KUTTIRAYIN AND CO Vs. STATE OF KERALA

JUDGEMENT

(1.) The tax revision cases raise a common question of law, viz., when timber logs are converted into sizes, planks and scantlings, are the logs consumed in the manufacture of other goods so as to attract tax liability under S.5A(1)(a) of the Kerala General Sales Tax Act, 1963.

(2.) That timber logs purchased by the assessees are subjected to some treatment, labour and manipulation, namely, sawing and very often, some processing prior to that, and that as a result thereof some change or transformation occurs to those logs admit of no doubt. But are the timber logs 'consumed in the manufacture of other goods'. It appears to us that the verb 'consume' in the provision read above means: 'to use up'. In that view it cannot also be denied that by sawing and converting the timber logs into sizes, planks, or scantlings these logs are consumed or used up. The further question is: Are they so consumed or used up 'in the manufacture of other goods'. If the result of the change or transformation of the logs is such that commercially new and different articles emerge there can be no doubt that the logs have been consumed or used up in the manufacture of other goods. Shortly stated, the test is: Are the goods the same articles of merchandise or different articles of merchandise as understood in commercial language or in common parlance, before and after the conversion or change. If different, the products obtained on conversion are the result of manufacture, and if same, they are not.

(3.) The Calcutta High Court in Shaw Bros. And Co. v. State of West Bengal, 1963 (14) STC 878 , took the view that planks sawed out of logs constitute a new kind of commodity different from logs themselves. Though in State of Orissa v. Rajani Timber Traders, ( 1974 (34) STC 374 ), the Orissa High Court held that sized timber is a different commodity from timber logs, in a subsequent decision, Krupasindhu Sahu & Sons v. State of Orissa, 1975 (35) STC 270 , that Court said that that will depend upon as to how or in what manner the logs were sized and how they lost the original character. Considering the question as to whether 'item 63 - Timber' in the First Schedule of the Andhra Pradesh Sales Tax Act is comprehensive enough to include planks, rafters, cut sizes etc. the Andhra Pradesh High Court in Ramaswamy v. State of Andhra Pradesh, 1973 (32) STC 309 , held that they would fall under that entry and observed that merely because they are sawn or cut from logs of wood their character is not altered and they would continue to be raw materials which by themselves and in the same form cannot be put to construction purposes. But we are afraid that this decision was not concerned with the question raised in these cases. And so far as that question is concerned, we are of the view, that it is of no consequence that timber after sawing or cutting still is raw material for manufacture or construction of something else. One other decision to be noticed is Sidhu Ram Atam Parkash v. State of Haryana, 1974 (34) STC 344 , where it was held that on conversion of a log into planks or rafters no new substance comes into being and therefore conversion will not be a manufacturing process. In the decision of the Supreme Court, Union of India v. Delhi Cloth and General Mills (AIR1963 SC 791) which was relied on in Sidhu Ram Atam Parkash v. State of Haryana, 1974 (34) STC 344, that Court has approvingly extracted a passage from an American judgment as quoted in Permanent Edition of Words and Phrases, Vol. 26. That passage reads:-