George Vadakkel, J. - The tax revision case raise a common question of law, viz., when timber logs are coverted into sizes, planks and scantlings, are the logs consumed in the manufacture of other goods so as to attract tax liability under Sec. 5A (1)(a) of the Kerala General Sales Tax Act, 1963.
2. Sec. 5A (1)(a) reads :-
'5A. (1) Levy of purchase tax : Every dealer who in the course of his business purchases from a registered dealer on 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 Sec. 5, and either -
(a) Consumes such goods in the manufacture of other goods for sale or otherwise; or
(b) xx xx
(c) xx xx
shall, whatever be the quantum of the turnover relating to such purpose for a year, pay tax on the taxable turnover relating to such purchase for that year at the rates mentioned in Sec. 5'
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 in 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 tests is : Are the goods the same articles of merchandise or different articles of merchandise as understood in commercial language or common parlance, before and after the conversion or charge. 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. & Co. vs. State of West Bengal,(1963 14 STC 878), took the view that planks saved out of logs constitute a new kind of commodity different from logs themselves. Though in State of Orissa vs. 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 vs. State of Orissa, (1975 35 STC 270 : 1975 CTR (Ori.) 16, 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 vs. State of Andhra Pradesh, (1973 32 STC 309), held that they would fall 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 cuting still is raw for manufacture or construction of something else. One other decision to be noticed is Sidhu Ram Atam Parkash vs. State of Haryana, (1974 34 STC 344), where it was held that on conversion on a log into planks or refers 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 vs. Delhi Cloth & General Mills, (AIR 1963 SC 791) which approvingly extracted a passage from an American judgment as quoted in Permanent Edition of Words and Phrases, Vol. 26. That passage reads :-
'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.'
From this passage it is clear that if the resulting produce is commercially a different article, the same is the result of a manufacturing process. The same proposition was stated by that Court in the negative form in Commissioner of Sales Tax vs. Harbilas Rai & Sons, (1968 21 STC 17) when it said :-
'In our view, the word 'manufacture' has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. The decision of the Madhya Pradesh High Court might perhaps be justified on the ground that a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed.'
4. In Pyare Lal Khushwant Ray vs. State of Punjab, (1974 34 S.T.C. 314), on which some reliance was sought to be placed by the learned counsel for the petitioners it was held that certain trees which could be used only as fuel wood would remin fuel wood even after wood even after felling of those trees and cutting them into small pieces, and that therefore no manufacturing process was involved in chopping off the branches of these trees or in cutting them into smaller pieces. We need only observe that that decision is of on assistance to the assessees. We also notive that on this question a different view was taken by the Calcutta High Court in Bachha Tewari vs. Divisional forest Officer, (1963 14 Sec. T.C. 1067). In so far as none of the cases before us raised that question we refrain from expressing any opinion as regards the above matter. So also we are not expressing any view as regards the question of felling of standing timber and their conversion into balls, discussed in Mohanlal Vishram vs. Commissioner of Sales Tax, (1969 24 S.T.C. 101), also a decision relied on by the learned counsel for the petitioners.
5. We do not think that the decision of this Court in National Timber Co. vs. State of Kerala, (1973 31 S.T.C. 572), would advance the assessees case. No doubt it was held in that case that :-
'In purchasing tree-growth, what is purchased is really the timber and the firewood available from the tree-growth, as, in the case of a purchase of standing crops the purchase is of the grain and the hay that the crops yield.'
We are not prepared to extend the analogy of standing crops to timber logs and hold that when one purchases timber logs, he really purchases planks and scantlings.
6. It was contented on behalf of the assessees that the question to be considered is whether a piece of an article can be considered as different from the whole. We are afraid that that is not the real test, but as pointed out earlier, whether the whole and the pieces obtained out of it by application of labour remain essentially the same commercial article. This our view is supported by the decision of the Supreme Court in State of Tamil Nadu vs. Pyare Lal Malhotra, (1976 37 S.T.C. 319) : 1976 CTR (S.C.) 278 again, another decision that reiterated the commercial identity test as explained above, - where it was said, no doubt in another context that :-
'The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity would make no difference for purpose of the law of sales tax. The object appears to us to be tax sales of goods of each variety and not the sale of the substance out of which they are made.'
It was also (once again) stated therein :-
'As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their indentity as such goods, are merely subjected to some processing or finishing or are merely jointed together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type.'
7. Applying the test as formulated above we are of the view that planks and scantlings are commercial articles different from the logs from which they are sawn. At any rate, they do not remain the same commercial article for one who requires planks or scantlings would not go to a timer-yard and ask for timber-logs or vice versa.
8. So far as sizes are concerned we are not aware of any such commodity. If timber logs are cut into sizes to facilitate transport, stacking etc. it cannot be said that commercial articles different commercial articles which are sold and purchased as beams, sleepers etc. and not as timber logs.
9. T.R.C. Nos. 74 to 76 1975 and 20 of 1976 are by the department and the two by the assessees. In all these the question of law raised is the same as stated in the beginning of this judgment. In all these cases the turnover of the respective assessee has to be recomputed in the light of this judgment. We, therefore, set aside the Tribunals orders in theses cases and remit them to the Appellate Tribunal. In the circumstances of the case we direct the parties to suffer their costs.