STATE OF MADRAS Vs. M R KRISHNASWAMI NAIDU

JUDGEMENT

(1.) THESE appeals raise a common question. The respondents are dealers in groundnut oil. In the assessment years 1959-60 and 1060-61 they sold quantities of groundnut oil set out in the table below to the Hindustan Lever Ltd.:

(2.) IN proceedings for assessment to sales-tax, the respondents claimed that they were liable to pay tax at a concessional rate under Section 3 (3) of the Madras General Sales Tax Act, 1959. That contention was rejected by the Additional Commercial Tax Officer and the order was confirmed by the Sales Tax Appellate Tribunal. The High Court set aside the orders holding that the respondents were entitled to claim the concessional rate under Section 3 (3) of the Act. The State of Madras has appealed to this Court with certificate granted by the High Court.

(3.) IT was, however, urged on behalf of the State that an article is a component part within the meaning of the Explanation of Section 3 (3) of the Act only if it is capable of being identified visually in the final product. We are unable to accept that contention. The Legislature has not provided that before a component part may qualify for the concessional rate of tax, it must be capable of visual identification in the finished product. A reference to the entries in the First Schedule clearly indicates that the benefit of Section 3 (3) may not be obtained in respect of any raw material supplied for manufacture of finished products, if the test of visual identification be adopted. In our judgment, if the component is capable of identification by a chemical or other test as a component of a finished product falling within the Schedule, it would be an identifiable constituent within the meaning of Section 3 (3) Explanation, and the sale of the component would qualify for the concessional rate of tax. The High Court was in our judgment, right in holding that the respondents were liable to tax only under Section 3 (3), and not under Section 3 (1) of the Act.