M NARAYANAN NAMBIYAR Vs. STATE OF KERALA

JUDGEMENT

(1.) THESE tax revision cases relate to the same assessee for different assessment years, namely, the assessment years 1970-71 to 1973-74, both inclusive. The accounts of the assessee were rejected and the assessment was made on best of judgment basis. The assessee was conducting a rice and flour mill called Dhanalakshmi Rice and Flour Mills, Ezhome, near Payangadi. The only point that is urged in these revision petitions is that the estimate of the purchase turnover of paddy, liable to tax under section 5a of the General Sales Tax Act, made by the Sales Tax Officer and sustained by the Tribunal, was unjustified and unwarranted in law. In view of the contentions raised, it is unnecessary to notice the amount of purchase turnover of paddy brought to tax under the best of judgment. The contention raised is that paddy, purchased locally and milled and converted into rice, would not attract the provisions of section 5a of the Act so as to render the dealer liable to levy of tax. Section 5a, clause (1) and sub-clause (a) thereof, which is the relevant provision, reads : " 5a. Levy of purchase tax.- (1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under section 5, and either - (a) consumes such goods in the manufacture of other goods for sale or otherwise;". The section has recently come in for examination before this Court in at least two decisions. In Deputy Commissioner of Sales Tax v. Pio Food Packers ([1978] 41 S. T. C. 364; 1978 K. L. T. 279), the question arose whether sale of pine-apple, the inedible portions of which had been removed (namely, the crown, the skin and the core) and which, thereafter, was sliced, filled in cane adding sugar as a preservating, sealed under temperature, and put into boiling water for sterilisation, could be said to involve "consumption" of the raw pine-apple for the purpose of "manufacture" of "other goods". This Court discussed the meaning of the three expressions emphasised supra. With respect to the treatises and judicial decisions, it was explained that while every manufacture involves a change, every change is not a manufacture. It was further noticed that there must be a transaction of the article into a new and different one, the resultant article being commercially different from the original one, which is subjected to a change amounting to a manufacturing process. It was well-recognised that, in the consideration and the practical application of these principles or decisions to concrete facts, philosophy and sophistry are bound to play their due share. That, it was pointed out, would alone explain the apparently conflicting decisions on more or less similar, if not identical, facts.

(2.) THE present case adds one more to the perplexing list of cases which fall to be resolved by the practical application of the principles expounded in the earlier decisions regarding the three terms or concepts emphasised above. That there is "consumption" of the paddy within the meaning of that expression, as explained in the treatises and judicial decisions, when paddy is milled or dehusked to result in the production of rice, seems clear enough; but the difficult questions to be faced are : Does the process of dehusking or milling amount to a process of manufacture ? And, is the rice produced as a result of the operation a new or different product or article vis-a-vis the paddy from which it was produced ? In other words, is the rice "other goods" qua the paddy from which it was milled or dehusked ? We are confronted with the oft-repeated aphorism that while every manufacture involves a change, every change is not a manufacture. This has been noticed and referred to in the treatises and decisions noticed in Deputy Commissioner of Sales Tax v. Pio Food Packers ([1978] 41 S. T. C. 364; 1978 K. L. T. 279 ). Unaided by authorities, and as a matter of first impression, we are inclined to take the view that a manufacturing process is involved in the dehusking of paddy or in the milling of paddy into rice in the mills. As a matter of first impression again, we are inclined also to think that paddy and rice are commercially two different articles or commodities. We propound to ourselves the question : Would the world of trade and commerce accept the two commodities as one and the same ? Or regard them as commercially different commodities ? We should think the latter to be the correct answer. THEse first impressions of ours should furnish the answer again the assessed.

(3.) THE learned Government Pleader complained that the decision of the Mysore High Court in State v. Raghurama Shetty ([1975] 35 S. T. C. 360) did not consider either the decision in Ganesh Trading Co. v. State of Haryana ([1973] 32 S. T. C. 623 (S. C.)) (sic) or the one in Sri Siddhi Vinayaka Coconut & Co. v. State of A. P. ([1974] 34 S. T. C. 103 (S. C.)), both of which were pronouncements of the Supreme Court. Attention was drawn to the decision in State of Tamil Nadu v. Pyare Lal Malhotra ([1976] 37 S. T. C. 319 (S. C.)), where the Supreme Court emphasised the principle that each commercial commodity becomes a separate object of taxation in the series of sales of that commodity so long as the commodity retained its identity. THE learned Government Pleader also drew our attention to the decision in K. C. Pazhanimala v. State (A. I. R. 1969 Ker. 154 (F. B.) ). That decision was rendered, no doubt, under a different background, and with respect to the provisions of the Essential Commodities Act. THE observations made by the Full Bench are interesting and enlightening on the aspect that arises for consideration here. Observed the learned Judges : " 19. THE preamble of the impugned order only shows that it was for maintaining and increasing the supplies of rice and paddy and for securing their equitable distribution and availability at fair prices. THE first question to be decided is whether the effect of the impugned order is to regulate by licences or permits the production or manufacture of any essential commodity. Rice is an essential commodity. Conversion of paddy into rice through the rice mills is production or manufacture of rice. THE term production can only mean making goods available for human wants. To constitute manufacture there must be a transformation of that article into another article which is commercially different from the one which was converted. THE essence of manufacture is that change of one object to another for the purpose of making it marketable. In market rice is a different commodity from paddy and therefore when there is a conversion of paddy into rice through rice mills there is either production of rice manufacture of rice from paddy. THE object of the impugned order is therefore to control the same for the purpose of making paddy and rice available to the community at fair prices. THE impugned order therefore falls under section 3 (2) (a) of the Essential Commodities Act. It was argued on behalf of the State that the purpose of the impugned order is to regulate by licences or permits the use of any essential commodity. According to the State, paddy is used for manufacturing rice through mills and what is sought to be regulated by the impugned order is the same use. THE expression 'use' is a word of very wide significance. THE expression in section 3 (2) (a) is not use and consumption but use or consumption. THE two expressions, therefore, connote different meaning. In Murray's New English Dictionary, the word 'use' is defined as : 'act of employing a thing for any (especially a profitable) purpose; the fact, state, or condition of being so employed : utilization or employment for or with some aim or purpose, application or conversion to some (especially good or useful) end;. " Reference was also made by the learned Government Pleader to the decision of this Court in Commissioner of Income-tax, Kerala v. Casino (Pvt.) Ltd. ([1973] 91 I. T. R. 289), where a Division Bench of this Court adopted a liberal construction of the terms "manufacturing" or "processing" of goods. THE decisions cited have only tended to confirm the impression, which we formed in the first blush, that a process of "manufacture" is involved in the production of rice by milling paddy, and that rice so produced represents "other goods" different and distinct in nature and character from the paddy from which it was produced.