Madras High Court
State Of Tamil Nadu vs Suguna Agencies on 8 November, 1990
Equivalent citations: [1991]81STC33(MAD)
JUDGMENT Mishra, J.
1. Government of the State has moved this Court in revision on a determination by the Appellate Tribunal under the Tamil Nadu General Sales Tax Act, 1959, that a commodity called grinders once taxed when the assessee/respondent purchased without electrically operating motors, does not become a new commodity for sale when it is sold again with the electric motor joined to it as a new item of sale by the assessee/respondent.
2. When it was determined that the assessee was liable to pay tax on a total and taxable turnover at Rs. 23,50,956.84 and Rs. 3,53,861.60 as against the reported total and taxable turnover of Rs. 24,48,676.84 and Rs. 2,985.02, respectively by the assessing authority for the assessment year 1977-78, the assessee objected to the imposition of any tax on the sale of wet grinders attached with electric motors and also raised some other objections. The issue, however, as to the tax liability upon the sale of grinders under item 41-B of the First Schedule to the Act came up before the Tribunal. The Tribunal agreed with the contention of the assessee that even though the wet grinder was sold with electric motor attached to it by the assessee, since it had already been taxed at the very first sale to him in the State, he was not liable to pay any tax.
3. To appreciate how this controversy arose and came to be answered as above by the Tribunal, it may be noticed that it is not in dispute that the assessee had purchased grinders and electric motors separately upon which tax had been realised by the State and also that the assessee had attached electric motors to such wet grinders purchased by him and marketed them to consumers. The assessee's case, however, was that by the contrivance of joining the grinders with electric motors, their identity was not changed and they continued to be grinders as they were purchased by him. Since they did not lose their identity, they were exempted from the tax liability.
4. In State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 the Supreme Court considered whether a division of the item of iron and steel into several categories and description of such divisions as separate entry was justifiable or not and in that connection also noticed a contention as to when a certain commodity with respect to which a tax liability was already determined could be subjected to a fresh tax. The Supreme Court has observed :
"As we all know, 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."
After considering the case of State of Madhya Bharat v. Hiralal and Devi Dass Gopal Krishnan v. State of Punjab , the Supreme Court in the said case has also observed :
"It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the sales tax law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of sales tax is also concerned with 'goods' of various descriptions. It, therefore, becomes necessary to determine when they ceased to be goods of one taxable description and become those of a commercially different category and description."
5. In the First Schedule to the Act wherein goods in respect of which single point tax is leviable under sub-section (2) of section 3 of the Act are described and identified separately, items 41, 41-A, 41-B, 41-C, 41-D and 41-E deal with electrical goods, instruments, apparatus and appliances, etc., including domestic electrical appliances, namely, grinders, mixers, etc., enumerated under item 41-B and wet grain grinders designed for use withe electrically or other form of power (whether or not sold as a composite unit, with or without motors) and the parts and accessories of such grinders under item 41-E. Item 41-E, it appears, has been inserted in the Schedule by Act 21 of 1983 with effect from January 1, 1983, and, therefore, not available as the charging provision as to the rate of tax for the relevant assessment year in the instant case. Grinders, which were not covered by item 41-B and thus not included in the definition of "domestic electrical appliances" as under item 41-B meaning electrical appliances, normally used in the household and similar electrical appliances used in hotels, restaurants, hostels, offices, educational institutions, hospitals, train kitchens, aircrafts or ships, pantries, canteens, tailoring establishments, laundry shops, hair dressing saloons and in similar establishments, it seems, until the introduction of item 41-E with effect from January 1, 1983 in the Schedule, fell under item 81 wherein all machinery (other than those specifically included in the Schedule) worked by electricity, diesel or petrol, furnace oil, kerosene, coal including charcoal, or any other form of fuel or power and parts and accessories of such machinery and tools used with such machinery were/are included. According to the assessee, at the time of purchase by him, the grinders were not treated as any electrical appliances because they were not attached with the motor as the motive power. The only act done by him was to attach an electric motor or it. This did not bring any change in the grinder's identity and thus having once subjected to tax, it could not be subjected to sales tax once again. It appears that the grinder in question was produced before the Tribunal. The Tribunal has said :
"...... The appellants had produced the wet grinder itself before this Tribunal for inspection. It is seen that no electric motor is build in the grinder itself, i.e., wet grain grinder, does not contain any built-in electric motor. It is stated that the grinder can be operated by any prime mover run by V belt mechanism. It is seen that the grinders are capable of being run not only by electric energy from a motor to be attached to it, but also mechanically with the use of diesel or petrol engine or by another prime mover. In the circumstances that the wet grinders as manufactured and dealt by the appellants' do not have any built-in motors for instant operation in the system itself, it is difficult to term them as electric grinders ......."
There is nothing before us to think otherwise. The Tribunal has in essence held that the grinders after being attached with electric motors, did not change their identity. It is not necessary, however, although the Tribunal has so said, to examine whether the grinders when sold to the assessee or purchased by him were electric grinders or not because if they were electric grinders at that point of time, they were to be assessed in accordance with the prescription with respect to the commodities under item 41-B or any such other item which applied to the electrical appliances. Why they were treated as not covered by item 41-B for the tax purpose at that point of time is not a relevant question. But what is relevant is to examine whether by the contrivance provided to the grinders, that is to say, by the electric motors having been attached to them, they were converted into a separate commodity or a commodity other than the grinders originally purchased by the assessee or not. We have noticed that it will not easily be inferred merely because more than one machine are joined together that a new commercial item has been created. The Supreme Court has in the aforequoted judgment said :
"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."
There is no dispute that electric motor and grinder, two different commercial goods were joined together by the assessee. The Tribunal has said that there being no in-built electric motor in the grinder, it could not be identified as an electrical appliance. We have no reason to differ with the said finding. Our observation, however, should not mean that in cases where materials become available to show that such a combination of electrical motor and grinder creates a new commodity altogether shall also not be taxed when sold by any person, who by creating such a new commodity sought or seeks exemption. The tax revision case carries no merit. It is accordingly dismissed. No costs.
6. Petition dismissed.