Civil Appeal No 2398 of 1978
Appeal by Special Leave from the Judgment and Order dated 24 1 1978 of the Kerala High Court at Ernakulam in TRC No 2 of 1976
M M Abdul Khader V J Francis and M A Firoz for the Appellant
section T Desai P A Francis and Mrs section Gopalakrishnan for the Respondent
The Judgment of the Court was delivered by PATHAK J
This appeal by special leave is directed against the judgment of the Kerala High Court holding that the turnover of pineapple fruit purchased for preparing pineapple slices for sale in sealed cans is not covered by s5 A1a of the Kerala General Sales Tax Act 1963
The respondent Messrs Pio Food Packers the assessee carries on the business of manufacturing and selling canned fruit besides other products
In its return for the year 1973 74 under the Kerala General Sales Tax Act 1963 the assessee claimed that a turnover of Rs 364138 89 representing the purchase of pineapple fruit was not covered by section 5 A1a of the Act
It was asserted that the pineapple was converted into pineapple slices pineapple jam pineapple squash and pineapple juice
Section 5 A1 a of the Act provides 5 A Levy of purchase tax 1 Every dealer who in the course of his business purchases from a registered dealer or from any other person any goods the sale or purchase of which is liable to tax under this Act in circumstances in which no tax is payable under section 5 and either a consumes such goods in the manufacture of other goods for sale or otherwise or        shall whatever be the quantum of the turnover relating to such purchase for a year pay tax 1274 on the taxable turnover relating to such purchase for the year at the rates mentioned in section 5 The assessee maintained that by the conversion of pineapple fruit into its products no new commodity was created and it was erroneous to say that there was a consumption of pineapple fruit in the manufacture of those goods
The Sales Tax Officer did not accept the contention and completed the assessment on the finding that a manufacturing process was involved and that therefore the case fell within section 5 A1a
In revision before the Sales Tax Appellate Tribunal the assessee conceded that pineapple jam and pine apple squash would be covered by section 5 A1a and in regard to pineapple juice the Tribunal found that section 5 1a was attracted
The only question which remained was whether the preparation of pineapple slices fell within section 5 A1a
On that question two members of the Tribunal found in favour of the assessee and the third member found in favour of the Revenue The Revenue then applied in revision to the High Court and the High Court has by its judgment dated 24th January 1978 maintained the order of the Tribunal
It appears that the pineapple purchased by the assessee is washed and then the inedible portion the end crown skin and inner core are removed thereafter the fruit is sliced and the slices are filled in cans sugar is added as a preservative the cans are sealed under temperature and then put in boiling water for sterilisation
Is the pineapple fruit consumed in the manufacture of pineapple slices  Section 5 A1a of the Kerala General Sales Tax Act envisages the consumption of a commodity in the manufacture of another commodity
The goods purchased should be consumed the consumption should be in the process of manufacture and the result must be the manufacture of other goods
There are several criteria for determining whether a commodity is consumed in the manufacture of another
The generally prevalent test is whether the article produced is regarded in the trade by those who deal in it as distinct in identity from the commodity involved in its manufacture
Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass
The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps a different kind of processing at each stage
With each process suffered the original commodity experiences a change
But it is only when the change or a series of changes take the commodity to the point where 1275 commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place
Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another
Although it has undergone a degree of processing it must be regarded as still retaining its original identity
A large number of cases has been placed before us by the parties and in each of them the same principle has been applied Does the processing of the original commodity bring into existence a commercially different and distinct article  Some of the cases where it was held by this Court that a different commercial article had come into existence include Anwarkhan Mehboob Co vs The State of Bombay and Others where raw tobacco was manufactured into bidi patti A Hajee Abdul Shukoor and Co vs The State of Madras raw hides and skins constituted a different commodity from dressed hides and skins with different physical properties The State of Madras vs Swasthik Tobacco Factory raw tobacco manufactured into chewing tobacco and Ganesh Trading Co Karnal vs State of Haryana and Another paddy dehusked into rice
On the other side cases where this Court has held that although the original commodity has undergone a degree of processing it has not lost its original identity include Tungabhadra Industries Ltd Kurnool vs Commercial Tax Officer Kurnool where hydrogenated groundnut oil was regarded as groundnut oil and Commissioner of Sales Tax UP Lucknow vs Harbilas Rai and sons where bristles plucked from pigs boiled washed with soap and other chemicals and sorted out in bundles according to their size and colour were regarded as remaining the same commercial commodity pigs bristles
In the present case there is no essential difference between pineapple fruit and the canned pineapple slices
The dealer and the consumer regard both as pineapple
The only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without 1276 spoiling
The additional sweetness in the canned pineapple arises from the sugar added as a preservative
On a total impression it seems to us the pineapple slices must be held to possess the same identity as the original pineapple fruit
While on the point we may refer to East Texas Motor Freight Lines vs Frozen Food Express where the US Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken
It was pointed out Killing dressed and freezing a chicken is certainly a change in the commodity
But it is no more drastic a change than the change which takes place in milk from pasturising homogenizing adding vitamin concentrates standardising and bottling
 It was also observed    there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cottonseed in the field and cottonseed at the gin than between a chicken in the pen and one that is dressed
The ginned and baled cotton and the cottonseed as well as the dressed chicken have gone through a processing stage But neither has been manufactured in the normal sense of the word
 Referring to Antheuser Busch Brewing Association vs United States the Court said Manufacture implies a change but every change is not manufacture and yet every change in an article is the result of treatment labour and manipulation
But something more is necessary   There must be transformation a new and different article must emerge having a distinctive name character or use And further At some point processing and manufacturing will merge
But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been manufactured
The comment applies fully in the case before us
Although a degree of processing is involved in preparing pineapple slices from 1277 the original fruit the commodity continues to possess its original identity notwithstanding the removal of inedible portions the slicing and thereafter canning it on adding sugar to preserve it
It is contended for the Revenue that pineapple slices have a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity
The higher price it seems to us is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it
It is not as if the higher price is claimed because it is a different commercial commodity
It is said that pineapple slices appeal to a different sector of the trade and that when a customer asks for a can of pineapple slices he has in mind something very different from fresh pineapple fruit
Here again the distinction in the mind of the consumer arises not from any difference in the essential identity of the two but is derived from the mere form in which the fruit is desired
Learned counsel for the Revenue contends that even if no manufacturing process is involved the case still falls within section 5 A1 a of the Kerala General Sales Tax Act because the statutory provision speaks not only of goods consumed in the manufacture of other goods for sale but also goods consumed otherwise
There is a fallacy in the submission
The clause truly read speaks of goods consumed in the manufacture of other goods for sale or goods consumed in the manufacture of other goods for purposes other than sale
In the result we hold that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture
The case does not fall within section 5 A1a of the Kerala General Sales Tax Act
The High Court is right in the view taken by it
The appeal fails and is dismissed with costs
SR Appeal dismissed


Summary:
The respondent assessee Pio Food Packers carries on the business of manufacturing and selling canned fruit besides other products
The Pineapple purchased by the assessee is washed and then the inedible portion the end crown skin and inner core are removed thereafter the fruit is sliced and the slices are filled in cans sugar is added as a preservative the cans are sealed under temperature and then put in boiling water for sterilisation
In its return for the year 1973 74 under the Kerala General Sales Tax Act 1963 the assessee claimed that a turnover of Rs 384138 89 representing the purchase of pineapple fruit was not covered by Section 5 A1b of the Act
It was asserted that the pineapple was converted into pineapple slices pineapple jam pineapple squash and pineapple juice
The assessee maintained that by the conversion of pineapple fruit into its products no new commodity was created and it was erroneous to say that there was a consumption of pineapple fruit in the manufacture of these goods
The Sales Tax Officer did not accept the contention and completed the assessment on the finding that a manufacturing process was involved and that therefore the case fell within section 5 A 1 a
In revision before the Sales Tax Appellate Tribunal the assessee conceded that pineapple jam and pineapple squash would be covered by section 5 A1a and in regard to pineapple juice the Tribunal found that section 5 1a was attracted
The only question which remained was whether the preparation of pineapple slices fall within section 5 A1a
On that question two members of the Tribunal found in favour of the assessee and the third member found in favour of the Revenue
The Revenue then applied in revision to the High Court and the High Court has by its judgment dated 24th January 1978 maintained the order of the Tribunal
Dismissing the appeal by special leave the court  HELD  1
When pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture within the meaning of Section 5A1a of the Kerala General Sales Tax Act 1963 1277 E F 2
Section 5 A1a of the Kerala General Sales Tax Act envisages the consumption of a commodity in the manufacture of another commodity
The goods purchased should be consumed the consumption should be in the process of manufacture and the result must be the manufacture of other goods
1272 There are several criteria for determining whether a commodity is consumed in the manufacture of another
The generally prevalent test is whether the article produced is regarded in the trade by those who deal in it as distinct in identity from the commodity involved in its manufacture
Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass
The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps a different kind of processing at each stage
With each process suffered the original commodity experience a change
But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place
Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another
Although it has undergone a degree of processing it must be regarded as still retaining its original identity
1274 F H 1275 A B In the present case there is no essential difference between pineapple fruit and the canned pineapple slices
The dealer and the consumer regard both as pineapple
The only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling
The additional sweetness in the canned pineapple arises from the sugar added as a preservative
The pineapple slices continue to possess the same identity as the original pineapple fruit
1275 G H 1276 A Tunghabhadra Industries Ltd Kurnool vs Commercial Tax Officer Kurnool 1960 10 STC 827 SC Commissioner of Sales Tax UP Lucknow vs Harbilas Rai  Sons 1968 21 STC 17 SC followed
East Texas Motor Freight Lines vs Frozen Food Express   Anheuser Busch Brewing Association vs United States 52 L ed
336 338 quoted with approval
Anwarkhan Mahboob Co vs The State of Bombay and Ors 1960 11 STC 698 A Hajee Abdul Shukoor and Co vs The State of Madras 1964 15 STC 719 The State of Madras vs Swasthik Tobacco Factory 1966 17 STC 316 and Ganesh Trading Co Karnal vs State of Haryana and Anr 1973 32 STC 623 held inapplicable
The fact that the pineapple slices have a higher price in the market than the original fruit does not imply that the slices constitute a different commercial commodity
The higher price is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it
It is not as if the higher price is claimed because it a different commercial commodity
1277 A B 4
The fact that the pineapple slices appeal to a different sector of the trade and that when a customer asks for a can of pineapple slices he has in mind something very different from fresh pineapple fruit does not give to the canned pineapple slices a separate identity either
The distinction in the mind of the consumer arises not from any difference in the essential identity of the two but is derived from the mere form in which the fruit is desired
1277 B C 1273 5
Clause 1 a of Section 5 A of the Kerala General Sales Tax Act speaks of goods consumed in the manufacture of other goods for sale or goods consumed in the manufacture of other goods for purposes other than sale1277 C D