RANGANATHA INDUSTRIES Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) IN this appeal filed under Section 16 of the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter referred to as 'the Act'), the appellant has called in question the correctness of the order dated June 27, 1994, passed by the Joint Commissioner of Commercial Taxes (Administration), Gulbarga Division, Gulbarga.

(2.) THE facts in brief can be stated as hereunder: The appellant (hereinafter referred to as 'the assessee') is a proprietary concern and is a registered dealer under the provisions of the Act and it is engaged in the activity of extracting oil from rice bran. During the years 1987 -88 and 1988 -89, the assessee caused entry of rice bran into the Raichur local area from outside. The assessing authority by means of its order dated May 29, 1991, granted exemption from the payment of tax under the Act on the entry of rice bran brought into the local area by the assessee taking the view that the same did not constitute raw material for the purpose of entry 16 -B of the Schedule given to the Act. To come to the said conclusion, the assessing authority relied upon the order passed by the Joint Commissioner of Commercial Taxes (Legal), Bangalore, wherein the Joint Commissioner of Commercial Taxes under similar circumstances in the case of M/s. Habib Oil Mills, Srirangapatna, had taken the view that when the goods like oil cake and rice bran are brought into the local area and oil extracted therefrom, the activity should be treated only as one of processing and not manufacturing; and therefore, it will not come within the ambit of entry 16B of the Schedule. However, in the impugned order the Joint Commissioner of Commercial Taxes took the view that the rice bran brought within the local area is liable for payment of tax as the assessee has admittedly used the rice bran for the purpose of extraction of oil out of the rice bran. As noticed by us earlier, the said order is called in question by the assessee in this appeal.

(3.) HOWEVER , Sri Anand, learned Additional Government Advocate while strongly supporting the impugned order pointed out that since un -disputedly oil is produced out of the rice bran, the revisional authority was fully justified in taking the view that the oil was produced as a result of manufacturing activity carried on by the assessee. According to the learned Government Advocate, when oil is extracted out of the rice bran, a new product is produced and the production of the new product takes place only on account of the manufacturing process involved. He pointed out that the production of a new material does not take place merely by way of processing of the rice bran and the nature of the production of the rice bran oil must be considered as taking place only on account of the manufacturing process involved. In support of his contention, that the production of oil out of the rice bran involves manufacturing process, he referred to us the decisions of the Supreme Court in the case of Devi Dass Gopal Krishnan v. State of Punjab : [1967]3SCR557 ; in the case of State of Karnataka v. B. Raghurama Shetty reported in : [1981]3SCR280 ; in the case of State of Andhra Pradesh v. Modern Proteins Ltd. reported in [1994] 95 STC 181 : [1994] 2 Supp. SCC 496 in the case of B.P. Oil Mills Ltd. v. Sales Tax Tribunal reported in [1998] 111 STC 188. He also relied upon the Solvent Extracted Oil, De -oiled Meal and Edible Flour (Control) Order, 1967. He also pointed out that since the revisional authority has passed the impugned order relying upon the judgment of this Court in the case of J.S. Auto Machine Shop v. State of Karnataka reported in [1993] 90 STC 121, there is absolutely no justification to interfere against the said order.