1. The petitioners in these cases are dealers in groundnut oil. They sold groundnut oil to Hindustan Lever Limited, which in its turn utilised the oil for the manufacture of vanaspati. The exact quantum of the turnover of such sales is not of importance, for only a question of interpretation of a provision of the Sales Tax Act is called for and that question arises in the following manner : Under Section 3 of the Madras General Sales Tax Act, 1959, every dealer whose total turnover for a year is not less than Rs. 10,000, shall pay a tax for each year at the rate of 2 per cent. on his taxable turnover. It would be sufficient to state the general liability of the dealer in such broad terms. The First Schedule lists out a number of goods, and Sub-section (2) of Section 3 states that in the case of goods mentioned in the First Schedule, the tax shall be payable at the rate and only at the point specified therein on the turnover relating to such goods, whatever may be the quantum of turnover in that year. This is in the nature of an exception to Section 3(1). Sub section (3) states:
Notwithstanding anything contained in Sub-section (1) or sub section (2), the tax payable by a dealer in respect of any sale of goods mentioned in the First Schedule by such dealer to another for use by the latter as component part of any other goods mentioned in that Schedule which he intends to manufacture inside the State for sale, shall be at the rate of only one per cent. of the turnover relating to such sale.
2. In order to understand this provision, we may refer in some detail to the First Schedule. The First Schedule contains a list of goods and specifies the single point of the levy of tax as well as the rate of tax at that point. While the general provision of Section 3(1) fixes the rate of tax at 2 per cent. on the turnover at the stage of every sale, even successive sales, in the case of all goods, Sub section (2) makes an exception and states that in the case of goods listed in the First Schedule, the tax shall be at a single point only, the point being specified, and further the rate of tax shall be as indicated, which is, generally speaking, higher than 2 per cent. These goods being subjected to a single point levy, their sales attract the somewhat higher rate of tax specified in the First Schedule. Sub section (3) makes a further exception. If the dealer sells any of the items listed in this Schedule to another dealer for use by the latter in the manufacture of some other item of goods mentioned in the same schedule, then the rate of tax shall be only one per cent. But the single point is still maintained. It would accordingly be seen that in the case of such goods which enter as component parts in the manufacture of other goods, both kinds of goods being borne on the First Schedule, the rate' of tax is at a very low figure at the stage of sale to the manufacturer. But the manufactured goods, being also listed in the First Schedule, will be liable to the single point levy of tax at the stage and the rate specified in that Schedule.
3. The proviso to Sub-section (3) further requires that the main part of the section shall not apply unless the dealer, selling the goods and claiming the lower rate of taxation of one per cent., furnishes to the assessing authority ' in the prescribed manner a declaration duly filled in and signed by the dealer to whom the goods are sold, containing the prescribed particulars in the prescribed form obtained from the prescribed authority.' It may be broadly stated that such declarations were in a few cases covered by the revision petitions produced before the assessing authority and in a few others only before the Appellate Assistant Commissioner at the time of the hearing of the appeal from the assessment to tax.
4. It has also further to be mentioned that this sub-section under went some changes. Originally, Sub-section (3) provided that the purchasing dealer should use the goods as component part of other goods manufactured by him and that such manufacture should be 'manufacture for sale inside the State.' By Madras Act 19 of 1960, these words were replaced by the words, 'manufacture inside the State for sale,' and this was made retrospective with effect from 1st April, 1959. This is of some importance for till this amendment was effected, the petitioners could not claim the benefit of Section 3(3). By Madras Act 44 of 1961, an explanation was added to this sub-section, and it reads thus :
For the purposes of this sub-section, 'component part' means an article which forms an identifiable constituent of the finished product and which along with others goes to make up the finished product.
5. It is the interpretation of this explanation that is called for in these cases.
6. We may refer in detail to the facts of one of these cases'--T.C. 136 of 1963. In that case, the assessee claimed that it had sold oil to the value of Rs. 3,73,229 to Messrs Hindustan Lever for the purpose of being used in the manufacture of vanaspati. Relief was sought under Section 3(3) of the Act. Before the assessing authority, the declaration form could not be filed, admittedly for the reason that forms were not available to the purchasers who had to supply the necessary certificate to the petitioners, the sellers. The assessing authority held that the concessional rate under Section 3(3) could be granted only if. the original of the declaration had been filed along with the return of the dealer for the month in which the oil was sold. The assessing authority, though it did not decide the question, was of the further view that the groundnut oil cannot be termed a component part of vanaspati and purported to distinguish the expression 'component part' from other more comprehensive expressions such as 'ingredient'', 'raw material', etc. He held that unless a component part retained its identity even after becoming part of the manufactured product, it cannot be held to be eligible for the concessional rate of tax. In the view of the assessing authority, the groundnut oil having undergone both physical and chemical changes in the course of manufacture into vanaspati, the oil lost its identity and could not therefore be treated as a component part.
7. On appeal, it was found as a matter of fact that Hindustan Lever had used the oil in the manufacture of vanaspati. But the Appellate Assistant Commissioner accepted the view taken by the assessing authority on the interpretation of the expression 'component part' and dismissed the appeal. In the further appeal to the Tribunal, an affidavit was filed by Messrs Hindustan Lever which stated that the groundnut oil purchased from the assessee-company was used in the manufacture of vanaspati. The Tribunal accepted the position that item 45 of the First Schedule referred to vanaspati, vanaspati being a vegetable product, that is to say, 'any vegetable oil or fat which, whether by itself or in admixture with any other substance had, by hydrogenation or by any other process, hardened for human consumption.' Item 20 is also in the First Schedule being 'all vegetable oils'. It may be mentioned that subsequently, by Madras Act VI of 1963, this item was omitted, but that this item was in the First Schedule during the years relevant to these tax revision cases is not in dispute. The Tribunal noticed that in other cases that came before it, it held that when groundnut oil was used in the manufacture of soaps, it had 'lost its semblance and has become amalgamated in a different product', and that the expression 'component part' could not be equated to raw product, and that it should be an identifiable constituent of the finished product. Before the Tribunal, the decision of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer  11 S.T.C. 827 was cited, where it was held that the groundnut oil had not changed its nature as groundnut oil on being manufactured into vanaspati. On the basis of this decision, the assessee contended before the Tribunal that the groundnut oil was an identifiable constituent of vanaspati. But the Tribunal did not accept this decision as justifying the interpretation sought to be placed upon the expression 'component part' by the assessee. It said that when the groundnut oil is mixed with any other oil, whatever shall be the quantity of the other oil, for the manufacture of vanaspati, it will not be the same groundnut oil coming within the scope of the concessional levy. It is this conclusion of the Tribunal that is challenged as incorrect in the present cases.
8. The question is not free from difficulty. But, before dealing with this principal question, the initial objection against the grant of concessional rate, on the ground that the necessary forms were not attached to the returns of the dealer may be dealt with. It has been stated that Section 3(3) of the Act by its proviso requires that the selling dealer has to furnish to the assessing authority in the prescribed manner a declaration containing the prescribed particulars in a prescribed form obtained from the prescribed authority. That the forms of declaration were in the prescribed form obtained from the prescribed authority and contained the prescribed particulars is not in dispute. But what is contended is that it was not furnished to the assessing authority in the prescribed manner. Rule 22 of the Madras General Sales Tax Rules deals with the matter. Broadly stated, it requires that the purchasing dealer who wishes to purchase the goods from any dealer on payment of the concessional rate of tax specified in Sub-section (3) of Section 3, shall obtain from the assessing authority a blank form and shall furnish to the selling dealer the original and duplicate parts of that declaration duly filled in and signed by him.
9. The original part of the declaration is required to be attached by the selling dealer to his return of turnover. He keeps in his custody the duplicate part of the declaration. In a like manner, the purchasing dealer retains with himself the counter-part of the form of declaration. While Sub-rule (5) in general terms requires the form of declaration to be attached to the monthly return, it nevertheless permitted the dealer to submit all the forms of declaration relating to the whole year along with the last monthly return of that year. The other parts of this rule refer to the maintenance of a true and complete account of every such form and to the surrender of unused declaration forms in certain contingencies. There is a prohibition against the transfer of forms from one person to another except for the purpose of furnishing a declaration by the purchasing dealer to the selling dealer. It is seen from these rules that in so far as the submission of the declaration form by the selling dealer is concerned he can either attach the relevant declaration form to his monthly return along with that return which has to be submitted on or before the 25th of every month, showing the turnover for the preceding month, or he can attach all the forms along with the monthly return for the last of the months of the assessment year. That in so far as the time-limit for furnishing these forms is concerned, this appears to be the prescribed manner. In these cases, owing to certain reasons which will be briefly indicated, the purchasing dealer, Messrs Hindustan Lever, was not able to obtain the forms from the appropriate authority and could not there fore furnish the necessary declaration to the selling dealers in these cases in time to comply with the above requirement. Notwithstanding that there was delay in furnishing the declaration forms, the question is whether the assessee's right to a concessional rate can be rejected.
10. The department has taken the view that whether or not the declaration forms are attached to the returns, these are not cases where the groundnut oil can be regarded as a component part of the manufactured product, that is, vanaspati, and that, therefore, Section 3(3) would not at all apply. We may refer to a decision of this Court in W.A. Nos. 291 and 292 of 1963 Since reported as Commercial Tax Officer, Salem and Ors. v. Mettur Chemical and Industrial Corporation and Anr.  15 S.T.C. 734 and  16 S.T.C. 281, which has a bearing upon the question regarding the delay in the furnishing of the declaration forms by the dealers. It has already been stated that according to the rules these forms have to be obtained from the appropriate authority and they have to be filled in by the purchasing dealer, two of the triplicates to be furnished to the selling dealer with the appropriate details of the transaction in question. It is one of these triplicate forms that has to be attached to the return of the selling dealer. Now, it appears that the purchasing dealers sought to obtain the supply of these prescribed forms from the assessing authority. That authority refused to supply the forms, taking the view that the raw materials used in the manufacture of the goods mentioned by the purchasing dealer do not form a separable component part of such goods and that, therefore, the concession under Section 3, Sub-section (3), would not be available. On the refusal to supply these forms, the matter came before this Court. Veeraswami, J., held that the groundnut oil did in fact form a component part of vanaspati and directed the supply of these forms. The State appealed against this decision and, in the writ appeals referred to earlier, this Court examined the content of the rules in that regard. The conclusion reached by this Court was that at the stage when only the supply of the forms was sought, the departmental officials had no jurisdiction to examine whether 'the concession contemplated by Section 3(3) would at all be available. It was observed that the declaration forms were required at a stage before the manufacture of the goods was undertaken and at the stage of purchase of what may be called the raw material. The eligibility of the concessional rate of tax was not a matter which called for adjudication at that stage. It was also pointed out that the relevant rule, Rule 22, made it clear that when a purchasing dealer obtained the blank declaration form, he was only expressing an intention that he proposed to manufacture goods such as would come within the scope of Section 3(3). The form itself did not contain any direction that the nature of the particular goods proposed to be manufactured should be specified. The certificate was merely a broad statement that the goods which the purchasing dealer purchases are for use in the manufacture of other goods contained in the First Schedule. In the light of the wording of the form, this Court drew the inference that the assessing authority was not conferred with the jurisdiction at that stage to determine whether the use of one class of goods for the manufacture of another class of goods found in the First Schedule was such as would give the selling dealer of the raw material the right to the concessional rate of tax. It was also pointed out that the determination of that question was an integral part of the assessment proceeding itself and that that power could not be exercised at any earlier stage. This Court however expressed its opinion that at the stage when the matter was brought before Veeraswami,], in the writ petitions challenging the propriety of the refusal to supply the forms, it was not necessary for this Court to decide whether groundnut oil figured as a component part of vanaspati within the meaning of the explanation to Section 3(3). The determination of that question was accordingly left open.
11. It will be seen therefore that the petitioners in these cases and other dealers of like description were prevented from obtaining the necessary declaration forms at the appropriate time by the refusal of the assessing authority to supply the forms. To that extent it would follow that any delay in furnishing the declaration forms would have to be condoned.
12. We have now to deal with the principal question that is before us, viz., whether groundnut oil is a component part of the manufactured product, vanaspati.
13. There is no dispute about the first requirement that both of these goods figure in the First Schedule to the Act. Till 1963, all vegetable oils stood included in this Schedule in serial No. 20. Another entry is serial No. 45 of this Schedule which refers to vegetable products, which, whether by themselves or in admixture with any other sub stance, either by hydrogenation or any other process, has been hardnened for human consumption. It is also not in dispute that the groundnut oil has been so hardened by a process of hydrogenation and would certainly come within the scope of serial No. 45. It is also undeniable that groundnut oil has gone into the manufacture of this vegetable product, vanaspati. Sub-section (3) of Section 3 provides for the lower rate of tax in respect of the sale of any goods mentioned in the First Schedule for use as component part of any other goods mentioned in that Schedule. By Madras Act 44 of 1961, an explanation to this sub-section was added by which 'component part' was declared to mean an article which forms an identifiable constituent of the finished product and which along with the others goes to make up the finished product. The expression 'component part' which occurs in Sub-section (3) was purportedly defined in a particular manner by this explanation. Quite obviously, the explanation which only purports to explain what the main provision means must be regarded as retrospective in its scope. The question then is whether groundnut oil is an identifiable constituent of vanaspati.
14. Mr. Rajah Iyer, learned counsel for the petitioners in these cases, places considerable reliance upon the decision of the Supreme Court in Tungabhacira Industries Ltd. v. Commercial Tax Officer  11 S.T.C. 827. In that case, the question arose whether the deduction of the purchase price of the groundnut from the sale price of groundnut oil in determining the turnover liable to tax would be available to a dealer who sold not the groundnut oil expressed from the groundnut but converted it into vanaspati and sold that product. To explain the position further, it may be mentioned that the turnover of a dealer represented by his purchases of groundnut was brought to tax. Such a dealer who crushed the groundnut and sold the oil obtained therefrom was also liable to tax on the sales turnover of that oil. This was considered to be an unfair burden and the rule-making authority granted relief to such a dealer. The relevant rule provided that in determining the net turnover in the case of a registered manufacturer of groundnut oil, the value of the groundnut and or kernel purchased by him was to be deducted from the turnover of sales of groundnut oil, if he had been taxed on the purchase of groundnut or kernel. What happened in the case of the assessee before the Supreme Court was that he, after expressing the oil from the groundnut, converted the oil, firstly, into refined oil and thereafter, by a process of hydrogenation, into vanaspati. The assessee succeeded in its claim in respect of the sales of refined oil, that is to say, the purchase turnover of the groundnut appropriate to that quantity of refined oil sold by it was permitted as a deduction, but its claim in so far as it related to the sales of hydrogenated oil, that is, vanaspati, was rejected. The question which their Lordships had to decide was whether hardening by the use of chemical process rendered the groundnut oil or the refined oil anything other than groundnut oil. That was the contention advanced by the State in support of the refusal to grant the deduction, and their Lordships set themselves to examine the question whether even after hydrogenation the groundnut oil continued to be oil. Their Lordships discounted the fact that there was a molecular change in the substance and held that neither mere absorption of other matter nor inter-molecular changes necessarily affected the identity of the substance as ordinarily understood. They pointed out that hydrogenated oil serves the same purposes as refined ground nut oil and that there is no use to which groundnut oil can be put for which hydrogenated oil cannot be similarly used. They concluded that hydrogenated oil still continued to be groundnut oil notwithstanding the process, which they held was merely for the purpose of rendering the oil more stable, thereby improving its keeping qualities. This decision is certainly of considerable importance, for it establishes that vanaspati is nothing other than groundnut oil in a more suit able and stable form, the process of manufacture only endowing it with qualities which would resist natural decay and deterioration.
15. Mr. Ramanujam, appearing for the State, argues that the above decision itself operates against the contentions of the petitioners in these cases. It is suggested that if the groundnut oil remains as such even after the process of hardening, it cannot be said to have been manufactured at all into any other product. Mr. Ramanujam seeks to interpret the decision of the Supreme Court as indicating that the groundnut oil continues to be groundnut oil even after conversion into what is called vanaspati. Arguing thus, he claims that it could not be said that one item of goods found in the First Schedule has been used in the manufacture of another item of goods, for the essence of the decision of the Supreme Court, according to the learned counsel, is that there has been no change at all which a process of manufacture would necessarily involve. We find it difficult to follow this contention. The decision of the Supreme Court did not deny that a process of manufacture was involved in the operation of conversion of groundnut oil into vanaspati. What it decided was, notwithstanding that a new product known as vanaspati, endowed with certain special properties, was brought into existence, it was essentially oil within the meaning of the relevant rule, which provided for a deduction from the turnover of the oil. What their Lordships had to determine was whether the sale of vanaspati was sale of oil expressed from the groundnut. The ratio of the decision was certainly not what Mr. Ramanujam claims it to be, viz., that the groundnut oil remained unchanged after the process. That there was a change in the constitution of the groundnut oil was accepted. But despite that change, the question which their Lord ships had to consider was whether the sale of that product amounted to sale of oil within the meaning of the rule granting deduction of the purchase price of the groundnut. We are not satisfied that the above decision supports the argument of Mr. Ramanujam that since vanaspati retained many of the properties of groundnut oil which went into its composition, no question of manufacture at all arises and for that reason Section 3, Sub-section (3), has no application at all.
16. There is another decision which bears on the point whether or not in producing vanaspati from groundnut oil, a process of manufacture is involved. It is Union of India v. Delhi Cloth and General Mills A.I.R. 1963 S.C. 791. In this case, the question arose whether, under the provisions of the Central Excises and Salt Act, I of 1944, when the raw ground nut oil is refined and purified and a product known as refined oil comes into existence at an intermediate stage in the process of the manufacture of vanaspati, excise duty could be levied on the production of the refined oil. In that case, the legality of the imposition of excise duty on the manufacture of refined oil arose. It was the contention of the manufacturers that the groundnut oil and til oil purchased by them from the open market were subjected to different processes in order to turn them into vanaspati. It was claimed that only the vegetable product of vanaspati was liable to excise duty and that they did not at any stage produce any new product which could be defined as a vegetable non-essential oil upon which excise duty could be levied, that is to say, since the refined oil was produced in the course of the manufacture of vanaspati, the State's attempt to levy excise duty on that refined oil was illegal. The contention that no excise duty was leviable on refined oil was accepted by the High Court, and the Union of India preferred appeals to the Supreme Court. Their Lordships pointed out that excise duty is leviable on the manufacture of goods and not on their sale and the circumstance that the substance produced at an intermediate stage was not marketed would not make any difference to liability to excise duty. They observed that numerous processes necessary to turn the raw groundnut oil or the til oil into the vegetable product had to be undertaken. They also pointed out that deodorization of the product was not undertaken except at the final stages, after hydrogenation was completed. The case of the Union was that deodorization was not necessary for refined oil to come into existence, while the appellants claimed that without deodorization the substance would not be refined oil. They accepted the contention of the appellants that the raw oil purchased for the purpose of the manufacture of vanaspati did not become at any stage refined oil as known to the consumers and to the commercial community. They also repelled the contention of the State that the purpose of the processes by which the impurities of the raw oil were removed and the oil was refined amounted to a process of manufacture. They observe:--
The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance' however minor in consequence the change may be.
17. The following quotation from the American judgment was also referred to:--
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.
18. Though the point was not directly in issue, the several observations of their Lordships clearly indicate that in producing vanaspati from a mixture of groundnut oil and til oil as has been done by the petitioners in these cases, a process of manufacture is indeed involved.
19. In order to be eligible for the lower rate of tax under Section 3(3) of the Act, two conditions are required : one is that some item of goods contained in the First Schedule of the Act must be used as a component part of some other item of goods also mentioned in that Schedule ; and the other is that a process of manufacture must be involved in the use of one item for the production of the other. It seems to us that both of these conditions are satisfied in the present case. Serial No. 20 of the First Schedule, as it stood at the relevant time, reads 'all vegetable oils' and serial No. 45 reads 'vegetable products, that is to say, any vegetable oil or fat which by itself or in admixture with any other substance has, by hydrogenation or by any other process, been hardened for human consumption.' We have already reached the conclusion that in producing the vegetable product known as vanaspati, a process of manufacture is involved and vegetable oils such as groundnut oil and til oil are used for the purpose of that manufacture.
20. But, on behalf of the State, it is contended that the explanation to this provision makes a difference, and this explanation requires, according to the State, that the expression 'component part ' used in Section 3(3) should be an identifiable constituent of the finished product. If the part loses its identity, then, learned counsel for the State argues that it cannot be regarded as a component part and that the main provision will not apply. It is exceedingly difficult to accept this contention. That the groundnut oil is a component part of vanaspati cannot admit of any denial. In fact, according to the decision of the Supreme Court in Tungabhadra Industries Limited v. Commercial Tax Officer  11 S.T.C. 827, it has been held that vanaspati still retains the essential characters of groundnut oil and that it is for all practical purposes only groundnut oil, though it has been hardened for the purpose of human consumption and rendered stable to protect it against deterioration. That it is also as a result of a process of manufacture is a conclusion we have already reached, and if any further authority should be required, it is found in Amritsar Sugar Company Limited v. Naurath  15 S.T.C. 814, where it has been specifically held that the conversion of raw groundnut oil into hydrogenated oil amounts to manufacture. Mr. Ramanujam, for the State, however contends that the explanation demands that a further requirement should be satisfied, viz., that one article used as a component part in the manufacture of another should be an identifiable constituent. Though he does not say so in so many words, what the learned counsel asks for is that there should be visual identity. He contends that having regard to the various words used in the section and in the explanation, such as 'part', 'component', 'constituent' as also expressions such as 'accessory or admixture' used in the First Schedule, unless one is in a position to point to the article in question in the final product, it cannot be said to form an identifiable part of the finished product. We are unable to agree with this contention. The expression 'identifiable' does not merely connote visual identity. When one says that it is identifiable, it expresses a knowledge of the existence of the thing whereby it becomes identifiable. No clear reason has been advanced before us to enable us to hold that if the presence of one substance in another is identifiable by other than visual means, such identity is not contemplated by the explanation.
21. In this regard, on behalf of the petitioners affidavits have been filed to show that the presence of groundnut oil in vanaspati can be chemically identified and even quantitatively estimated. The State does not dispute this proposition.
22. As far as we can appreciate the purpose underlying Section 3(3) in so far as the production of vanaspati is concerned, we must take note of the well-recognised fact that groundnut oil either exclusively or mixed with a very small quantity of til oil and cotton-seed oil is processed into refined oil and hardened by a process of hydrogenation into vanaspati. In the market, vanaspati is in fact identified with groundnut oil, and as their Lordships of the Supreme Court pointed out in Tungabhadra Industries Limited v. Commercial Tax Officer  11 S.T.C. 827, vanaspati is used for all purposes for which groundnut oil is used. It is in fact identified both by the consumer and the trade with groundnut oil, and in such a state of things, to claim that the explanation requires a different kind of identity to be established, seems to us to be unacceptable. We are accordingly satisfied that the expression 'identifiable constituent' must necessarily be given a broad meaning, for the nature of the identity must alter, having regard to the process of manufacture to which the article used is subjected. If the identity is not necessarily required to be visual, this contention of the State that the groundnut oil is not identifiable as a constituent in vanaspati has necessarily to be rejected.
23. It follows that the petitioners are entitled to the lower rate of taxation. The petitions are accordingly allowed with costs. Counsel's fee Rs. 200 (one set).