since the assessee was the last purchaser in respect of raw rubber latex used for production of centrifuged latex. The assessee was, therefore, liable to pay tax on the purchase turnover of raw rubber latex. The filing of form No. 25 declaration in respect of the sale of centrifuged latex cannot enable the assessee to contend that it is not liable to tax on the turnover of raw rubber latex since raw rubber latex and the centrifuged latex were two different commercial commodities. Feeling aggrieved by this decision, the assessee filed a further appeal before the Kerala Sales Tax Appellate Tribunal. The Appellate Tribunal based on the decision of this Court in Padinjarekkara Agencies' case (1996) 2 KLT 641, held that centrifuged latex was a commercially different product from raw rubber latex. After considering the various materials and the decisions brought to its notice including the deci-sion of the Supreme Court in Telangana Steel Industries v. State of Andhra Pradesh [1994] 93 STC 187, the Tribunal held that the Deputy Commissioner (Appeals) was justified in his conclusion that the assessee was liable to tax on the purchase turnover of raw rub-ber latex. After allowing some of the other claims of the assessee, the Tribunal dismissed the appeal in so far as it related to the assess-ment of the turnover on the purchase of rubber latex by the assessee. Feeling aggrieved by the decision of the Tribunal that the assessee has filed this revision under Section 41 of the Act raising the question of law whether the Appellate Tribunal was justified in law in holding that raw rubber latex and centrifuged latex are two different commercial commodities for. levy of sales tax under item 161(a) of the First Schedule to the Act and whether on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that levy of sales tax on purchase turnover of raw rubber latex is sustainable in law.
3. The main contention of learned counsel for the assessee was that the said decision in Padinjarekkara Agencies' case (1996) 2 KLT 641, was not relevant in construing the scope of entry 161 of the First Schedule to the Act as it stood during the relevant assessment year. According to the counsel, that decision was rendered in the context of Section 5(7) of the Act and the question was whether centrifuged latex was a finished product within the meaning of Section 5(7) of the Act. No doubt, the decision was in the context of Section 5(7) of the Act as then stood. But the clear ratio of the decision is that by converting rubber latex or latex purchased from the planter and making centrifuged latex out of it involves a process of manufacture and that the centrifuged latex obtained at the end of a process as detailed in that decision was commercially a different product from raw rubber latex. Counsel submitted that the principle that must be applied in interpreting an entry like the one in entry No. 161 of the First Schedule to the Act is the one indicated by the Supreme Court in Telangana Steel Industries case [1994] 93 STC 187. Counsel submits that entry 161 covers "rubber" and explains it by saying :
"Rubber, that is to say-
(a) Raw rubber latex, dry ribbed sheet of all RMA grades, tree lace earth scrap, ammoniated latex, preserved latex, concentrate, centrifuged latex and all other qualities and grades of latex except raw rubber latex, dry crepe rubber, dry block rubber, crumb rubber, skimmed rubber; and
(b) Reclaimed rubber, all grades and qualities."
According to the counsel, while construing a similar entry in Section 14 of the Central Sales Tax Act deal with iron and steel, that is to say, wire rods and wires, the Supreme Court has held that wires even if it be a separate commercial commodity was not to be taken as a commodity different from rods for the purpose of permitting imposition of sales tax once again on wires despite rods having been subjected to sales tax. In that decision, in paragraph 6 their Lordships of the Supreme Court have observed thus :
"The point has however arisen for consideration because we are concerned with a single point sales tax, which would not allow taxing of the same commodity again. It is also not in dispute that if the two goods at hand be different commodities, the single point taxing principle would not debar realisation of tax once again from the sale of wires. Shri Tarkunde's whole emphasis is that the goods in question cannot be regarded as two different commercial commodities. Let it be seen why this stand has been taken by the learned counsel on behalf of the appellants and whether the same is sound."
(emphasis* supplied) It cannot, therefore, be said that merely because both raw rubber latex and centrifuged latex are included in entry No. 161 of the First Schedule to the Act, the two commodities cannot be taxed separately if the two items are different commodities. With respect, we find that what exactly was decided in the decision in Padinjarekkara Agencies case (1996) 2 KLT 641 was that raw rubber latex and the centrifuged latex are different commodities. Hence going by the principles stated by the Supreme Court in Telangana Steel Industries case [1994] 93 STC 187 as quoted above, it has to be held that the argument raised on behalf of the assessee based on the fact that both the products can come under entry No. 161 of the First Schedule to the Act and hence they cannot be taxed separately cannot be accepted.
4. We may now refer to the decision of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319. The said decision was rendered by four learned Judges of the Supreme Court. In that decision their Lordships held as follows :
"Entry No. (iv) in Section 14 of the Central Sales Tax Act, 1956, as originally worded (prior to its amendment by Amendment Act 61 of 1972) was meant to enumerate separately taxable goods and not just to illustrate what was just one taxable substance, viz., 'iron and steel'. Each sub-item in entry No. (iv) is a separate taxable commodity for purpose of sales tax and each of them forms a separate species for each series of sales although they may all belong to the genus, 'iron and steel'. Therefore, manufactured goods consisting of 'steel rounds, flats, angles, plates, bars' or similar goods in other forms and shapes could be taxed again even if the material out of which they were made had already been subjected to sales tax once as iron and steel scrap.
The ordinary meaning to be assigned to a taxable item in a list of specified items is that each item so specified is considered as a separately taxable item for purposes of single point taxation in a series of sales unless the contrary is shown. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object is to tax sale of each commercial commodity and not the sale of the substance out of which they are made. Each commercial commodity becomes a separate object of taxation in a series of sales of that commercial commodity so long as it retains its identity as that commodity.
In the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression 'that is to say' is apparently meant to exhaustively enumerate the kinds of goods on a given list. The purpose of an enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales.
Ordinarily the expression 'that is to say' is employed to make clear and fix the meaning of what is to be explained or defined. Such words are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word 'included' is generally employed. In unusual cases, depending upon the context of the words 'that is to say', the expression may be followed by illustrative instances.
A definition is expected to be exhaustive. Its very terms may, however, show that it is not meant to be exhaustive, A purported definition may say that the term sought to be defined 'includes' what it specifies, but, in that case, the definition itself is not complete."
In our view, the above decision of the Supreme Court clearly supports the view adopted by the Tribunal in the light of the decision in Padinjarekkara Agencies case (1996) 2 KLT 641 to the effect that centrifuged latex is a different commercial product from raw rubber latex. With respect, we are in agreement with the view expressed by the learned single Judge in Padinjarekkara Agencies case (1996) 2 KLT 641 on this aspect.
5. In this context we may notice that a division Bench of this Court in Commissioner of Income-tax v. Kanam Latex Industries P. Ltd. [1996] 221 ITR 1 ; (1996) KLJ (TC) 210 has held that centrifuged latex is commercially a different product from raw rubber latex (field latex). Therein their Lordships referred to the various decisions of the Supreme Court and followed the decision in Empire Industries Limited v. Union of India [1987] 64 STC 42 (SC) ; [1986] 162 ITR 846, and noted that if after undergoing process and emerges as a commercially different commodity with its own price structure, custom and other commercial incidents it would Be partaking the characteristics of manufacture, including incidental or ancillary processes in the direction of the final product. It may notice hat the manufacture of centrifuged latex from field latex is done with sophisticated machinery installed at great cost and the emerging product on manufacture has entirely different commercial identity and its own price structure thus clearly establishing that field latex when converted into centrifuged latex undergoes a manufacturing process. With respect we are inclined to agree with the above view of the division Bench. Once we agree with that view, it is clear that the decision of the Supreme Court in State of Tamil Nadu y. Pyare Lal Malhotra [1976] 37 STC 319 and the ratio of the decision in Telangana Steel Industries case [1994] 93 STC 187, as quoted by us above make the assessee liable for tax on the, purchase turnover of raw rubber latex on the basis that it is the last purchaser of that item in the State.
6. At this stage, we may also refer to the decision of the Supreme Court rendered on September 5, 2001 in Aspinwall & Co. Ltd. v. Commissioner of Income-tax, Ernakulam [2002] 125 STC 101 ; [2001] 251 ITR 323 ; (2001) 6 Supreme 737. In that decision, the Supreme Court held that the High Court of Kerala was not right in coming to the conclusion that the assessee was not involved in any manufacturing or production activity in the process of curing the coffee. Their Lordships referred to the decision of the Supreme Court in Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC) ; (1980) Suppl. SCC 174, and the test laid down therein for determining whether manufacture can be said to have taken place as to whether the commodity Which was subjected to the process of manufacture can no longer be regarded as the original commodity or is recognised in the trade as a new and distinct commodity. We feel that the ratio of the said decision also supports the view we have taken as above.
7. It may also be noticed that in the decision of the division Bench of this Court in K.K.S. Khader Mohideen v. State of Kerala Reported in [2003] 130 STC 61, the division Bench of this Court following the decision of the Supreme Court in K.A.K, Anwar & Co. v. State of Tamil Nadu [1998] 108 STC 258 held that raw hides and skins and dressed hides and skins are different commercial commodities. The ratio of that decision also supports the view we have adopted.
8. Learned counsel for the assessee relied on a circular No. 16/ 98 dated May 28, 1998 issued by the Board of Revenue clarifying that with effect from April 1, 1988 if a dealer purchased field latex, converted it into centrifuged latex and sold centrifuged latex within the State to a registered dealer, he could claim exemption from tax if the buyer had issued the declaration in form No. 25. If on the other hand the processed latex (centrifuged latex) is sold inter-State, the dealer may have to pay tax on purchase of field latex, he being the last purchaser within the State and also pay Central sales tax on the inter-State sales of centrifuged latex. From April 1, 1997 if a tax is paid on field latex under the Kerala General Sales Tax Act, no tax will be payable on centrifuged latex sold inter-State. We are not quite sure how this circular would help the assessee to contend that both field latex and centrifuged latex are commercially the same product. That apart, the circular issued by the Board of Revenue cannot have binding force in the place of the conclusion that is to be arrived at based on an appreciation of rival arguments on the scheme of the Act. Under Section 3(lA)(c) of the Act the Board of Revenue may issue such orders, instructions and directions to such officers and persons as it may deem fit for the proper administration of the Act. The Board of Revenue cannot issue, a circular exempting a commodity from tax. That power is vested with the Government under Section 10 of the Act and the same can be done by the Government by a notification in the gazette making an exemption or reduction in rate in respect of any tax payable under the Act. There is no case for the assessee that there has been any notification issued by the Government under Section 10 of the A,ct exempting the payment of tax. In that situation, we are of the view that the circular relied on by counsel for the assessee is of no avail.
9. In the light of our discussion as above, we see no error in the decision of the Appellate Tribunal on the aspect raised and argued before us. Hence, we find no reason to interfere with that decision. Consequently, we confirm the decision of the Tribunal and dismiss this revision.
Order on C.M.P. No. 467 of 2001 in T.R.C. No. 37 of 2001 dismissed.