1. In this reference made under section 69 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the Act') by the Gujarat Sales Tax Tribunal (hereinafter referred to as 'the Tribunal') at the instance of the assessee, the following question has been referred to this Court for its opinion :
'Whether, on the facts and in the circumstances of the case, a product known as anand pashu ahar sold by the applicant would be covered by entry 11 of Schedule II-Part B to the Gujarat Sales Tax Act, 1969, as held by the Tribunal or it would be covered by entry 21 of Schedule I to the Gujarat Sales Tax Act, 1969, read with entry 25 of the Government notification issued under section 49 of the Gujarat Sales Tax Act, 1969, as contended by the applicant ?'
2. The assessee is a co-operative society carrying on business of ginning and pressing cotton and producing cotton-seed oil as also a product known as anand pashu ahar (hereinafter referred to as 'the ahar' for the sake of convenience). The ahar is produced out of cotton-seed oilcakes. The assessee made an application under section 62 for the determination of the question whether or not the ahar was taxable goods and, if so, what was the rate of tax in respect of the same. The Deputy Commissioner of Sales Tax, who heard the matter, came to the conclusion that the ahar, which is used as cattle-feed, retained the characteristics of oilcakes and that, therefore, the sale of the said product was not exempt from tax under entry 21 of Schedule I. The Deputy Commissioner of Sales Tax further found that the ahar was also not a mechanically produced cattle-feed and that, therefore, it was not covered by entry 25 in the Schedule to the Government notification dated 29th April, 1970, issued under section 49. The Deputy Commissioner of Sales Tax was of the view that the ahar, being in substance and reality, oilcake was covered by entry 11 of Schedule II-Part B, and that it was, therefore, taxable at the rate set out in the said entry.
3. The assessee, feeling aggrieved by the determination of the Deputy Commissioner of Sales Tax, carried the matter in appeal before the Tribunal. The Tribunal took into consideration four different entries, namely, entry 21 of Schedule I, entry 25 of Schedule II-Part A, entry 11 of Schedule II-Part B and entry 25 of the Schedule to the Government notification dated 29th April, 1970, issued under section 49. Having read the aforesaid entries and having considered certain decided cases, the Tribunal proceeded to state as under :
'There is no dispute that what the appellant has sold is a cattle-feed. All cattle-feeds are, however, not exempt from tax. In order that no tax is payable on the sales of cattle-feed, it must be established that it is not an oilcake. This is for two reasons, firstly, oilcakes are specifically excluded from entry 21 of Schedule I to the Act. And secondly, there is a specific entry for oilcakes being entry 11 of Schedule II-Part B to the Act. The entry of oilcakes being a specific entry and oilcakes being specifically excluded from entry 21 of Schedule I, a product though sold as cattle-feed must not fall within the category of an oilcake. In other words, a mechanically produced cattle-feed, in order to be exempt, should cease to be an oilcake. An oilcake which is sold as mechanically produced cattle-feed containing all the elements and characteristics of oilcake shall nevertheless be taxable as an oilcake.'
4. The Tribunal then proceeded to consider whether the ahar, which was a cattle-feed, ceased to be oilcake or whether it continued to retain all the characteristics of oilcake. It might be noted at this stage that in the forefront of its order the Tribunal referred to a pamphlet issued by the assessee which explained the process that was applied in the manufacture of the ahar. The relevant extract from the pamphlet, which is quoted in the order of the Tribunal, reads as under :
'The cotton-seeds, after they come out from the ginning factory, are first cleaned with the help of sieves by which the dust and other waste material are removed. Thereafter, the cotton content on the cotton-seeds is removed with the help of a plant meant for this purpose. This content is removed because it is not beneficial to the cattle. After removal of cotton particles on the cotton-seeds, the black cotton-seed, that is left, is broken and outer shells in the form fotari, which are about 25 per cent, are separated. The remaining portion of the cotton-seeds, that is left, which is about 65 per cent, is crushed with the help of expeller, which gives cotton-seed oil on the one side and cotton-seed oilcakes on the other. This cotton-seed oilcake is known as popadi khol. Popadi khol also contains some percentage of cotton-seed oil. With the help of solvent plant, the part of cotton-seed oil in the popadi khol is also extracted. As a result, what is obtained is cotton-seed oilcake, which contains about 40 per cent of protein.' Another important aspect in the process of manufacture of the ahar, to which reference does not appear to have been made in the pamphlet, but to which the attention of the Deputy Commissioner Sales Tax as well as of the Tribunal was drawn on behalf of the assessee, may be referred to, in the words of the Tribunal, as follows : '.................... in order to convert the cotton-seed oilcakes into anand pashu ahar, certain quantity of salt is mixed with the oilcakes and a special treatment of citric acid wash is given for which there is a special plant. By giving this citric acid treatment, gossypol particles are removed and the cattle-feed so processed and sold becomes free from toxic effects and is a harmless cattle-feed.'
5. Although the attention of the Tribunal was drawn to the process applied in the manufacture of the ahar and it has set out the same in the aforesaid words in its order, the Tribunal ultimately held as follows :
'In the letter that was received by him from the manager of the appellant the details of the contents of pashu ahar are given. But salt does not figure in these contents. The literature that was produced before the Deputy Commissioner and which was read out before me nowhere states that the product sold ceases to be an oilcake. On the other hand, it has been emphatically stated that this oilcake contains 40 per cent of protein and, therefore, it is nutritive and best cattle-feed .......................... No evidence has been produced either before the learned Deputy Commissioner or before me that the addition of salt and citric acid wash treatment have changed the essential characteristics of oilcakes. On the other hand, the pamphlet issued by the appellant would go to establish that what has been sold by the appellant under the trade name of anand pashu ahar is nothing but an oilcake.'
6. On the basis of the aforesaid approach and reasoning, the Tribunal concurred in the decision of the Deputy Commissioner of Sales Tax that the ahar, which was nothing but oilcake, was taxable under entry 11 of Schedule II-Part B of the Act.
7. We have copiously quoted from the order of the Tribunal, because, as it would ultimately appear, the entire approach of the Tribunal in the instant case is erroneous inasmuch as it has failed to make an essential distinction between cattle-feed, properly so-called, and oilcakes, both of which are distinct commercial commodities, and the error so committed has resulted in the Tribunal not deciding a very material question, which it was necessary for it to pronounce upon after taking into account the relevant materials, in order to determine the controversy, which was raised before it.
8. The relevant entries in the different schedules may be first cited. Entry 21 of Schedule 1 reads as under :
'Cattle-feed (other than mechanically produced cattle-feed) including fodder and concentrates but excluding cotton-seeds, oilcakes and de-oiled cakes.'
9. Entry 25 of Schedule II-Part A reads as under :
'Mechanically produced cattle-feed Do. Do.' Entry 11 of Schedule II-Part B reads as under : 'Oilcakes and de-oiled cakes Do. Do.'
10. Entry 25 of the Schedule to the notification dated 29th April, 1970, issued by the State Government under section 49 reads as under :
'25. Sales of mechanically Whole of tax. Nil.' produced cattle-feed.
11. Under section 5 no tax is payable on the sales or purchases of any goods specified in Schedule I subject to the conditions of exceptions, if any, set out against each of the goods specified in column 3 of the said schedule. If, therefore, the ahar is covered by entry 21 of Schedule I, on its sales or purchases, no tax would be payable. To be covered by entry 21, the ahar, in the first place, must be cattle-feed. Cattle-feed, which is mechanically produced is, however, specifically excluded from the coverage of the said entry by the words of exclusion contained in the bracketed ( ) portion. The entry makes it clear, at the same time, that the word 'cattle-feed' includes fodder and concentrates but it excludes cotton-seeds, oilcakes and de-oiled cakes. On an integral reading of entry 21, it would appear that cattle-feed including fodder and concentrates, which is not mechanically produced, but excluding cotton-seeds, oilcakes and de-oiled cakes, will be covered by the said entry. The legislative intent is, therefore, clear, namely, that it did not want mechanically produced cattle-feed and cotton-seeds, oilcakes and de-oiled cakes to be exempt from the levy of tax.
12. Entry 25 of Schedule II-Part A subjects to sales tax at the first stage 'mechanically produced cattle-feed' at the rate mentioned in the said entry. The inclusion of mechanically produced cattle-feed in the aforesaid schedule makes the legislative intent still further clear, namely, that those goods must bear the levy of sales tax at the specified rate.
13. Entry 11 of Schedule II-Part B subjects 'oilcakes and de-oiled cakes' to the levy of general sales tax at the last stage at the rate set out in the said entry. The inclusion of oilcakes and de-oiled cakes in this schedule manifests the intention of the legislature that those goods must bear the levy of general sales tax at the specified rate.
14. Before we proceed to consider the interaction of these various entries, it would be necessary to remember that, in the context of a statute dealing with sales tax at a single point in a series of sales, the purpose of an enumeration of different goods is to indicate the types of goods, each of which would constitute a separate class. The ordinary meaning to be assigned to a taxable item in a list of specified items is that each item so specified is considered as a separately taxable item for the purposes of single point taxation in a series of sales unless the contrary is shown. It is well-known that sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entitles for the purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined 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. However, when a distinct commercial commodity emerges, it becomes a separate object of taxation so long as it retains its identity : see State of Tamil Nadu v. Pyare Lal Malhotra [ 37 S.T.C. 319 (S.C.)]. In the process of interpretation of the abovesaid three entries and of judging their interaction and, if need be, of their harmonisation, this fundamental principle must always be borne in mind.
15. We are herein concerned with distinct commercial commodities, each one of which has received recognition at the hands of the legislature by its enumeration in one schedule or the other. 'Cattle-feed' is one of such commodities. It finds place in two schedules. Entry 21 of Schedule I takes in cattle-feed which is not mechanically produced, whereas entry 25 of Schedule II-Part A takes in mechanically produced cattle-feed. The former kind of cattle-feed is exempt from tax, whereas the latter bears the levy of sales tax. Thus far, there should be and there is no difficulty in the process of interpretation. Another distinct commercial commodity, namely, oilcakes, is mentioned in entry 21 of Schedule I with a view to excluding it from the coverage of the term 'cattle-feed'. It is clear, therefore, that oilcakes, even though they might be used as cattle-feed, are not intended to be covered by entry 21 of Schedule I and that, consequently, they are not intended to be exempted from the levy of tax. This intention of the legislature is made amply clear by the inclusion of oilcakes in entry 11 of Schedule II-Part B. By such inclusion, those goods are made to bear the levy of general sales tax at the specified rate. Once this scheme of enumeration in respect of different commercial commodities is appreciated, it would become clear that that commercial commodity, which is 'cattle-feed', properly so-called, is exempt from tax if it is not mechanically produced and that it is subject to levy of sales tax if it is mechanically produced. This is so, irrespective of the fact that that cattle-feed might have been produced or manufactured out of oil-cakes. If a separate commercial commodity, which can be properly described as cattle-feed, emerges or comes into existence after oilcakes are subjected to a process of manufacture, such cattle-feed would become separately taxable by entry 21 of Schedule I or entry 25 of Schedule II-Part A, depending upon whether they are or are not mechanically produced. As against this, if oilcakes without change of their identity as such commercial goods are merely subjected to some processing or finishing whereby they do not cease to be the same commercial goods and are still, inter alia, used as feed for cattle, they cannot be properly comprehended within entry 21 of Schedule I or entry 25 of Schedule II-Part A. The said commodity would still be covered by entry 11 of Schedule II-Part B.
16. The foregoing discussion would show that each of the three entries in question operates in demarcated fields and that each covers a distinct commercial commodity. There is no conflict between those entries nor is it possible to conceive of a case where a commercial commodity would be covered by more than one of such entries. The question, which will require to be determined in each case whenever the point arises as to which of the entries applies to the commodity in question, is as to whether, in the first place, the commodity is cattle-feed or oilcakes and, in the next place, if it is cattle-feed, whether or not it is mechanically produced.
17. At this stage, we must consider entry 25 in the scheme to the Government notification dated 29th April, 1970, issued under section 49. Before we do so, however, it may be pointed out that 'taxable goods' are defined in clause (33) of section 2. Accordingly, 'taxable goods' mean goods other than those on the sale or purchase of which no tax is payable under section 5 or section 49 or a notification issued thereunder. This extended definition excludes from the category of taxable goods not only those goods to which exemption attaches by virtue of exemption granted under section 5 but also those goods which are the subject-matter of a transaction of sale or purchase which is exempted from payment of the whole or any part of any tax payable under the Act by virtue of the provisions of section 49. The taxable goods, which would have otherwise borne levy of tax, become, so to say, non-taxable goods once they are the subject-matter of the transaction of sale or purchase which has been exempted from the payment of the whole of tax payable under the Act. Against this background, let us turn to entry 25 of the Government notification. Under the said entry, sales or purchases of mechanically produced cattle-feed, which would have otherwise borne the levy of sales tax under entry 25 of Schedule II-Part A, are exempted from the payment of the whole of tax. It would thus appear that although under the parent legislation it was intended that sales or purchases of mechanically produced cattle-feed should bear the levy of sales tax, the State Government, presumably having regard to the importance of this commodity in the maintenance and improvement of cattle-stock, has thought it fit to exempt the sales of such commodity from the whole of tax. By virtue of the inclusion of mechanically produced cattle-feed in the Schedule to the Government notification by entry 25, the effect of the inclusion of the said commodity in Schedule II-Part A by entry 25 has been wholly nullified, so far as the sale transactions of the said commodity are concerned. In that sense, though there is an antithesis between entry 25 in Schedule II-Part A, and entry 25 of the Schedule to the Government notification, that antithesis is meaningful and purposeful and it has to be given effect to.
18. Now, in the present case, the assessee has been contending all throughout that the ahar, which is manufactured out of cotton-seed oilcakes, is a mechanically produced cattle-feed. In other words, the contention of the assessee has been that by applying certain mechanical process of manufacture to the cotton-seed oilcakes, it has brought into existence a separate commercial commodity, the sole use of which is as a cattle-feed. The name which has been given to the said commodity and its advertised use point in the direction that it is nothing else but cattle-feed. In fact, the Tribunal has in terms observed in para 4 of its order that there was no dispute that what the assessee sold was cattle-feed. So far as the mechanical process applied to the cotton-seed oilcakes to bring into existence the ahar is concerned, the case of the assessee appears to have been that certain quantity of salt is mixed with the oilcakes and that a special treatment of citric acid wash is given for which there is a special plant. As a result of giving this treatment, gossypol particles are removed and the cattle-feed, which emerges, is free from toxic effects and is harmless. This is apparent from the portion of the Tribunal's order, which has been extracted above. It appears that on the record of the case there is a letter addressed by the manager of the assessee to the learned Advocate, who appeared on behalf of the assessee before the Deputy Commissioner of Sales Tax, in which there is a specific reference to this process of addition of salt and citric acid wash treatment. Reference to this letter is to be found in para 4 of the order of the Tribunal and the original letter on record was shown to us at the hearing of the reference by the counsel appearing on behalf of the revenue.
19. It is against the aforesaid background that the Tribunal was required to address itself to the principal question, namely, whether cotton-seed oilcakes, which were subjected to the said process, changed their identity and whether the ahar, which emerges and which is admittedly used as cattle-feed, was a separate commercial commodity, which can be properly called cattle-feed. The Tribunal, with respect, failed to do so in the proper perspective. In the first place, the Tribunal appears to have been swayed by the fact that the ahar is produced out of cotton-seed oilcakes and it appears to have proceeded on the footing that since no evidence was produced either before the Deputy Commissioner of Sales Tax or before it to the effect that the addition of salt and citric acid wash treatment changed the essential characteristics of oilcakes, the oilcakes retained the characteristics of oilcakes and that, therefore, the product, which emerged after the application of the said process continued to be oilcakes and it is not cattle-feed properly so-called. In adopting this approach, it has been overlooked that even if there was no direct evidence on the point that a distinct commercial commodity in the shape of cattle-feed (other than oilcakes) emerged, the Tribunal was not prevented from considering and raising a proper and reasonable inference that upon application of some recognised mechanical process to cotton-seed oilcakes, a distinct commercial commodity in the shape of cattle-feed had, in fact, emerged. In the next place, the Tribunal does not appear to have clearly comprehended the true content and effect of the various entries in question and it has also failed to appreciate the significance of the separate enumeration of distinct commercial commodities in a statute dealing with single point levy of sales tax and the logical corollary that each of the goods is a separately taxable item. Under the circumstances, the Tribunal's ultimate view has been vitiated.
20. In this connection, reference may be made to Encyclopaedia Britannica, Volume 6, page 628, where 'cotton-seed' is the topic of discussion. It has been there pointed out that cotton-seed is obtained as a by-product of cotton production. The commercial importance of cotton-seed lies in the four principal products obtained through its processing, namely, oilcakes or meal, linters and hulls. Cake or meal, it is pointed out at page 629, is used principally as high-protein supplement in feeding cattle. It contains up to 45 per cent protein as usually produced. Methods of processing are developed to reduce from cake or meal the influence of gossypol, a pigment peculiar to the cotton plant, to a low level, and the resultant cotton-seed meal can and has been used in mixed rations for single-stomached animals. It would thus appear that cake or meal, which is a by-product of cotton-seed, is principally used as a high-protein supplement in feeding cattle after certain process is applied to the same with a view to reducing gossypol to a low level.
21. In McGraw Hill Encyclopaedia of Science and Technology, Volume 1, at page 457, the subject of 'animal-feed composition' is dealt with. At point 458, it is inter alia observed that examples of high-protein feeds are oilcake meals (cotton-seed meal, peanut meal and soya-bean meal). It has been pointed out at page 459 that iodinated salt is widely used in mixed feeds and salt blocks. Following the discoveries that certain mineral elements in trace amounts were essential for the animals' nutrition, there has been widespread addition, at low cost, of small quantities of salts of all trace elements (iron, copper, manganese, zinc, and cobalt) to formula feeds for all types of livestock.
22. Now, as earlier pointed out, the ahar is produced after subjecting the cotton-seed oilcakes to the process of addition of salt and citric acid wash treatment with a view to removing gossypol particles. The discussion contained in the two Encyclopaedias, to which we have just referred, would show that treatment prima facie appearing to be similar to that applied to oilcakes, in the instant case, brings into existence a high-protein cattle-feed or high-protein supplement in feeding cattle. The Tribunal, therefore, was required to consider, inter alia, whether a distinct commercial commodity, namely, cattle-feed, had, in fact, emerged as a result of the application of such process to oilcakes, without being unduly influenced by the fact that oilcakes were the original product, which was itself subjected to tax under entry 11 of Schedule II-Part B, and that the ahar was loosely described as oilcakes. If the Tribunal found that a distinct commercial commodity in the shape of cattle-feed had, in fact, emerged, it is obvious that entry 11 of Schedule II-Part B would not be attracted. The only entries which would then survive for consideration would be entry 21 of Schedule I, entry 25 of Schedule II-Part A and entry 25 in the Schedule to the Government notification. It is apparent that entry 21 of Schedule I would not apply in the circumstances present herein, for, the said entry specifically excludes cattle-feed, which is mechanically produced. Entry 25 of Schedule II-Part A would, therefore, be attracted because it covers mechanically produced cattle-feed. At the same time, however, entry 25 in the Schedule to the Government notification will come into picture because by the said entry the sales of mechanically produced cattle-feed are exempted from the levy of the whole of tax. It is only be proceeding as aforesaid that the Tribunal could have reached the correct conclusion in the instant case.
23. As we have pointed out earlier, the Tribunal has not decided in the proper perspective the main question which it was required to determine, because it has not appreciated these various aspects and concepts involved herein. The result, therefore, is that it is not possible for us to finally dispose of the dispute, which is the subject-matter of the question referred to us.
24. Two courses are open to us under such circumstances, namely, to call for a supplementary statement of the case from the Tribunal, or to decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 69(4) in the light of the observations of this Court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will be restricted to the evidence on the record and it may not be entitled to take additional evidence. That may result in injustice. In the circumstances, we think it appropriate, following the decisions of the Supreme Court in Lakshmi Cotton Mfg. Co. Ltd. v. Commissioner of Sales Tax, Bombay [ 26 S.T.C. 263 (S.C.)], and Commissioner of Income-tax, West Bengal v. Indian Molasses Co. P. Ltd. [ 78 I.T.R. 474 (S.C.)], to decline to answer the question on the ground that the Tribunal has failed to consider and decide in proper light and perspective and on the basis of the evidence on record the question whether the ahar was a mechanically produced cattle-feed, properly so-called. It will be open to the Tribunal to dispose the appeal under section 69(4) in the light of the observations made by this Court after determining the questions which ought to have been decided.
25. The reference accordingly stands disposed of, with no order as to costs.
26. Reference not answered.