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The North Arcot District Co-operative Supply and Marketing Society Ltd. Vs. the State of Tamil Nadu - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 560 of 1975
Judge
Reported in[1980]45STC337(Mad)
AppellantThe North Arcot District Co-operative Supply and Marketing Society Ltd.
RespondentThe State of Tamil Nadu
Appellant AdvocateC. Natarajan, Adv.
Respondent AdvocateAdditional Government Pleader
DispositionPetition allowed
Excerpt:
- .....mixtures effected by the assessee. the contention of the assessee was that the sales were second sales of chemical fertilisers and, as such, were exempt from tax. the assessing authority treated the disputed turnover as first sales of chemical fertilisers taxable at single point under item 21 of the first schedule. the appellate assistant commissioner upheld that view of the assessing authority. on further appeal, the tribunal took the view that though the manure mixtures would fall within item 21 of the first schedule, the sales by the assessee of the manure mixtures were second sales of chemical fertilisers and hence could not be taxed. it is against this decision of the tribunal that the state of tamil nadu preferred a revision to this court. during the course of the arguments in.....
Judgment:

Sethuraman, J.

1. This revision petition has been filed against the judgment of the Tamil Nadu Sales Tax Appellate Tribunal, Madras (Second Additional Bench), dated 30th July, 1974. The only point in dispute relates to the assess-ability of chemical fertilisers. For the assessment year 1967-68, the Joint Commercial Tax Officer, Vellore (South), taxed the assessee among others on a turnover of Rs. 28,71,627.26 and assessed it at the rate of 31/2 per cent. This turnover related to the sale of 'fertiliser mixture'. According to the assessee, the mixture sold by it was a mixture of inorganic chemical fertilisers mixed with deoiled cake and other fillers and the said mixture did not contain any organic fertiliser. As the inorganic chemical ingredients used in the mixture were already subjected to single point tax at the hands of the suppliers, it was submitted that the fertiliser mixture would not fall within item 21 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. Consequently, the exemption conceived by that entry was not available to the assessee and, therefore, the turnover would have been taxed under Section 3(1). With reference to the turnover under Section 3(1), the contention of the assessee was that it was entitled to exemption under G. 0. Ms. No. 976, Revenue, dated 28th March, 1959. As the inorganic mixture had already suffered tax and a mere mixing operation would not amount to a manufacturing process, it was submitted that the tax-suffered ingredients could not be taxed under item 21 of the First Schedule. This contention having been negatived by the sales tax authorities, the matter came before the Sales Tax Appellate Tribunal. The Tribunal held that even a mixture of pure inorganic chemicals with fillers like gypsum, china-clay and deoiled cake will fall under item 21 of the First Schedule and, consequently, G. 0. Ms. No. 976, Revenue, dated 28th March, 1959, would not be attracted. As regards the claim for exclusion of the turnover on the ground that the ingredients had already suffered tax, the Tribunal relied on the decisions of this Court in State of Tamil Nadu v. Rallis India Limited [1974] 34 S.T.C. 532, and Shaw Wallace & Company Limited v. State of Tamil Nadu T.C. Nos. 77 and 78 of 1974 decided on 5th March, 1974 (Madras High Court) and negatived it. The result was that the assessee's claim for exclusion on either ground stood rejected. The assessee has now come forward in revision against the said order of the Tribunal.

2. In the present case, the only contention taken before us is that the fertiliser mixture sold by the assessee did not fall within item 21 of the First Schedule and that, therefore, the provisions of Section 3(1) of the Act would apply with the consequence that the exemption available to the assessee under the notification would have to be given.

3. The contention really falls into two parts. The first part is that what the assessee does is only mixing up of Sub-items (1) to (15) of item 21 of the First Schedule along with some other items, which are extraneous to item 21, so that the mixture being a different commercial substance, had to be taxed under Section 3(1) with reference to which the exemption under the notification would have to be considered. The other part of the contention was that it does not fall under sub-item (16) so that the assessment would have to be under Section 3(1) and there would be exemption under the notification. It is this contention that has to be considered.

4. There is a recipe of the kind of mixtures sold by the assessee which appears at pages 9 and 10 of the typed set of papers filed before us. The Sales Tax Appellate Tribunal has not considered the question as to whether this is a mixture of sub-items (1) to (15) or whether it is a mixture coming under sub-item (16). The matter will have to be gone into by the Tribunal in the light of what we have to say on the question of exemption available to the assessee under the notification.

5. A list of notifications under the Madras General Sales Tax Act, 1959, granting exemptions and reductions of tax under Section 17 is given in all the publications of the Act. Item 43 of the said list which is the reproduction of G. 0. Ms. No. 976, Revenue, dated 28th March, 1959, runs as follows:

Serial No. Description of the sale or purchase Conditions or restrictions

and the class of persons and subject to which exemption

institutions is granted

43. Sales by Co-operative Wholesale Exemption applies to the

Stores in the State of Madras to tax payable under

primary Co-operative Stores which Section 3(1) of the Act only.

are members of such Co-operative

Wholesale Stores.

Section 3(1) provides that every dealer whose total turnover for a year exceeds the minimum amount not taxable shall pay a tax for each year at the specified percentage of his taxable turnover. Sub-section (2) of Section 3 provides that notwithstanding anything contained in Sub-section (1), in the case of goods mentioned in the First Schedule, the tax under the Act shall be payable by a dealer at the rate and only at the point specified therein on the turnover in each year relating to such goods whatever be the quantum of turnover in that year. The First Schedule contains a list of the goods in respect of which single point tax is leviable under Sub-section (2) of Section 3. Item 21 of the said list, as it was in force in the relevant year, ran as follows:

Serial No. Description of the goods Point of levy Rate of tax(1) (2) (3) (4)per cent21 Chemical fertilizers, that At the point of 3(1) Ammonium sulphate; first sale in the(2) Ammonium nitrate; State.(3) Urea;(4) Ammonium chloride;(5) Sodium nitrate;(6) Calcium ammonium nitrate;(7) Superphosphate single;(8) Superphosphate triple;(9) Kotka phosphate;(10) Di-calcium phosphate;(11) Potassium chloride (muriate ofpotash);(12) Sulphate of potash;(13) Mono-ammonium phosphate;(14) Di-ammonium phosphate;(15) Bonemeal;(16) any mixture of one or more ofthe articles mentioned initems (1) to (15) and one ormore of the organic manures.

7. This item uses the following expression: 'that is to say'. The expression 'that is to say' has been the subject of consideration by the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 S.T.C. 319. The entry under consideration in that case was entry (iv) in Section 14 of the Central Sales Tax Act, 1956. As regards iron and steel, the following was the entry:

(iv) iron and steel, that is to say,--

(a) pig iron and iron scrap;

(b) ...

(c) ...

(d) ...

8. We have not reproduced the entire entry as regards iron and steel as it is not relevant for our purpose. The question in the Pyare Lal Malhotra's case [1976] 37 S.T.C. 319 at 324 was whether steel rounds, flats, angles, plates, bars, etc., came within the scope of entry (iv) of Section 14 of the Central Sales Tax Act. The Supreme Court held that the expression 'that is to say' was meant to exhaustively enumerate the kinds of goods on a given list. At page 324 of the Reports, it was pointed out:

But, in the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression was apparently meant to exhaustively enumerate the kinds of goods on a given list. The purpose of an enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise, the listing itself loses all meaning and would be without any purpose behind it.

9. The result of this interpretation was that unless a commodity fell within the enumerated category it would not come within the scope of the provisions of Section 14. Similarly, in the present case, unless the fertiliser sold by the assessee came within the enumerated category, the turnover in such item would not fall for consideration of single point levy of tax.

10. In this connection, the decisions of this Court, which have considered the interpretation to be put on item 21 of the First Schedule, may now be referred to. In State of Tamil Nadu v. Rallis India Ltd. [1974] 34 S.T.C. 532, the disputed turnover represented sales of manure mixtures effected by the assessee. The contention of the assessee was that the sales were second sales of chemical fertilisers and, as such, were exempt from tax. The assessing authority treated the disputed turnover as first sales of chemical fertilisers taxable at single point under item 21 of the First Schedule. The Appellate Assistant Commissioner upheld that view of the assessing authority. On further appeal, the Tribunal took the view that though the manure mixtures would fall within item 21 of the First Schedule, the sales by the assessee of the manure mixtures were second sales of chemical fertilisers and hence could not be taxed. It is against this decision of the Tribunal that the State of Tamil Nadu preferred a revision to this Court. During the course of the arguments in that case, reference was made to an earlier decision in Imperial Fertiliser and Company v. State of Madras [1973] 31 S.T.C. 390, in which the assessee purchased various items of chemical fertilisers referred to in item 21 of the First Schedule and brought about a new product by mixing one or more of the said articles with one or more of the organic manures and sold the mixed product. It was held that the manure mixture sold by the assessee had different characteristics and properties of its own and that it did not retain the same characteristics or properties of any one of the chemical manures or organic manures which formed its components, and that for getting an exemption on the ground that the sale of an article is a second or a subsequent sale it must be established that there has been a sale of the same goods at an anterior point of time, and unless there was identity between the items of chemical fertilisers purchased and the manure mixture sold, it was not possible to treat the sales of manure mixtures as second sales.

11. In the case of Rallis India Ltd. [1974] 34 S.T.C. 532, this Court held, after referring to the above decision, that a mixture of any one of the goods referred to in item 21 would be a chemical fertiliser and, as such, could be brought within item 21. As such a mixture and its components had different chemical properties of their own and their uses also were different, it was not possible to treat the manure mixture as the same article as the components themselves and when the product obtained by mixing the various articles of chemical fertilisers referred to in item 21 was sold as a different commercial product and for a different user, it had to be treated as a different article from the component, whether the process of such mixture was one of manufacture or not. The result was that the sale effected by the assessee was not considered to be a second sale of the same commodity.

12. Along with the above decision, the case of Shaw Wallace and Company Limited T.C. Nos. 77 and 78 of 1974 decided on 5th March, 1974 (Madras High Court) was also decided and the same conclusion was reached. The case of Shaw Wallace and Company Ltd. was taken up in appeal to the Supreme Court and the Supreme Court decision is reported in Shaw Wallace and Co. Ltd. v. State of Tamil Nadu [1976] 37 S.T.C. 522 at 524, 526. The Supreme Court affirmed the decision of this Court on the basis that the mixtures produced by the assessee were different from their component parts, that their properties and uses were also different, and that they were sold as different commercial products. It was, therefore, held that the assessee was not entitled to the exemption on the ground that the tax had been paid on the components at an earlier stage. One aspect which may be noticed at this stage with reference to the decision in Shaw Wallace and Co. Ltd. v. State of Tamil Nadu [1976] 37 S.T.C. 522 is that this was a case of a mixture of chemical fertilisers consisting of sub-items (1) to (15) of item 21 of the First Schedule. The Supreme Court had not to deal with the question as to whether the case came within the scope of sub-item (16) of item 21. That the decision has to be understood in the above manner would be clear from the following extract from the said decision at page 524:

The principal question for determination in these appeals is whether the fertiliser mixtures in question can be treated as the same article as chemical fertilisers composing them.

13. Again, at page 526, it was observed:

The only question before us, as already indicated, is as to whether there was any mixture of one or more of the articles shown as sub-items (1) to (15) of item 21. It is admitted by the appellant in the statement of the case that the fertiliser mixture is prepared by mixing various chemical fertilisers and fillers like china-clay, gypsum, etc., by a shovel. It cannot also be disputed that the fertiliser mixture is a marketable commodity different from its components, is put to different use and has different properties.

14. Thus, whether the mixture in that case was liable to fall within sub-item (16) had not to be considered.

15. In Deputy Commissioner of Commercial Taxes, Tiruchirapalli v. K. Sowrirajan [1977] 40 S.T.C. 359, this Court had again to consider the liability to tax of fertiliser mixtures in the context of item 21 of the First Schedule to the Act. In that case, what was under consideration was N.P.K. complex fertilisers, which contained no organic manure. The question that arose for consideration of this Court was whether this fell within the scope of sub-item (16), 'any mixture of one or more of the articles mentioned in items (1) to (15) and one or more of the organic manures'. Sub-item (16) thus contemplates the mixture of items (1) to (15) on the one hand and one or more of the organic manures. What an organic manure is would have to be decided in the light of the meaning to be assigned to it in commercial parlance. In dealing with the claim of the assessee to bring the N.P.K. complex fertilisers which consisted merely of a mixture of sub-items (1) to (15), as if it fell within item (16), this Court held as follows:

The use of the expression 'any mixture of one or more of the articles in items (1) to (15)' is significant. If the intention of the legislature had been that any mixture consisting of two or more of the articles mentioned in items (1) to (15) should be brought within the scope of item (16), then the said item should have been couched in a different language, such as 'any mixture of two or more of the articles mentioned in items (1) to (15)' because there cannot be a mixture of less than two articles. Since similar expression has been used in respect of organic manures and both the expressions are joined together by the word 'and', it is indisputable that for a mixture to fall under item (16), it must be a mixture of at least one or more of the articles mentioned in items (1) to (15) and at least one organic manure.

16. The result can be summed up as follows: If there is only a mixture of sub-items (1) to (15), then the product will not fall within the scope of item 21 as the mixed product is a commercially different one and is not the same as the components. If there is a mixture of sub-items (1) to (15), and an organic manure, then it will fall within sub-item (16) and come within the scope of item 21. If there is a mixture of sub-items (1) to (15) with any other foreign substance, which is not an organic manure, then it would not fall within the scope of item 21 at all. It is in the light of the above that the question will have to be considered by the Sales Tax Appellate Tribunal when it considers the matter afresh as a result of our decision in this case.

17. The result is that the matter is remanded to the Tribunal to consider the matter afresh in the light of the above reasoning and conclusion. The revision petition is accordingly allowed. There will be no order as to costs.


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