JUDGMENT
1. This is a reference at the instance of the Commissioner of Sales Tax under Section 44(1) of the M.P. General Sales Tax Act, 1958 and the following question has been referred for answer by this Court:
Whether, under the facts and in the circumstances of the case, the Board of Revenue was justified in holding that badi and papad is processing of cereals and pulses and is covered by entry 51(ix) of Schedule I?
2. The respondent-assessee is a dealer registered with the Madhya Pradesh Khadi and Village Industries Parishad, Bhopal, for manufacture of papad and badi for which a certificate of registration has been issued by the Parishad under notification dated January 25, 1981, issued by the Department of Commerce and Industries. In the assessment proceedings for the period November 16, 1982 to November 4, 1983, the respondent-assessee claimed exemption of tax on badi and papad manufactured by it on the ground that a unit registered with M.P. Khadi and Village Industries Board is exempted from tax under entry No.51 of Schedule I. This plea was rejected by the assessing officer, namely, Assistant Sales Tax Officer, Rajnandgaon, vide assessment order dated September 18, 1984. The total sales of papad, badi and aghar worth Rs. 18,800/- was taxed at the rate of 10 per cent. Thereafter first appeal was filed which was rejected by the Additional Appellate Deputy Commissioner of Sales Tax, Raipur, by order dated January 29, 1987. Second Appeal was preferred by the assessee before the Tribunal. It was contended that the process of manufacturing papad and badi is processing of cereals and pulses covered by entry No. 51(ix) of Schedule I and is, therefore, tax-free. It was contended on -behalf of the Revenue that papad and badi manufactured by the respondent-assessee are not covered by any of the items under entry No. 51 of Schedule I, but it is covered by the term “cooked food” because they are neither cereals not pulses.
3. The Tribunal found that papad and badi are nothing but pulses (dal). It was also observed that manufactured papad and badi are not eatables unless they are properly cooked. The contention of the Revenue that papad and badi are “cooked food” was therefore negatived. However, the Tribunal found that they are processed articles out of cereals and pulses and hence eligible for exemption from payment of tax under entry 51(ix) of Schedule I. The Revenue has therefore moved this reference before the Board of Revenue which has referred the aforesaid question for answer by this Court. We have heard learned Counsel and perused the record.
4. Question is whether badi and papad which are prepared out of cereals and pulses through a particular process amount to manufacture or not. It is no gainsaying that badi and papad are prepared out of cereals and pulses. Question is whether this process amounts to manufacture or not. In somewhat identical situation, the question was posed before the honourable Supreme Court as to whether flour, maida and suji though prepared out of wheat amount to manufacture or not when all the three articles retain the main ingredient, i.e., wheat. It was observed that–
When wheat is consumed for producing flour or maida or suji, the commodities so obtained are different commodities from wheat. Wheat loses its identity. It gets consumed and in its place new goods/commodities emerge. The new goods so emerging have a higher utility than the commodity consumed. They are different goods commercially speaking.
5. In the present case also, when pulses and cereals are consumed and papad and badi are prepared out of them, a new commercial commodity comes out. Therefore, it cannot be said to be processed item out of cereals and pulses. An entirely new item emerges which is known in commercial market in its own name. Therefore, badi and papad cannot be said to be processed items. They are manufactured items out of cereals and pulses and they would not fall under Clause (ix) of entry 51 of Schedule I and not entitled to exemption from tax.
6. This reference is therefore answered in favour of Revenue and against the assessee.