TEEJAN BEVERAGES LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The petitioners in these cases claim sales tax exemption on "drinking water" packed in bottles and sold by them under various Brand names. In fact, the very same item was earlier sold as "mineral water" and the sales tax exemption claimed in all these cases pertain to that period also. It is now conceded that after the prescription of standards for mineral water and for packed drinking water (other than mineral water ) Vide G.S.R. No. 760(E) dated 29.9.2000 with effect from 29.3.2001, under the Prevention of Food Adulteration Rules, 1955, the petitioners have changed the name of their product from "mineral water" to "drinking water". Therefore the admitted position is that the item in respect of which sales tax exemption claimed in the O.Ps, namely "mineral water" earlier, and now renamed "drinking water" is one and the same. Now the question is whether this item qualifies for sales tax exemption as a "manufactured product" within the meaning of notification, SRO 1729/93 issued by the Government of Kerala. The said notification among other things grants sales tax exemption on new SSI units in regard to manufacture and sale of products subject to certain limitations for a definite period. The petitioners are admittedly SSI units, who obtained registration from the Industries Department as such. The basic condition for claiming sales tax exemption by SSI units is that the unit is engaged in the manufacture of a product. The notification defines "manufacture" and therefore what has to be decided is whether the processes engaged by the petitioners constitute "manufacture" and whether their product, namely, "mineral water", or "drinking water", is a manufactured product to qualify for exemption under the said notification. The definition of "manufacture" contained in SRO 1729 of 21993 is as follows : "Manufacture" shall mean the use of raw materials and production of goods commercially different from the raw materials used but shall not include mere packing of goods, polishing, cleaning, grading, drying, blending or mixing different varieties of the same goods, sawing, garbling processing one form of goods into another form of the same goods by mixing with chemicals or gas, fumigation or any other process applied for preserving the goods in good condition or for easy transportation. The process of producing desiccated coconut out of coconut (chemical treatment of rubber wood and production of dressed or tanned hides out of raw hides) shall be deemed to be 'manufacture' for the purpose of this notification. The following process shall not be deemed to be 'manufacture' for the purpose of this notification :- (a) Crushing copra and producing coconut oil and coconut oil cake. (b) Converting timber logs into timber sizes. (c) Crushing rubble into small metal pieces. (d) Converting sodium silicate into liquid silicate. (e) Tyre-retreading. (f) Cutting granite or marble slabs into smaller pieces and polishing them. (g) Such other process as may be notified by Government in this behalf. (h) Conversion of rubber latex into centrifugal latex, raw rubber sheet, ammoniated latex, crepe rubber, crumb rubber, or any other item falling under entry 110 of the First Schedule to the Kerala General Sales Tax Act, 1963 or treating the raw rubber in any form with chemicals to form a compound of rubber by whatever name called. The petitioners in these cases claim sales tax exemption on "drinking water" packed in bottles and sold by them under various Brand names. In fact, the very same item was earlier sold as "mineral water" and the sales tax exemption claimed in all these cases pertain to that period also. It is now conceded that after the prescription of standards for mineral water and for packed drinking water (other than mineral water ) Vide G.S.R. No. 760(E) dated 29.9.2000 with effect from 29.3.2001, under the Prevention of Food Adulteration Rules, 1955, the petitioners have changed the name of their product from "mineral water" to "drinking water". Therefore the admitted position is that the item in respect of which sales tax exemption claimed in the O.Ps, namely "mineral water" earlier, and now renamed "drinking water" is one and the same. Now the question is whether this item qualifies for sales tax exemption as a "manufactured product" within the meaning of notification, SRO 1729/93 issued by the Government of Kerala. The said notification among other things grants sales tax exemption on new SSI units in regard to manufacture and sale of products subject to certain limitations for a definite period. The petitioners are admittedly SSI units, who obtained registration from the Industries Department as such. The basic condition for claiming sales tax exemption by SSI units is that the unit is engaged in the manufacture of a product. The notification defines "manufacture" and therefore what has to be decided is whether the processes engaged by the petitioners constitute "manufacture" and whether their product, namely, "mineral water", or "drinking water", is a manufactured product to qualify for exemption under the said notification. The definition of "manufacture" contained in SRO 1729 of 21993 is as follows : "Manufacture" shall mean the use of raw materials and production of goods commercially different from the raw materials used but shall not include mere packing of goods, polishing, cleaning, grading, drying, blending or mixing different varieties of the same goods, sawing, garbling processing one form of goods into another form of the same goods by mixing with chemicals or gas, fumigation or any other process applied for preserving the goods in good condition or for easy transportation. The process of producing desiccated coconut out of coconut (chemical treatment of rubber wood and production of dressed or tanned hides out of raw hides) shall be deemed to be 'manufacture' for the purpose of this notification. The following process shall not be deemed to be 'manufacture' for the purpose of this notification :- (a) Crushing copra and producing coconut oil and coconut oil cake. (b) Converting timber logs into timber sizes. (c) Crushing rubble into small metal pieces. (d) Converting sodium silicate into liquid silicate. (e) Tyre-retreading. (f) Cutting granite or marble slabs into smaller pieces and polishing them. (g) Such other process as may be notified by Government in this behalf. (h) Conversion of rubber latex into centrifugal latex, raw rubber sheet, ammoniated latex, crepe rubber, crumb rubber, or any other item falling under entry 110 of the First Schedule to the Kerala General Sales Tax Act, 1963 or treating the raw rubber in any form with chemicals to form a compound of rubber by whatever name called.

(2.) The petitioners' arguments are two fold, the first is that the entire processing and packing of mineral water amount to manufacture under the definition of the term contained in the notification, and the second is that it is not an item in the negative list provided in the very same notification, nor is it an item, the process of which is notified by the Government under clause (g) of the said definition, to exclude that the same from the scope of manufacture. The processes stated to be engaged by the petitioners in the processing and bottling of drinking water briefly are : 1. Alum dosing 2. Sedimentation

(3.) Chlorination