IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.M.JOSEPH MONDAY, THE 31ST MARCH 2008 / 11TH CHAITHRA 1930 ST.Rev..No. 322 of 2004 ------------------------- TA.145/2003 of S.T.A.TRIBUNAL,ADDL.BENCH,KOZHIKODE .................... REVISION PETITIONER/ASSESSEE/RESPONDNT: -------------------------- M/S. KANHOLY RAMANKUTTY NAIR, GENERAL MERCHANT, BIG BAZAR, KOZHIKODE REPRESENTED BY ITS PARTNER, C. VIJAYAKUMAR. BY ADVS. SRI.P.RAGHUNATH SRI.P.RAMACHANDRAN SRI.PREMJIT NAGENDRAN RESPONDENTS/ REVENUE/APPELLANT: ----------------- STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT (TAXES) DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY SR. GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 18/12/2007, ALONG WITH S.T.REV. NO. 323 OF 2004 AND CONNECTED CASES,THE COURT ON 31/03/2008 PASSED THE FOLLOWING: H.L. Dattu, C.J. & K.M. Joseph, J. ------------------------------------- S.T.Rev. Nos. 322, 323, 325, 384, 420 and 421 of 2004 ------------------------------------ Dated this, the 31st day of March, 2008. ORDER H.L. Dattu, C.J. In all these tax revision cases, the one and only question that arises for our consideration and decision is, whether Maize and flattened Maize (Maize Poha) are one and the same commodity so as to be covered by the term 'maize' under the heading “cereal” in Entry No.9 of Second Schedule to Kerala General Sales Tax Act or a different commodity liable to be assessed as an unclassified item taxable under the residuary entry? 2. These revision petitions pertain to the orders of assessment passed by the assessing authority for the assessment years 1991-92, 1997-98, 1998-99, 1999-2000 and 2000-01. 3. The assessments had been completed by the assessing authority for the assessment year 1991-92. The assessing authority was of the view, that maize and maize poha are commercially different commodities and therefore, they are not covered by the term maize that find a place under cereal in Entry 9 of Second Schedule to K.G.S.T. Act. The first appellate authority had confirmed the findings and conclusions reached by the assessing authority. In the appeal filed by the assessee, the Kerala Sales Tax Appellate Tribunal, Kozhikode Bench in T.A. No.99 of 1996 had taken the view that maize and maize poha are one and the same commodity and therefore, they are covered by the term 'maize' that find a place under cereal in Entry 9 of Second Schedule to KGST Act. Aggrieved by the said order passed by the Tribunal, the State had carried the matter in Revision Petition No.302 of 2000 S.T.Rev.No.322 of 2004 etc. - 2 - before this Court . 4. For the assessment years 1997-98, 1998-99 and 1999-2000 in the appeals filed by the State Government in T.A. Nos.156, 157 and 158 of 2001, the Tribunal had concluded that Maize and Maize Poha are commercially different commodities and therefore they would not be covered by the term maize under the heading cereal in Entry 9 of Second Schedule to KGST Act. The assessee being aggrieved by the orders passed by the Tribunal had filed Tax Revision Cases in T.R.C. Nos.294, 295 and 296 of 2002 before this Court. This court by common judgment dated 6th November, 2002 in T.R.C. Nos.294, 295, 296 of 2002 and 302 of 2000 has set aside the orders passed by the Tribunal and has remanded the matter to the Tribunal for fresh consideration of the matter in the light of the decision rendered by the Apex Court and also the catena of decisions rendered by this Court. While doing so, the Division Bench has observed as under: “We have perused the orders of the assessing authority and of the appellate authorities. We find that all the authorities have decided the issue one way or other without considering the factual situation as to whether any process has been employed by the revision petitioner in converting maize into flattened maize and, if so, as to whether its character and use have changed in any manner and further as to whether this item is known by the buyer and in common parlance as a different commodity. All these are matters for evidence which has to be adduced by the parties. It is without going into all the factors mentioned above, all the authorities including the Tribunal have taken the view one way or the other. According to us, the question as to whether flattened maize dealt with by the assessee for all these years is the S.T.Rev.No.322 of 2004 etc. - 3 - same as maize will depend on various factors such as the process employed by the revision petitioner in converting the maize into flattened maize, the character and use of the product, viz., flattened maize and as to whether flattened maize is known in common parlance and in commercial world as a different commodity from maize. Since the item maize is occurring in the second schedule to the Act, the aforesaid aspects have to be considered in the background of the provisions of Section 14 of the Central Sales Tax Act and also keeping in mind the principles laid down by the Supreme Court in Rajasthan Flour Mills case mentioned supra and other decisions on the point. 7. In these circumstances, we are of the view that the matter must be considered by the Tribunal afresh in the light of the decisions of the Supreme Court and in the light of the observations made in this judgment. We accordingly set aside the common order of the Tribunal for all the three assessment years and remit the matter for fresh consideration in the light of the principles laid down by the Supreme Court in Rajasthan Flour Mills Association v. State of Rajasthan [(1993) 91 STC 408] and other cases mentioned in this judgment and in the light of the observations made in this judgment. If the Tribunal feels that the matter must go back to the assessing authority for taking further evidence in this matter, certainly the Tribunal is free to do so.”. 5. The Tribunal after such remand has allowed the State's Appeal and has rejected the cross objections filed by the assessee. The finding of the Tribunal is that, Maize and Maize Poha are commercially different commodities and in the absence of a specific entry in the Schedule, the assessing authority was justified in classifying the same under the residuary S.T.Rev.No.322 of 2004 etc. - 4 - entry, i.e. Entry 177 of First Schedule. The finding of the Tribunal in this regard is as under: “We have considered the arguments of both sides and also perused the assessment records. The only question to be decided in this appeal is whether kakai powha is a declared good falling under entry 9 of the second schedule to the KGST Act. It is true that there were conflicting decisions on the same issue by different benches of the Tribunal. The Hon'ble High Court of Kerala set aside the earlier orders of the Tribunal and remanded the issue back to the Tribunal with specific direction to reconsider the entire issue in the light of the decision of the Hon'ble Supreme Court of India in Rajasthan Flour Mills case. Accordingly, the matter was considered in detail in T.A. Nos.156, 157, 158/2002 dated 6..7.2004 (Helmi Enterprises) and elaborately discussed in order dated 6.7.04. It was found that a manufacturing process is involved while converting maize into maize poha. In other words, maize is consumed while manufacturing maize poha Maize loses its identity while converting into poha. The manufactured produce differ in its size, shape and structure. Further the product manufactured has a higher utility than the raw material consumed. Applying the ratio of the decision of the Hon'ble Supreme Court in Rajasthan Flour Mills case, this Tribunal held that maize and maize poha are different commodity and a process of manufacture involved while converting maize into poha. Hence maize poha is not a commodity declared under section 14 and 15 of the CST Act. In the absence of specific entry in the schedule, the assessing authority is justified in classifying the same under the residuary entry, i.e. Entry 177 of First Schedule. We therefore, set aside the order of the Deputy Commissioner (Appeals) in STA 370/2002 dated 31.12.2002.”. 6. Aggrieved by the aforesaid finding and conclusion reached by the Tribunal, the assessee is before us in these tax revision cases. S.T.Rev.No.322 of 2004 etc. - 5 - 7. The assessee has framed the following questions of law for our consideration and decision. They are:- “(i). Is not the order of the Appellate Tribunal improper and unsustainable in the facts and circumstances of the case? Is not the order of the Appellate Tribunal vitiated by a perverse appreciation of evidence? (ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that maize and maize poha are different commodities and that maize poha is not a commodity declared under Section 14 and15 of the CST Act especially when maize cannot be consumed as such? (iii) Whether on the facts and circumstances of the case, the Appellate Tribunal is justified in holding that maize poha does not come within the entry maize under entry no.9 of the second schedule to the KGST Act especially in the light of the decision of the Allahabad High Court in Commissioner of Sales Tax v. Anand Ram Hari Ram (1982 UPTC 987) confirmed by the Hon'ble Supreme Court in S.L.P. No.11915 of 1982 that maize poha is a food grain (cereal)? (iv) Whether the Appellate Tribunal justified in holding that maize and maize poha are different commodity since no manufacturing process is involved while converting maize into maize poha and as the only process involved is steaming and flattening on maize? Is not the approach adopted by the tribunal in coming to the conclusion that manufacturing process is involved in converting maize into maize poha and that maize and maize poha are different commodities, unsustainable in law in the light of the judgments of the Hon'ble Supreme Court in 41 STC 394, 46 STC 63, 69 S.T.Rev.No.322 of 2004 etc. - 6 - STC 11? (v) In a taxing matter, when two views are possible, is not the tribunal bound to take a view which is favourable to the assessee in the light of various decisions of the Apex Court and this Hon'ble Court? (vi) Whether the Appellate Tribunal is justified in unsettling the settled position of law by discarding the dictum laid down by the Apex Court and various High Courts? (viii) Is the revenue justified in levying tax on the sale of maize poha at different rates for different dealers in different parts of the State and also at different rates for the same dealer in respect of different assessment years? (ix) Is not the tribunal bound by its own decision rendered earlier for another assessment year on the very same question? (xi) Is the tribunal justified in not following the decision of another bench of the tribunal and also of the very same bench on the very same question?” 8. At the time of hearing of these revision petitions, the learned counsel for the assessee would submit, that, the finding of the Tribunal that maize and maize poha are different commodities and a process of manufacture is involved while converting maize into maize poha is without any factual basis. It is further contended that petitioner used to effect purchase of maize poha and the same is sold without undergoing any further processing. 9. Learned counsel for the petitioner would further contend that maize is converted into maize poha by employing some labour work, i.e. steaming and flattening, without adding any salt, sugar or any other ingredients for its processing. The maize poha obtained is not cooked and cannot be S.T.Rev.No.322 of 2004 etc. - 7 - directly used as food and further frying process is necessary before its use. Therefore, maize poha retains identity as cereal and is not different from maize. Learned counsel also relies upon the test result of maize manufactured by M/s.Miki Food Products, Camby issued by the Assistant Collector (Tech) Central Excise, Ahemadabad wherein it is stated, that maize poha does not possess any essential characteristic of prepared food as maize corn flakes and is not edible. In view of the report by the technical expert, learned counsel contends that maize and maize poha are one and the same commodity and therefore, requires to be taxed at the rate of 1% treating it as a cereal falling under entry 9 of the Second Schedule to KGST Act. Learned counsel further submits that the view of the Tribunal is that a manufacturing process is involved while converting maize into maize poha and this finding of the Tribunal, according to the learned counsel, is contrary to the decision of the Apex Court in the case of Board of Revenue (Taxes), Ernakulam vs. Plo Food Packers (46 STC 63), wherein the apex court has held that 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. In the said decision, it is further stated that, there must be transformation, a new and different article must emerge having a distinctive name, character or use. Therefore, it is stated that the Tribunal ought to have concluded that maize poha has the same characteristics of maize, and therefore, they are not commercially different commodities. 10. The learned counsel also relies upon the decision of the West Bengal Taxation Tribunal in the case of Ram Bilash Agarwal vs. C.T.O., Durgapur Range and others, (2004) 137 STC 510. Reliance is also placed S.T.Rev.No.322 of 2004 etc. - 8 - on the decision of the Uttar Pradesh High Court in the case of Commissioner of Sales Tax, U.P., Lucknow vs. M/s.Anand Ram Hari Ram, 1982 UPTC 987 and the order passed by the Supreme Court in rejecting the Special Leave Petition filed by the State. 11. Lastly, it is contended that the Tribunal merely relying on the decision of the Apex Court in the case of Rajasthan Flour Mills Association and another vs. State of Rajasthan, 91 STC 408, could not have come to the conclusion that maize and maize poha are commercially different commodities. 12. Per contra, Mr.Mohammed Rafiq, appearing for the Revenue would submit that in view of the law laid down by the Apex Court in the case of Rajasthan Flour Mills Association and another vs. State of Rajasthan, 91 STC 408, State of Tamil Nadu vs. Pyare Lal Malhotra, 37 STC 319; State of Karnataka vs. B.Raghurama Shetty, 47 STC 369; Bangalore Wood Industries vs. Asst. Commissioner of Commercial Taxes, 92 STC 603; Sterling Foods vs. The State of Karnataka and another, 63 STC 239; and Aspinwall and Co. Ltd., vs. Commissioner of Income Tax, 125 STC 101, there is essential difference and distinction between maize and maize poha and therefore, the Tribunal was justified in treating maize poha as an item which would not come within the expression maize that finds a place in entry 9 of Second Schedule to the Act, and was justified in directing the assessing authority to treat the said commodity under the residuary entry and tax the same at the rate of 12.5%. 13. The one and only question that arises for our consideration and decision, as we have already noticed is, whether the Sales Tax Tribunal S.T.Rev.No.322 of 2004 etc. - 9 - was justified in holding that Maize and Maize Poha are commercially different commodities and therefore it would not come under the heading “cereal” under Entry 9 of second schedule to KGST Act. 14. Section 5 of KGST Act is the charging provision. Sub-section (1) lays down that every dealer, other than a casual trader or agent of non-resident dealer, whose total turnover is not less than two lakhs and every casual trader or agent of a non-resident dealer whatever may be his total turnover for the year shall pay tax on his taxable turnover for that year. Clause (i) of subsection (1) of Section 5 lays down that in the case of goods specified in first and second schedule to the Act, levy of tax shall be at the rate or rates specified therein and only at the points specified against such goods. Second Schedule to KGST Act enumerates declared goods in respect of which a single point of tax is leviable under sub-section (1) or sub-section (2) of Section 5 of the Act. Entry 9 of second schedule to the Act speaks of cereals. The said entry reads as under: =========================================================== Sl. Description of the Point of Rate of No. goods levy tax ---- --------------------- -------------- -------------- Cereals, that is to say, At the point of first sale 9 paddy, rice, jower or in the State by a dealer 4 milo, bajra, maize, who is liable to tax under ragi, kodon, kutki and Sectin 5 barli. =========================================================== 15. The legislature has enumerated the goods that would fall under entry cereals. Immediately after the word cereals, the legislature has used the expression “that is to say”. This expression had come up for consideration and interpretation in the case of State of Tamil Nadu vs. Pyarelal Malhotra 37 STC 319, wherein it is stated that the said expression is S.T.Rev.No.322 of 2004 etc. - 10 - generally employed to make clear and fix the meaning of what is to be explained or defined, and not to amplify the meaning, for which purpose the word 'includes' is generally employed. In Sait Rikhaji Furtarnal and another vs. State of A.P., 1991 Supp (1) SCC 202, the apex court has observed that the expression “that is to say” is exhaustive and not merely illustrative. In Rajasthan Roller Flour Mills Association vs. State of Rajasthan, (1993) 91 STC 408, the Supreme Court has observed, that the expression “that is to say” is employed in Section 14(1) of the CST Act, to make clear and fix the meaning of what is to be explained or defined. Such words are not used as a rule to amplify a meaning and in the context of single point sales tax, the expression is meant to exhaustively enumerate the kind of goods in a given list. 16. From the decisions cited supra, what can be deduced is, the words “that is to say” are the words of limitation confined to specified items only. They are words of illustration, and the instances that follows operate as a guide for interpretation. 17. The Apex Court while explaining the concept of single point tax in the case of State of Tamil Nadu vs. Pyarelal Malhotra (1976) 37 STC 319 (SC), has stated that sales tax law is intended to tax sales of different commodities and not to tax the production or manufacture of particular substance out of which these commodities may have been made. As soon as separate commercial commodities are made or come in to existence, they become separately taxable goods or entities for purposes of sales tax and so long as they retain their identity as goods of a particular type, they cannot be taxed again in a series of sales. In such cases, where one commercial commodity is transformed into another, it becomes separate for purposes of S.T.Rev.No.322 of 2004 etc. - 11 - sales tax. The object of single point of taxation is the commercial commodity of each variety and not the sale of the substance out of which it is to be made. The Court has further observed, “It is true that the question whether the goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the sales tax, the taxable event is the same and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the sales tax law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of sales tax is also concerned with the “goods” of various descriptions. It, therefore, becomes necessary to determine when they ceased to be goods of one taxable description and becomes those of a commercially different category and description.”. 18. The Central Sales Tax Act is an Act to formulate the principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for levy, collection and distribution of taxes on the sales of goods etc. One of the purposes sought to be achieved by this Act is to specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of certain goods, which are declared to be of special importance. The meaning of the expression “declared goods” is defined in Section 2 (c) of the Act, to mean goods declared under Section 14 to be of special importance in interstate trade or S.T.Rev.No.322 of 2004 etc. - 12 - commerce. Section 14 of the Act enumerates the various goods which are declared to be of special importance in inter-State trade or commerce. Section 15 of the Act imposes restrictions and conditions in regard to tax on sale or purchase of declared goods within the State. 19. The Sales Tax Appellate Tribunal, while allowing the State's appeal has primarily relied on the ratio of the decision in Rajasthan Flour Mills' case for coming to the conclusion that Maize and Maize Poha are commercially different commodity. 20. In Rajasthan Flour Mills' case, the question before the Apex Court was whether the expression “wheat” in Section 14(1)(iii) of the Central Sales Tax Act, 1956, includes flour, maida and suji. The court held that, flour, maida and suji derived from wheat are not 'wheat' within the meaning of Section 14(1)(iii) as they are different and distinct goods from wheat and therefore they are not declared goods. While saying so, the court has observed, that, in taxing matters one has ultimately to take a common sense view of the matter. The terms as understood in the commercial sense and with reference to their use must be kept in view, in order that a correct conclusion may be reached. Although 'wheat' is a cereal, but commodities like atta (flour) or Maida or suji obtained by subjecting wheat to a different process are commercial commodities different from wheat and those cannot be treated as declared goods in the manner wheat as a cereal does. The restrictions of Section 15 must be limited to the goods specifically mentioned in Section 14 of the Act. 21. In Gopuram Gram Mill Co. vs. State of Andhra Pradesh (1994) 95 STC 358, the question before the court was whether gram or gulab gram which has undergone the process of parching or frying would be a gram S.T.Rev.No.322 of 2004 etc. - 13 - or gulab gram as specified in sub item (i) of item (vi-a) of Section 14 of the Central Sales Tax Act, 1956. The Apex Court following the observation made in Rajasthan Flour Mills case has stated that item (vi-a) of Section 14 of the Central Sales Tax Act, 1956 refers to 'pulses' that is to say, and that expression that is to say has been held by this Court in Rajasthan Flour Mills case to mean, “to make clear and fix the meaning of what is to be explained or defined. The words, it was said, are not used as a rule to amplify the meaning and in the context of a single point sales tax, they exhaustively enumerate the kind of goods in a given list. That judgment also holds that the provisions of Section 14 and 15 of the Central Act, being restrictions upon the