COMMISSIONER OF SALES TAX Vs. BOMBAY TRADERS

JUDGEMENT

(1.) This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959, (hereinafter referred to as "the said Act"), made at the instance of the Commissioner of Sales Tax.

(2.) The facts giving rise to this reference are as follows : The assessee (respondents) are registered as a dealer under the said Act and hold a registration certificate. By an application under section 52(1)(b) of the said Act dated 8th July, 1968 made by the assessees to the applicant, the Commissioner of Sales Tax, the assessees set out that they were buying plain cashew-nuts in this and after frying and applying spices to these cashew-nuts to make them tasty, the assessee packed them in plastic bags and sold them locally. By this application the assessees requested the Commissioner to determine as to whether the aforesaid activity frying and spicing amounts to "manufacture" under section 2(17) of the said Act, and that if the answer to the first question was in the affirmative, then what would be the rate of tax on the sale of fried cashew-nuts. Along with this application the assessees sent a copy of the purchase bill dated 21st February, 1968 and the sale bill dated 31st May, 1968. As far as the purchase bill is concerned, we are not concerned with the same, because that relates to the purchase of plain cashew-nuts by the assessees. But, as far as the sale bill is concerned, it is made out on the Controller of Stores and Purchases, Santa Cruz, Airport, Bombay, and shows that the assessees have sold to the purchaser ten thousand two hundred packets of cashew-nuts, the said purchaser being Air India. Apart from this document, the assessees have also produced at the hearing before the Commissioner a purchase order placed by Air-India on the assessees. The relevant part of this purchase order, showing the nature of the cashew-nuts ordered by Air-India, runs as follows : "Cashew-nuts of 210 count, best selected whole nuts. Fried lightly without browning and no lossing salt present. To be packed and supplied in heat-sealed transparent cellophane packets of size 75 x 75 mm. bearing out insignia the centaur and the lego (probably meaning legend) AIR-INDIA in red. Each packet shall weigh 30 gm. net when packed, as per your sample approved by us."

(3.) The Commissioner held that ordinary plain cashew-nuts and the fried and salted cashew-nuts sold by the assessees were quite district commercial commodities. In coming to this conclusion the Commissioner relied on the fact that Air-India has described in detail the process which must be carried out on cashew-nuts and the manner in which it was to be carried out and that if the cashew-nuts were not of the required standard and taste, Air-India would have refused to take delivery of the same. the Commissioner held that the activity of frying the cashew-nuts and spraying them with spices and salt to make them tasty would amount to "manufacture" within the meaning of section 2(17) of the said Act. The Commissioner further held that the fried and salted cashew-nuts sold in heat sealed plastic bags of less than 5kg. each fell within the scope of entry 6 of Schedule E to the said Act. The assessees appealed against this decision to the Tribunal. The Tribunal came to the conclusion that as a result of the activity of frying and salting carried out by the assessees on the cashew-nuts no new or different commercial commodity had come into being and hence the process or activity applied on the cashew-nuts could not be said to be "manufacture" within the meaning of the said term in section 2(17) of the said Act. As far as the question of the rate of tax is concerned, the Tribunal has pointed out in its judgment that the plastic paper bags in which the cashew-nuts were packed for sale were produced before the Tribunal. The Tribunal came to the conclusion that from examining these plastic paper bags it could not be said that the cashew-nuts were sold by the assessees in sealed containers. On this basis the Tribunal came to the conclusion that the cashew-nuts sold by the assessees were covered by entry 5 of Part I of Schedule D and not entry 6 in Schedule E to the said Act as held by the Commissioner. Arising from this judgment and order of the Tribunal, the following two questions have been referred to us for our determination : 1. Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the activity of frying and spicing of the cashew-nuts did not amount to manufacture within the meaning of section 2(17) of the Bombay Sales Tax Act, 1959 ? 2. Whether on the facts and in the circumstances of the case the Tribunal was right in holdings that the fried and salted cashew-nuts sold to Air-India under Bill dated 31-5-68 in pursuance to purchase order No. CM-58633 dated 11-4-68 in heat-sealed transparent cellophane packets of size 75 x 75 mm. and weighing 30 gm. each were not covered by entry 6 of Schedule E. But were covered by entry 5 of Schedule D to the Bombay Sales Tax Act, 1959 ? 3. We now propose to consider the first question, as to whether the activity of frying and spicing of the cashew-nuts by the assessees amounted to "manufacture" within the meaning of that term in section 2(17) of the said Act. We may clarify here that although the expression "spicing" had been used, what really the assessees did was that they fried plain cashew-nuts and salted the same. However, we are not reframing the question, because, in our view, whether the assessees salted or spiced the cashew-nuts would not make much difference. Clause (17) of section 2 of the said reads as follows : "'manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods, but does not include such manufacturers or manufacturing processes as may be prescribed." There is little dispute that the activity carried on by the assessee on the plain cashew-nuts could be said to be "processing" or "treating" within the meaning of the said expression in clause (17) of section 2 of the said Act. The question, however, is as to whether this activity could be said to amount to "manufacture". In this connection, we may usefully refer to our decision in C.S.T. vs. Dunken Coffee Manufacturing Co., (1975 35 STC 493), where we have laid down (at page 500) certain principles as to when an activity can be said to amount to manufacture for the purposes of section 2(17) of the said Act. We have observed there, after considering several decided case, as follows : "The above discussion shows that the ration of decided cases is that for an activity to amount to manufacture it must result in a different commercial article or commodity. It must not be a commodity which is commercially the same as it was before the activity was applied to it. In a given case, it may be that the ingredients are totally transformed and in another given case, it may be that they undergo some change alteration or transformation and yet retain their essential character and properties. The test in all cases, therefore, is to ascertain this result is commercially a different commodity and it is irrelevant whether this result is produced by a mechanical or chemical process or otherwise.