Karnataka High Court
Reliable Rocks Builders And Suppliers vs The State Of Karnataka And Anr. on 31 July, 1980
Equivalent citations: [1982]49STC110(KAR)
JUDGMENT Rama Jois, J.
1. In these four connected appeals presented under section 24(1) of the Karnataka Sales Tax Act (hereinafter referred to as "the Act") by the assessee, the following question of law arises for consideration :
Whether the assessee, who had purchased boulders under circumstances in which no tax was leviable at the purchase point and who converted them into jelly, in a process which is not a manufacturing process, is liable to tax under section 6 of the Karnataka Sales Tax Act ?
2. The facts of the case are these : The assessee is a registered firm carrying on business in latrite and granite stones. During the relevant assessment years, the assessee purchased boulders from unregistered dealers, who are not liable to tax under section 5 of the Act. He produced jelly out of these boulders. For the assessment years 1970-71, 1972-73 and 1973-74, the turnovers of the assessee were as follows :
1970-71 ... Rs. 34,368.00
1972-73 ... Rs. 71,725.00
1973-74 ... Rs. 1,00,000.00
In the first instance, the assessing authority did not levy tax on the said turnover under section 6 of the Act. Later in exercise of his power under section 12-A of the Act, the assessing authority rectified the assessment and brought the aforesaid turnovers to tax under section 6 of the Act.
3. Aggrieved by the orders of the assessing authority, the assessee preferred appeals before the Deputy Commissioner of Commercial Taxes. The appeals were disposed of by a common order dated 21st May, 1976. The Deputy Commissioner was of the opinion that as the purchase turnover of boulders was already before the assessing authority at the time when he passed original order, the provisions of section 12-A of the Act could not be invoked. In the said view of the matter he set aside the rectification orders.
4. Thereafter the Commissioner initiated proceedings under section 22-A of the Act on the ground that the order of the Deputy Commissioner was erroneous and prejudicial to the revenue and, therefore, he proposed to revise the order of the Deputy Commissioner. As regards the assessment year 1971-72 also the purchase turnover of boulders of the assessee amounting to Rs. 28,051 had been exempted from tax by the assessing authority. But he had not made rectification order under section 12-A of the Act. Therefore the Commissioner initiated similar action for suo motu revision of that order also under section 22-A of the Act.
5. In its reply to the Commissioner, the assessee contended as follows :
That when it converted the boulders into jelly no manufacturing process was involved. Section 6 of the Act makes the purchase turnover liable to tax only if the goods purchased under circumstances that no tax could be levied under section 5(1) of the Act are consumed in the manufacture of other commodities. It was argued for the assessee that as no manufacturing process was involved as the boulders were merely converted into jelly just by the process of breaking, the purchase could not be brought to tax under section 6 of the Act.
6. The Commissioner, however, did not agree with the contention urged for the assessee. He relied on the judgment of the Madhya Pradesh High Court in G. R. Kulkarni v. State [1957] 8 STC 294 in which a Division Bench of the said High Court had held that the breaking of boulders into jelly was a process of manufacture within the meaning of section 2(i)(a) of the Madhya Pradesh Sales Tax Act, 1947. The Commissioner held that the process by which the assessee converted boulders into jelly amounted to manufacture and therefore the purchase turnover attracted the provisions of section 6 of the Act. Aggrieved by the said order, the assessee has preferred these four appeals.
7. The contention urged for the assessee is that the conversion of boulders into jelly by the mere process of breaking, is no manufacturing process and the view taken by the Commissioner to the effect that it was a manufacturing process and consequently the provisions of section 6 of the Act were attracted, was erroneous. In support of this contention a decision of this Court in K. Cheyyabba v. State of Karnataka [1980] 45 STC 1; (1979) 2 Kar LJ 249 was relied on for the assessee. In the said case, the question for consideration was whether the process of slaughtering sheep and goats to produce mutton, hides and skins amounted to a manufacturing process. The Commissioner had taken the view that it was not a manufacturing process. This Court also proceeded on the same basis referring to a similar view taken by the Kerala High Court in A. B. Ismail v. State of Kerala [1978] 42 STC 217. The learned counsel for the revenue also did not seriously dispute that the process by which the boulders are converted into jelly did not amount to manufacture of the latter from the former. In our view, the process of breaking boulders into jelly cannot be described as a manufacturing process.
8. The learned counsel for the revenue, however, argued that even if the process of converting boulders into jelly did not amount to a manufacturing process, even then the assessee is liable to pay purchase tax as he has consumed boulders for producing jelly, which is a different article for purposes of sale. He invited our attention to the wording of section 6 of the Act which reads :
"6. Levy of purchase tax under certain circumstances. - Subject to the provisions of sub-section (5) of section 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and,
(i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State, or * * * * He argued that the levy of tax under section 6 of the Act would be attracted if the following conditions are satisfied :
(i) The dealer should have purchased the goods in the course of business under circumstances in which no tax was leviable under section 5 of the Act; and
(ii) The dealer after having so purchased, consumed such goods in the manufacture of other goods for sale; or has consumed such goods for producing other goods for sale by any process otherwise than manufacture.
He submitted that so long as the dealer had consumed the goods for producing other goods for sale either by a process of manufacture or by any other process, the liability to pay tax under section 6 of the Act arises. In support of his submission, he relied on he decision of the Supreme Court in Ganesh Prasad Dixit v. Sales Tax Commissioner, M.P. . In the said case the Supreme Court interpreted section 7 of the Madhya Pradesh General Sales Tax Act, which is similar to section 6 of the Act. In the said case, it was held that even if the goods were consumed otherwise than in the process of manufacture, the liability to pay tax under section 7 of that Act arose. The relevant portion of the judgment on which the learned counsel for the revenue relied on reads on follows :
"Mr. Chagla, for the appellants urged that the expression 'or otherwise' is intended to denote a conjunctive introducing a specific alternative to the words 'for sale' immediately preceding. The clause in which it occurs means, says Mr. Chagla, that by section 7 the price paid for buying goods consumed in the manufacture of other goods, intended to be sold or otherwise disposed of, alone is taxable. We do not think that that is a reasonable interpretation of the expression 'either consumes such goods in the manufacture of other goods for sale or otherwise'. It is intended by the legislative that consumption of goods renders the price paid for their purchase taxable, if the goods are used in the manufacture of other goods for sale or if the goods are consumed otherwise."
9. He also relied on the decision of this Court in K. Cheyyabba v. State of Karnataka [1980] 45 STC 1; (1979) 2 Kar LJ 249. In the said case, as stated earlier, the question for consideration was whether the dealer who had purchased sheep in the course of his business and had converted into mutton, hides and skins by slaughtering the sheep was liable to pay tax under section 6 of the Act. This Court even after accepting the contention of the assessee urged therein that the process of slaughtering the sheep to produce mutton, hides and skins, did not amount to a manufacturing process, following the decision of the Supreme Court in Ganesh Prasad Dixit's case held that as the dealer had consumed sheep to produce other commercial goods, though otherwise than by the process of manufacture, he was liable to pay tax under section 6 of the Act. The above decision fully supports the contention urged for the revenue.
10. On behalf of the assessee, however, reliance was placed on the decision of the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers . In the said case, section 5A(1)(a) of the Kerala General Sales Tax Act, which is similar to section 6 of the Act, came up for consideration before the Supreme Court. The assessee therein had purchased pineapple fruits from growers under circumstances when no tax could be levied and converted them into pineapple slices for purposes of sale. The question for consideration was whether liability to pay tax under section 5A(1)(a) arose. The Supreme Court held that the process by which pineapple was converted into pineapple slices did not amount to a manufacturing process. Further, it was held that the liability to pay tax under section 5A(1)(a) of the Kerala Act arises only if the goods are consumed in the manufacture of other goods either for purposes of sale or for purposes other than sale. The relevant portion of the judgment reads :
"The learned counsel for the revenue contends that even if no manufacturing process is involved, the case still falls within section 5A(1)(a) of the Kerala General Sales Tax Act, because the statutory provision speaks not only of goods consumed in the manufacture of other goods for sale but also goods consumed otherwise. There is a fallacy in the submission. The clause, truly read, speaks of goods consumed in the manufacture of other goods for sale or goods consumed in the manufacture of other goods for purposes other than sale.
In the result, we hold that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture. The case does not fall within section 5A(1)(a) of the Kerala General Sales Tax Act. The High Court is right in the view taken by it."
The above decision fully supports the contention urged for the assessee.
11. The learned counsel for the revenue however submitted that the decision in Ganesh Prasad Dixit's case which was followed by this Court in Cheyyabba's case [1980] 45 STC 1; (1979) 2 Kar LJ 249 should be followed as the said decision has not been referred to in Pio Food Packers case and the same has not been overruled. It is true that Ganesh Dixit's case is not referred to and overruled in Pio Food Packers' case . It is also true that the former supports the contention urged for the revenue and the latter supports the contention urged for the assessee. In this situation as both the decisions are rendered by a Bench of three Judges of the Supreme Court, the latest decision is binding on this Court.
12. For the reasons aforesaid, we make the following order :
The appeals are allowed. The order of the Deputy Commissioner in appeal for the assessment years 1970-71, 1972-73 and 1973-74 and the order of the assessing authority for the assessment year 1971-72 shall stand restored. No costs.
13. Appeals allowed.