JUDGMENT
P.C. Balakrishna Menon, J.
1. All these tax revision cases at the instance of the Deputy Commissioner, Sales Tax (Law), raise a common question whether the assessee is liable to tax under Section 6A of the Kerala General Sales Tax Act, 1963, in respect of the purchase turnover of raw-bones converted into bone-meal for sale as fertiliser. The cases relate to 1975-76, 1976-77, 1977-78 and 1978-79. The assessments for the years 1975-76, 1976-77 and 1977-78 were completed on best judgment by the Sales Tax Officer and separate orders for these years were issued fixing the taxable turnover and the sales tax due thereon. The Sales tax Officer later initiated proceedings under Section 19 of the Act on the ground that the purchaser turnover of (sic) to tax under Section 6A of the Act had escaped assessment. The assessing officer overruling the contentions of the assessee that the purchase turnover relating to raw-bones is not liable to tax, issued revised orders of assessment for these years. The order of assessment for the year 1978-79 took in also the purchase turnover of raw-bones as liable to tax under Section 6A of the Act. In appeal by the assessee the Appellate Assistant Commissioner remanded all these cases for fresh disposal after giving the assessee a further opportunity to prove his case. The remand in respect of the assessment year 1978-79 took in also matters other than the assessee’s liability to tax under Section 5A of the Act. In further appeal, the Sales Tax Appellate Tribunal, Ernakulam, has set aside the reassessment proceedings in-respect of the years 1975-76, 1976-77 and 1977-78 holding that no tax is leviable on the purchase turnover of raw-bones under Section 6A of the Act. The remand order in respect of the assessment year 1978-79 was, however, confirmed confining it to matters other than the assessee’s liability to tax under Section 6A on the purchase turnover of raw-bones. In regard to the purchase turnover of raw-bones it was held that the sale is not liable to tax under Section 5A of the Act. It is against these orders of the Tribunal that the Deputy Commissioner of Sales Tax (Law) has come up in revision.
2. The relevant portion of-section 5A(1) is extracted below :
Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under Section 6, and either-
(a) consumes such goods in the manufacture of other goods for sale or otherwise; or shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in Section 6.
According to the department the raw-bones purchased by the assessee is consumed in the manufacture of bone-meal for sale in the market and therefore the purchase turnover of raw-bones is liable to tax under Section 5A. A Division Bench of this Court in Deputy Commissioner of Sales Tax v. Pio Food Packers [1978] 41 STC 364 considering the question whether sliced pine-apple packed in tins is liable to tax under Section 5A of the Act stated at page 366 :
The relevant clause in the section which has application is Section 6A(1)(a) and the conditions to be established before liability can be attracted are : (1) that the goods purchased have been consumed; (2) that such consumption was in the process of manufacture; and (3) that the manufacture was of other goods for sale. It is necessary to concentrate on the expressions underlined, namely, “consumption”, “manufacture” and “other goods”. The last of these is to be noticed only to emphasise that the resultant product must be distinct and different from the goods consumed in the process of manufacture.
After an elaborate consideration of the meaning of these expressions with reference to decided cases the Division Bench held that sliced pine-apple, the fruit, and despite the process involved in packing it in containers for being made available in the market, remains the same as pine-apple and there is neither “consumption” of the commodity nor is there any process of “manufacture” of “other goods” for sale. This decision was affirmed by the Supreme Court in Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC). It is stated at page 65:
Section 5A(1)(a) of the Kerala General Sales Tax Act envisages the consumption of a commodity in the manufacture of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture, and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. 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. Where there is no 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 after considering its earlier decisions and the decision of the ,U. S. Supreme Court in East Texas Motor Freight Lines v. Frozen Food Express 100 L Ed 917 stated at page 66 :
Although a degree of processing is involved in preparing pine-apple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it.
The decision in Pio Food Packers’ case [1980] 46 STC 63 (SC) was followed in a later decision of the Supreme Court in Chowgule & Co. P. Ltd. v. Union of India [1981] 47 STC 124 (SC) wherein it is stated at page 130 :
The point which arises for consideration under the first question is as to whether blending of ore in the course of loading it into the ship through the mechanical ore-handling plant constituted manufacture or processing of ore. Now it is well-settled as a result of several decisions of this court, the latest being the decision given on 9th May, 1980, in Civil Appeal No. 2398 of 1978, Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC) that the test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity.
It is further stated at the same page :
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 ?
Applying the aforesaid test it was held that blending of different qualities of iron ore possessing different chemical and physical compositions for the purpose of standardisation to conform to certain contractual specifications does not bring into existence a commercially new and distinct commodity from the ore of different specifications blended together. The Supreme Court in Kathiawar Industries Ltd. v. Jaffrabad Municipality AIR 1979 SC 1721 had occasion to construe the meaning of the words “consumption” and “use” in considering the question whether uncrushed salt brought from outside the octroi limits of the respondent-municipality was liable to octroi under the Saurashtra Terminal Tax and Octroi Ordinance and the Rules issued thereunder. After referring to the decision in Burntah-Shell Oil Storage & Distributing Co. of India Ltd. v. Belgautn Borough Municipality [1963] Suppl 2 SCR 216 the Supreme Court stated at page 1723 :
In considering the meaning of the words ‘consumption’ and ‘use’, this court observed in Burmah-Shell case [1963] Suppl 2 SCR 216 that the word ‘consumption’ in its primary sense means ‘the act of consuming’ and in ordinary parlance means ‘the use of an article in a way which destroys, wastes or uses up that article’. But in some legal contexts, the word ‘consumption’ has a wider meaning. It is not necessary that by the act of consumption the commodity must be destroyed or used up.
After considering the question with reference to the earlier decisions of the Supreme Court it was held :
Applying this test the conclusion is irresistible that when uncrushed salt is crushed in the factory it is commercially a different article and the uncrushed salt must-‘be held to have been consumed. The word ‘use’ is of wider import than ‘consumption’. It cannot be denied that the uncrushed salt has been used and by the user a new product, crushed salt has come into existence.
3. The bone-meal manufactured out of raw-bones has got a different commercial identity as fertiliser even though the process of manufacture involved is only the crushing and powdering the same. Counsel for the assessee relies on the decision of the Madras High Court in State of Tamil Nadtt v. Subbaraj [1981] 47 STC 30, wherein it is held that raw-bones cannot be said to have been “consumed in the process of bringing into existence the crushed bone, bone grist, bone-meal, fluff or horn hoof, apart from the distinctive meaning that will have to be attributed to the word ‘manufacture’ “. Construing the wording in the corresponding Section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act, it is stated at page 34 :
Inasmuch as the goods purchased are not consumed in the process of manufacture of some other goods, Section 7-A(1)(a) will not be attracted. The very use of the word ‘consume’ contemplates that the goods purchased should have been devoured or exhausted in the process of manufacture with the result, its identity must have been completely lost. So long as its identity remained, the goods purchased and used in the manufacture of some other goods cannot be said to have been consumed in the process of manufacture of other goods.
The decision of the Supreme Court in Pio Food Packers’ case [1980] 46 STC 63 (SC) referred to above makes it clear that if the product manufactured has a different commercial identity, the commodity purchased for such manufacture is liable to tax under Section 5A(1)(a) of the Act. The bone-meal manufactured for sale as fertiliser in the market has a separate commercial identity distinct from these raw-bones purchased. We are clearly of the view that the purchase turnover of raw-bones is liable to tax under Section 6A of the Act.
The result of the foregoing discussion is : we allow the tax revision case and set aside the impugned orders of the Sales Tax Appellate Tribunal. The reassessment orders relating to the assessment years 1975-76, 1976-77 and 1977-78 are restored. The remand order relating to the assessment year 1978-79 will however remain and subject to the decision as stated above all other questions directed to be considered afresh will be considered and a fresh order of assessment will be passed by the assessing authority.
Counsel for the assessee prays for leave to appeal to the Supreme Court. We do not see any substantial question of law of general importance that needs to be decided by the Supreme Court. The prayer for leave is accordingly rejected.
