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C. Gokaldas and Co. and ors. Vs. the State of Gujarat - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference Nos. 31, 41 and 43 of 1963 and 8 of 1964
Judge
Reported in(1965)0GLR601; [1966]17STC138(Guj)
ActsBombay Sales Tax Act, 1953 - Sections 10, 34 and 66(1); Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954 - Rule 12(1A); Income-tax Act ; Madras General Sales Tax Act, 1939
AppellantC. Gokaldas and Co. and ors.
RespondentThe State of Gujarat
Appellant Advocate I.M. Nanavaty and; S.L. Mody, Advs.
Respondent Advocate J.M. Thakore, Advocate-General; i/b M.M. Thakore,; M.G.
Cases ReferredKailash Nath v. State of U.P.
Excerpt:
sales tax - remission - section 10 of bombay sales tax act, 1953 and rule 12 (1a) of bombay sales tax (exemptions, set-off and composition) rules, 1954 - whether assessees entitled to remission of purchase tax paid by them under section 10 (a) on purchase of raw tobacco under rule 12 (1a) - remission under rule 12 (1a) permissible in case basic essential properties of goods remained unchanged - 'bidi pattis' commercially not same commodity as raw tobacco - sales of 'bidi pattis' cannot be said sales of raw tobacco purchased by assessees - non-fulfilment of condition precedent for applicability of rule 12 (1a) renders assessee's claim untenable - question answered in negative. - - but the contention raised on behalf of the revenue was that bidi pattis were commercially a different.....bhagwati, j.1. the short question that arises for consideration in these references is whether the assessees are entitled to remission of purchase tax paid by them on purchase of raw tobacco under rule 12(1a) of the bombay sales tax (exemptions, set-off and composition) rules, 1954. the assessees in these references are different but the question involved is the same and it would therefore be convenient to dispose them of by a common judgment. in each of the references the assessees purchased raw tobacco from unregistered dealers on which they were assessed to purchase tax under section 10(a) of the bombay sales tax at, 1953. the assessees after purchasing raw tobacco subjected it to the process of grading by passing it through sieves and removing stones and dust from it and as a result.....
Judgment:

Bhagwati, J.

1. The short question that arises for consideration in these references is whether the assessees are entitled to remission of purchase tax paid by them on purchase of raw tobacco under rule 12(1A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954. The assessees in these references are different but the question involved is the same and it would therefore be convenient to dispose them of by a common judgment. In each of the references the assessees purchased raw tobacco from unregistered dealers on which they were assessed to purchase tax under section 10(a) of the Bombay Sales Tax At, 1953. The assessees after purchasing raw tobacco subjected it to the process of grading by passing it through sieves and removing stones and dust from it and as a result of this, what came into being was processed tobacco known as bidi pattis. The assessees thereafter sold bidi pattis and despatched them to addressees outside the State of Bombay in the course of inter-State trade or commerce within a period of nine months from the dates of the respective purchases of raw tobacco made by them. In the assessment of the assessees to sales tax, the assessees claimed remission of the purchase tax paid by them on the purchase of raw tobacco under rule 12(1A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954. The rule relied upon before the Revenue authorities as also before the Tribunal was in the form set out in the statement of the case, but it is not necessary to reproduce the same since, as we shall presently point out, no reliance has been placed upon it on behalf of the assessees in the present references. The claim for remission made by the assessees was rejected by the Sales Tax Officer and on appeal to the Assistant Commissioner of Sales Tax, the claim met with the same fate. The matter was then carried in revision by the assessees but the Deputy Commissioner of Sales Tax also negatived the claim put forward by the assessees. The assessees thereupon approached the Tribunal in revision. It was not disputed before the Tribunal that bidi pattis were sold by the assessees within a period of nine months from the dates of the respective purchases of raw tobacco from which they were prepared and that the sales of bidi pattis so effected by the assessees were in the course of inter-State trade or commerce. But the contention raised on behalf of the Revenue was that bidi pattis were commercially a different commodity from raw tobacco and it could not, therefore, be said that when bidi pattis were sold by the assessees, raw tobacco purchased by the assessees on which purchase tax had been paid, was sold by the assessees in the course of inter-State trade or commerce so as to attract the applicability of rule 12(1A). This contention was accepted by the Tribunal and the Tribunal held that bidi pattis being a different commercial commodity from raw tobacco, the terms of rule 12(1A) were not satisfied and the assessees were not entitled to claim remission of purchase tax paid by them on raw tobacco under that rule. The correctness of this view of the Tribunal is now challenged before us in these references.

2. Now, it must be pointed out at the outset that rule 12(1A) in the form set out in the statement of the case was not in force during the assessment periods relevant to all the four references but it came into force only on 29th June, 1957. Prior to 29th June, 1957, rule 12(1A) which was in force, was in the following terms :-

'12. (1A) Where a dealer, who has become liable to pay purchase tax under clause (a) of section 10 on his purchase of goods, shows to the satisfaction of the Collector that the goods so purchased have, within a period of nine months from the date of their purchase by him, been despatched -

(i) by him, or

(ii) by a registered dealer to whom he sold the goods on his furnishing a certificate in Form N prescribed under the Bombay Sales Tax (Registration, Licensing and Authorization) Rules, 1953, to an address outside the pre-reorganisation State of Bombay, excluding the transferred territories .........then the Collector shall by order remit the amount of purchase tax payable by such dealer on his purchase of such good or where such dealer has already paid such amount, the Collector shall, on an application for refund made by such dealer in the manner specified in rule 25 of the Bombay Sales Tax (Procedure) Rules, 1953, refund to such dealer the amount so paid : * * *'

3. and even in that form the rule was in force only from 1st March, 1957, there being no such rule at all prior to that date. Rule 12(1A) was, therefore, in force only during one month of the period of assessment relevant to Sales Tax Reference No. 31 of 1963, namely, 1st March, 1957, to 31st March, 1957, and that too not in the form set out in the statement of case but in the form reproduced above in this paragraph and so far as the other three references are concerned, the rule was not in force at all during any part of the assessment periods relevant to those references. When this position was pointed out by the learned Advocate-General on behalf of the Revenue at the commencement of the hearing of these references, Mr. I. M. Nanavati, learned Advocate appearing on behalf of the assessees in Sales Tax Reference No. 31 of 1963 greed that rule 12(1A) which applied was not the rule as set out in the statement of case but the rule as set out here in this paragraph but he objected to our taking note of the fact that the rule was in force only during one month of the period of assessment and did not apply during the rest of the period. He urged that the case was argued before the Tribunal on the basis that the claim for remission made by the assessees was governed by rule 12(1A) and the only ground on which the claim was sought to be negatived was that the requirements of the rule were not fulfilled. He pointed out that at no stage was it contended on behalf of the Revenue that rule 12(1A) did not govern the discrimination of the claim of the assessees and that the claim was liable to fail on the ground that the rule was not in force during the entire period of assessment but was in force only during one month nor was any question raising such contention submitted for the opinion of the Court. He contended that under these circumstances it was not competent to the Revenue to raise the plea that rule 12(1A) was in force only during one month of the assessment period and was not in force during the rest of the assessment period and that the claim of the assessees in respect of that part of the assessment period in which it was not in force was, therefore, unsustainable. A similar contention was also advanced by Mr. S. L. Mody on behalf of the assessees in the other three references. This contention though at first blush attractive is, in our opinion, entirely devoid of merit. The question referred to us for our opinion in each of the four references is in following terms :

'Whether on the facts and in the circumstances of the case, the opponents were entitled to a remission under Rule 12(1A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954, of the purchase tax paid under section 10(a) of the Bombay Sales Tax Act, 1953, in respect of the purchases by the opponents of raw tobacco at the price of Rs. 46,932 ?'

4. and on a plain reading of the question it is clear that the question can and does cover the contention sought to be urged on behalf of the Revenue. Since the question raises a challenge to the right of the assessees to claim remission under rule 12(1A), it should be open to the Revenue within the framework of the question to contend that the assessees are not entitled to claim remission under rule 12(1A) inasmuch as rule 12(1A) was not in force during the relevant period. If the Revenue can, on the question as framed, seek to defeat the claim of the assessees to remission under rule 12(1A) on the ground that the terms of rule 12(1A) were not satisfied, we do not see why the Revenue cannot seek to defeat the claim of the assessees on the ground that rule 12(1A) on which the claim of the assessees is based was not in force during any part of the relevant assessment period. The latter contention would be merely one more aspect of the question and would be clearly included within the ambit and coverage of the question. It is now well-settled as a result of the decision of the Supreme Court in Commissioner of Income-tax v. Scindia Steam Navigation Co., Ltd. ([1961] 42 I.T.R. 589) - and the principle there laid down in regard to section 66 of the Income-tax Act must apply equally in regard to section 34 of the Bombay Sales Tax Act, 1953 - that once a question is in issue before the Tribunal and is referred to the Court for its opinion, there is no limitation that the reference should be limited to those aspects of the question which have been argued before the Tribunal. As observed by Venkatarama Aiyar, J., '....it will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act'. Where, therefore, a question involves more than one aspect requiring to be tackled from different standpoints, all aspects of the question can be agitated before the Court even though they might not have been argued before the Tribunal. It is, therefore, clear that even though the contention that rule 12(1A) was in force only during one month of the assessment period and was not in force during the rest of the assessment period in Sales Tax Reference No. 31 of 1963 and was not in force at all during any part of the relevant assessment period in the other three reference, was not raised before the Tribunal, it can still be agitated on the present references inasmuch as it represents merely one more aspect of the question referred to us for our opinion and is comprised within the question. We cannot, therefore, refuse to allow the Revenue to raise this contention before us and we must entertain it. The answer which Mr. I. M. Nanavati gave to this contention on merits was that rule 12(1A) was retrospective in operation and, therefore, applied to govern even those transactions which took place prior to 1st March, 1957. A similar answer was also given by Mr. S. L. Mody on behalf of the assessees in the other three references. This position was disputed by the learned Advocate-General and these rival contentions, therefore, raise a question of retrospectivity of the operation of rule 12(1A). It is, however, not necessary for us to go into this question since in the view we are taking of the matter, we think that even if rule 12(1A) was in force during the entire period of assessment in all the four references, the assessees would not be entitled to succeed inasmuch as bidi pattis sold by them could not be said to be the same goods as raw tobacco purchased by them.

5. It will be apparent from what is stated above that the only point which remains for consideration in these references is whether the assessees could be said to have sold raw tobacco purchased by them on which they had paid purchase tax when they sold bidi pattis made out of such raw tobacco. Mr. I. M. Nanavati on behalf of the assessees contended before us that it was no doubt true that rule 12(1A) required that 'the goods so purchased' being the goods purchased by the assessees on which purchase tax was paid by them, should be sold by the assessees and despatched to an address outside the State of Bombay; but that did not mean that the identical thing, namely, raw tobacco should be sold without any processing or alteration being performed on it. He submitted that so long as what was sold retained the basic essential properties of tobacco, the fact that it was the result of processing or cleaning did not make any difference to the applicability of rule 12(1A) and in support of this contention he relied on two decisions of the Supreme Court, one in Kailash Nath v. State of U.P. ([1957] 8 S.T.C. 358) and the other in Tungabhadra Industries Ltd. v. Commercial Tax Officer ([1960] 11 S.T.C. 827). We shall presently examine these decisions, but we may point out straightway that in our opinion neither of these decisions supports the contention of Mr. I. M. Nanavati. Nor is the contention of Mr. I. M. Nanavati supportable on principle. On a plain grammatical construction rule 12(1A) grants remission of purchase tax paid by a registered dealer on goods purchased by him when 'the goods so purchased' are sold and despatched by him to an address outside the State of Bombay within a period of nine months from the date of purchase. What the rule requires is that the goods purchased by a registered dealer on which purchase tax has been paid by him must be sold and despatched and not any goods into which the goods purchased are converted. The rule says that the goods sold and despatched must be the same as the goods purchased. If the goods sold and despatched are a different commercial commodity than the goods purchased, the requirement of the rule would not be satisfied and remission of the purchase tax paid on the goods purchased would not be admissible to the assessee. Mr. I. M. Nanavati joined issue on this proposition and contended that it was not necessary that the identical goods purchased must be sold and despatched by the assessee, but that it was enough if the goods inherently remained the same though when they were sold and despatched, they were a commercially different commodity from what they were when purchased. The emphasis which Mr. I. M. Nanavati place was on the basic essential properties of the goods purchased and he considered it a matter of no important that the goods purchased were converted into a different commercial commodity and what were sold and despatched were goods constituting such commercially different commodity so long as the basic essential properties remained unchanged. We do not think we can agree with this contention of Mr. I. M. Nanavati. The sales tax law deals with persons engaged in trade and commerce and when rule 12(1A) says that the goods purchased must be sold and despatched, the requirement of the rule cannot be said to be satisfied when the goods that are sold are a commercially different commodity from the goods that are purchased. It may be that when the goods purchased are converted into goods which are a commercially different commodity, the basic essential properties may remain the same; but on that ground it would not be possible to say that when the latter goods are sold, what are sold are the goods purchased, for the goods purchased would be one commercial commodity while the goods sold would be another. The real test which must, therefore, be applies for the purpose of determining the applicability of rule 12(1A) is not whether the basic essential properties of the goods remain the same, but whether the goods sold are the same as the goods purchased as a commercial commodity.

6. Mr. I. M. Nanavati relied on certain provisions of the Bombay Sales Tax Act, 1953, in support of his contention that the true test to be applied for determining the applicability of rule 12(1A) was not whether the goods sold were commercially the same commodity as the goods purchased but whether the basic essential properties of the goods were the same. He drew our attention to sub-section (a) of section 8 which provided for deduction from turnover of sales of goods (i) which were purchased from a registered dealer on or after the appointed day or (ii) on the purchase of which the dealer had paid or was liable to pay purchase tax and pointed out that the proviso to that sub-section prescribed the requirement that the goods must not have been processed or altered in any manner after such purchase. He urged that whereever the Legislature wanted a strict test to be satisfied, namely, that the identical goods which are purchased must be sold, the Legislature made a provision such as the proviso to sub-section (a) of section 8, but such a proviso was absent in sub-section (b) of section 8 and was not to be found either in the main part which provided for exclusion of sales of goods made to a dealer who held an authorization and furnished to the selling dealer a certificate in the prescribed form declaring inter alia that the goods so sold to him were intended for being despatched by him to an address outside the State of Bombay or in the second proviso which declared that if the goods so purchased were not despatched by the purchasing dealer to an address outside the State of Bombay within a period of six months from the date of purchase, the purchasing dealer should be liable to pay purchase tax on the purchase of goods despite the fact that the purchase was made from a registered dealer. The argument was that in a case covered by sub-section (b) of section 8 it was not necessary that the goods required to be sold by the purchasing dealer must be the identical goods as the goods purchased by him, for if that had been the intention of the Legislature, the Legislature would have inserted a proviso in the same terms as the proviso to sub-section (a) of section 8. The absence of the proviso indicated, so ran the argument, that it was not necessary that the identical goods purchased must be sold without any processing or alteration and that even if any processing or alternation was done in respect of the goods purchased as a result of which the goods purchased were converted into a different commercial commodity and then sold by the purchasing dealer within the prescribed period of six months, that did not amount to non-compliance with the declaration in the certificate and was sufficient to repel the applicability of the second proviso to sub-section (b) of section 8. It was contended that rule 12(1A) was complementary to sub-section (b) of section 8 in that it sought to give the same benefit to a registered dealer in respect of purchase tax payable on the purchase of goods effected by him from an unregistered dealer as was given by sub-section (b) of section 8 in respect of sales tax in case of purchase of goods effected from a registered dealer and since in the latter case the identical goods purchased by him were not required to be sold, so also in the former case the identical goods purchased were not required to be sold. Now it is undoubtedly true that rule 12(1A) is in a sense complementary to sub-section (b) of section 8. A registered dealer may purchase goods from a registered dealer or an unregistered dealer. If he purchases goods from a registered dealer, he would have to pay sales tax on the goods to the registered dealer, for the registered dealer being himself liable to pay sales tax to the State Government, would pass it on to the purchasing dealer. Now sub-section (b) of section 8 provides that in such a case if the purchasing dealer holds an authorization and furnishes to the selling dealer a certificate in the prescribed form declaring inter alia that the goods purchased by him are intended for being despatched by him to an address outside the State of Bombay, the selling dealer would not be liable to pay sales tax on the sale of the goods effected by him to the purchasing dealer and the purchasing dealer in his turn would not have to pay sales tax to the selling dealer. The purchasing dealer would also not be liable to pay purchase tax on the purchase since the purchase would be from a registered dealer. But if the purchasing dealer purchases goods from a selling dealer who is unregistered, though, the selling dealer being unregistered, there would be no question of the purchasing dealer being liable to pay any amount to the selling dealer by way of sales tax, the purchasing dealer would have to pay purchase tax to the State Government under section 10(a) and such a purchasing dealer would, therefore, be at a disadvantage compared to a purchasing dealer who purchases from a selling dealer who is registered. The State Government, therefore, with a view to placing on a par the purchasing dealers in both cases, made rule 12(1A) granting exemption to the purchasing dealers from payment of purchase tax in case of purchase of goods effected by him from a selling dealer who was unregistered. The condition imposed was the same, namely, that the purchasing dealer must despatch the goods purchased to an address outside the State of Bombay though the period within which this was required to be done was nine months under rule 12(1A) as against six months under sub-section (b) of section 8. If the condition is broken, then under rule 12(1A) the purchasing dealer would not be entitled to exemption in respect of purchase tax payable by him on the purchase while under sub-section (b) of section 8, the purchasing dealer would become liable to pay purchase tax on the purchase notwithstanding the fact that his purchase is from a registered dealer. The purchasing dealers in both cases are thus placed in the same position. Rule 12(1A) and sub-section (b) of section 8 are therefore clearly and indubitably complementary to each other. So far we are in agreement with Mr. I. M. Nanavati. But there our agreement ends. Mr. I. M. Nanavati is in our opinion not right in seeking to draw an inference in favour of his contention from the absence of the proviso in sub-section (b) of section 8 and rule 12(1A). The proviso undoubtedly imposes a stricter condition in that it requires that the goods sold must not have been processed or altered in any manner after purchase and this stricter condition is not insisted upon in sub-section (b) of section 8 and rule 12(1A). But that does not in any way affect the main requirement imposed by the plain language of sub-section (b) of section 8 and rule 12(1A) that the goods sold must be the goods purchased. It may be that the goods purchased may be subjected to processing or alteration without in any manner changing the goods into a different commercial commodity. In such a case the goods having been processed or altered, the sale of such goods would be outside the exemption contained in sub-section (a) of section 8 but since the goods remain the same commercial commodity, the terms of sub-section (b) of section 8 and rule 12(1A) would still be satisfied. That would be the only effect of the absence of the proviso in sub-section (b) of section 8 and rule 12(1A). The proviso merely imposes an additional requirement and if the proviso is absent, the additional requirement would not be necessary to be fulfilled but from the absence of the proviso, it would not be right to infer that the Legislature in the one case and the State Government in the other also dispensed with the requirement that the goods sold must be commercially the same commodity as the goods purchased. To do so would be to ignore the plain language of the provision enacted in sub-section (b) of section 8 and rule 12(1A). The correct way of looking at the provision appears to be to see whether the goods sold are commercially the same commodity as the goods purchased and it is not relevant to consider whether the goods purchased have been processed or altered in any manner for producing the goods sold except in so far as such question might affect the character of the goods as a commercial commodity.

7. The reason for this rule will become apparent if we examine the matter a little more closely. The Legislature obviously wanted to exempt from sales tax sales of goods in the course of inter-State trade or commerce or in the course of export outside India. Where a dealer, registered or unregistered, sold goods directly in the course of inter-State trade or commerce or in the course of export outside India, there was no difficulty : in such a case neither was the vendor liable to pay sales tax nor was the purchaser liable to pay purchase tax by reason of Article 286 of the Constitution and section 46 of the Bombay Sales Tax Act, 1953, and the goods were received by the purchaser without suffering any incidence of tax. But goods might be sold by a dealer whether registered or unregistered not directly in the course of inter-State trade or commerce or in the course of export outside India, but to an intermediate dealer and the intermediate dealer might despatch them to an address outside the State of Bombay in the course of inter-State trade or commerce or in the course of export outside India within such a short period as would indicate that he purchased them with a view to selling them in the course of inter-State trade or commerce or in the course of export outside India. Where such a thing happened, the sale by the original dealer might be regarded as the starting point of the inter-State sale or export sale and on that basis the Legislature made provision in sub-section (b) of section 8 for securing that in such a case where the original dealer is a registered dealer, no incidence of tax should fall on the ultimate purchaser, the entire journey being regarded as one in the stream of inter-State trade or commerce or in the course of export outside India. But as pointed out by us above, no such provision was made in case the original dealer was an unregistered dealer; in such a case the intermediate dealer would have to pay purchase tax to the original dealer and the goods would, therefore, suffer incidence of tax before they reach the hands of the purchaser. It was with a view to remedying this state of affairs and bringing the case of purchase from an unregistered dealer on a par with the case of purchase from a registered dealer that the State Government made rule 12(1A), the object of the rule being that though the goods were sold by the original dealer to the intermediate dealer and it was the intermediate dealer who despatched them outside the State of Bombay, there was in effect and substance one transaction involving despatch of goods outside the State of Bombay in the course of inter-State trade or commerce or in the course of export outside India and that the goods should not, therefore, suffer incidence of tax before they reach the hands of the purchaser. This reason behind the rule clearly shows that the goods sold by the intermediate dealer must be the same as the goods purchased by the intermediate dealer from the original dealer, for it is only then that the entire transaction can be regarded as one single transaction. If this reason of the rule is borne in mind, it is clear that what is required by the rule is that the goods sold must be commercially the same commodity as the goods purchased, whether processing or alteration has been performed on the goods or not and it is not enough that merely the basic essential properties of the goods remain unchanged.

8. This being the position, in order to determine whether the assessees, when they sold bidi pattis, could be said to have sold the goods purchased by them, namely, raw tobacco, we must ask ourselves the question whether raw tobacco and bidi pattis could be said to be commercially the same commodity. Now there can be no doubt that raw tobacco and bidi pattis are commercially different commodities. This position was indeed so evident that Mr. I. M. Nanavati on behalf of the assessees actually found it difficult to dispute it. As a matter of fact we find that there is also a decision of the Supreme Court which supports this view and that decision is the one reported in Anwarkhan Mehboob Co. v. State of Bombay ([1960] 11 S.T.C. 698). That was also a case dealing with raw tobacco and bidi pattis and the question which arose was whether raw tobacco could be said to be consumed when it was converted into bidi pattis. The petitioners in that case purchased raw tobacco for the purpose of preparing bidi pattis in the State of Bombay and when the State of Bombay sought to tax the purchase, the petitioners resisted the claim of the State on the ground that the purchases were outside the State of Bombay. The State of Bombay, on the other hand, contended that as a result of the purchases, raw tobacco was delivered in the State of Bombay for consumption in the State of Bombay and the purchases were, therefore, covered by the Explanation to Article 286(1)(a) and must be said to have taken place inside the State of Bombay. This contention of the State was upheld by the Supreme Court which took the view that when tobacco was delivered in the State of Bombay for the purpose of changing it into bidi pattis which was a commercially different article, the delivery was for the purpose of consumption and the purchases, therefore, fell within the Explanation to Article 286(1)(a). The Supreme Court observed that whenever a commodity is so dealt with as to change it into another commercial commodity, there is consumption of the first commodity within the meaning of the Explanation to Article 286(1)(a) and applying this principle the Supreme Court held that when raw tobacco was converted into bidi pattis by subjecting it to the process of sieving and removal of stems and dust, raw tobacco was consumed and what was produced was a commercially different article, namely, bidi pattis. This decision clearly shows that, for the purpose of sales tax laws at any rate, when a commodity is so dealt with as to change it into another commercial commodity, there is consumption of the first commodity and the commodity into which it is changed cannot be said to be the same commodity as the first commodity. Now if raw tobacco was consumed when it was converted into bidi pattis, it is difficult to see how it could be said that raw tobacco was sold when bidi pattis were sold. What were sold were bidi pattis which were a commercially different commodity and which were produced as a result of consumption of raw tobacco. In view of this decision of the Supreme Court it is impossible to hold that when bidi pattis were sold by the assessees in the present case, what were sold were the goods purchased by the assessees, namely, raw tobacco.

9. Turning now to the two decisions of the Supreme Court on which reliance was placed by Mr. I. M. Nanavati, the first decision to which we must refer is the decision in Tungabhadra Industries Ltd. v. Commercial Tax Officer ([1960] 11 S.T.C. 827). In that case the assessee purchased groundnuts and prepared hydrogenated oil out of them. In the course of its assessment to sales tax, the assessee claimed a deduction of the purchase price of groundnuts from the proceeds of sale of all oil including hydrogenated oil relying on rule 5(1)(k) read with rules 18(1) and (2) of the Turnover the Assessment Rules made under the Madras General Sales Tax Act, 1939. The assessee was entitled to such deduction only if hydrogenated oil was covered by the expression 'groundnut oil' in these rules. The Supreme Court held that hydrogenated oil was groundnut oil within the meaning of those rules even though hydrogenated oil was the result of a physical process and the assessee was, therefore, entitled to deduction in respect of the purchase price of groundnuts attributable to the hydrogenated oil sold by the assessee. Now it is difficult to sell how this decision in any way supports the contention of Mr. I. M. Nanavati. The question in this case was not whether hydrogenated oil and unrefined or unprocessed groundnut oil constituted commercially different commodities or the same commodity. The only question was whether the expression 'groundnut oil' used in the relevant rules covered hydrogenated oil and the Supreme Court held that it did. In the present case also if the question were whether bidi pattis could be said to be tobacco, the answer perhaps would have been that they were tobacco just as raw tobacco would also be tobacco. But that is very much different from saying that bidi pattis and raw tobacco are commercially the same commodity. It is evident that they are commercially different commodities and that fact can no longer be disputed having regard to the decision of the Supreme Court in Anwarkhan Mehboob's case ([1960] 11 S.T.C. 698).

10. The next decision of the Supreme Court to which we must refer is the decision in Kailash Nath v. State of U.P. ([1957] 8 S.T.C. 358). The question before the Supreme Court in that case was in regard to the construction of a notification issued by the Uttar Pradesh Government exempting certain sales of cloth and yarn in the exercise of its powers under section 4 of the Uttar Pradesh Sales Tax Act, 1948. The notification exempted inter alia sales of cotton cloth and yarn manufactured in Uttar Pradesh made on or after 1st December, 1949, with a view to export such cloth or yarn outside the territories of India on condition that the cloth or yarn was actually exported and proof of such export was furnished. The petitioners, a textile mill in Uttar Pradesh, sold cotton cloth manufactured by them to indentors who thereafter dyed and printed such cloth with hand-made apparatus and exported it overseas as hand-printed cloth. The petitioners claimed exemption in respect of the cloth sold by them to the indentors and which was exported by the latter after printing and dyeing it. The claim was resisted by the Revenue on the ground that the terms of the notification were not satisfied inasmuch as the goods exported by the indentors were different from the goods sold by the petitioners. This contention of the Revenue was, however, rejected by the Supreme Court which took the view that by using the word 'such' in the notification, the Legislature did not intend to lay down that the identical thing should be exported in bulk quantity or that any change in appearance should be crucial to alter it but that the words 'such cloth or yarn' meant cloth or yarn manufactured in Uttar Pradesh and sold and thereafter exported and they had nothing to do with the transformation of the cloth by printing designs on it. The Supreme Court observed that the cloth exported was the same as the cloth sold with this variation or difference that the colour had changed by printing and processing. It will be seen from this summary of the decision which we have given, that the decision proceeded on the construction of the words 'such cloth or yarn' which showed that what was required to be exported under the notification was the cloth or yarn manufactured in Uttar Pradesh and sold and not any other cloth or yarn. So long as the cloth or yarn which was exported was the same as the cloth or yarn manufactured in Uttar Pradesh and sold, the terms of the notification were satisfied even though the goods manufactured and sold might have undergone transformation by printing and processing and might have been converted into a commercially different commodity. This decision cannot help us in deciding what should be the test to be applied for the purpose of determining the applicability of rule 12(1A).

11. We are, therefore, of the opinion that in order to attract the applicability of rule 12(1A), the goods sold must be commercially the same commodity as the goods purchased and since in the present case bidi pattis were commercially not the same commodity as raw tobacco, the sales of bidi pattis effected by the assessees could not be said to be sales of raw tobacco purchased by the assessees and the condition for the applicability of rule 12(1A) was, therefore, not fulfilled. The assessees were consequently not entitled to claim remission of the purchase tax paid by them under rule 12(1A). The question in each of the four references must, therefore, be answered in the negative. The assessees will pay the cost of the State in each reference.

12. References answered accordingly.


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