R SURESH KUMAR Vs. STATE OF KERALA

JUDGEMENT

(1.) WHETHER conversion of tamarind seeds into tamarind powder is a manufacturing process for claiming exemption under S. R. O. NO. 1729/93 is the question to be considered in this case. The above notification grants exemption to small scale undertakings from payment of tax payable under the Kerala general Sales Tax Act (hereinafter referred to as "the Act") for the goods manufactured for a specified period on satisfying certain conditions. Appellant/petitioner is producing tamarind powder from tamarind seeds. Exemption was denied on the ground that the processing of tamarind seeds into powder is not a manufacturing process. The learned single Judge dismissed the claim for exemption following the Full Bench decision of this Court reported in nambuthiris Pickle Industries v. State of Kerala and another (1992 STC 1 ). In that case, assessee contended that processing of chilly into chilly powder is not a manufacturing process, and therefore, tax is not payable at two stages. That was accepted by the Full Bench. The matter was taken in appeal to the supreme Court. The Supreme Court dismissed the appeal as no evidence was adduced by the State to show that a commercially different product is manufactured. The Supreme Court observed as follow: "whether the chilli powder is the result of a process of manufacture which the chillies have undergone and whether chilli powder is a commodity commercially distinct from chillies are questions of fact to answer which the party proposing that the chilli powder is also exigible to tax must place relevant evidence before the appropriate taxing authority in the instant case, the sales tax authorities should have placed such material to establish that the chillies underwent some process or manufacture and that then end-product, namely, chilli powder, was recognized by those who dealt in it as being distinct from chillies. They did not do so. Therefore, SLP was dismissed by the Supreme Court because no evidence was adduced by the State to show that a commercially different product is manufactured when chilli is converted into chilli powder.

(2.) THE word "manufacture" is defined in the notification S. R. O. No. 1729/93. THErefore, we have to consider whether conversion of tamarind seed into tamarind powder is manufacture as defined in the notification itself. THE entries in the Statute are also relevant to come to a finding on this question. "manufacture" is defined in the notification as follows: " (ix) "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. " So, the question to be considered is whether tamarind powder is commercially different from the raw material tamarind seed. In the definition of "manufacture" in the notification, dehusking and powdering are not excluded from the process of manufacture even though packing, polishing, cleaning, processing one form of goods into another form of the same goods etc. were specifically excluded from the term of "manufacture".

(3.) THE learned Special Government Pleader pointed out the judgment of the Karnataka High Court in Sri Vinayaka Oil Industries v. State of karnataka ( (1993) 91 STC 253) wherein it was held that conversion of tamarind seed into powder does not result in the manufacture of a new article so as to attract section 6 of the Karnataka Act. THEre was no definition of "manufacture" in section 6 of the Karnataka Sales Tax Act. In the above decision, main discussion was whether mere dehusking of tamarind seeds into tamarind pappu was not a manufacture as both were produced in that case for providing starch. If dehusked tamarind seed is used, it will produce brownish starch whereas when pappu is used, it will produce white starch. THE legislative entry in the Act is also not mentioned in the above decision and, without much discussion, after holding that this is normally a matter for the authorities to consider in the light of principles of observations decided, it was held that conversion of seed into powder does not result in the manufacture of a new article. But, in the notification considered by us, there is clear definition of "manufacture" and the Legislative entry also shows that tamarind seed and tamarind powder are considered differently and in the counter affidavit it is stated that tamarind seed cannot be used as cattle feed; but, tamarind powder is used as cattle feed showing functional difference.