Case: Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes) Ernakulam Vs. Thomas Stephen and Company Limited

the decision of the Tribunal and rejected the Revenue s contention. 7. The construction of Section 5A of the Act came up for consideration before this Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers [1980, Vol. 46 STC 63 = 1980 E.L.T. 343 (S.C.)]. That was a case dealing with pine apples sliced for being sold in sealed cans. It was held that there was no consumption of the original pine apple fruit for the purpose of manufacture and the case did not fall under Section 5A(1)(a) of the Act. It was further observed that although a degree of processing was involved in preparing pine apple slices from the original fruit, the commodity continued to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. 8. On the construction of the section, this Court observed that Section 5A(1)(a) of the Act envisaged the consumption of a commodity in the manufacture of another commodity (emphasis supplied). The goods purchased should be consumed, the consumption should be in the process of manufacture, and the result must be manufacture of other goods. Pathak, J. as the learned Chief Justice then was, at page 67 of the report observed as follows : The learned Counsel for the Revenue contends that even if no manufacturing process is involved, the case still falls within Section 5A(1)(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. 9. The cashew shells in the instant case had been used as fuel in the kiln. The cashew shells did not get transformed into the end product. These have not been used as raw materials in the manufacture of the goods. These have been used only as an aid in the manufacture of the goods by the assessee. Consumption must be in the manufacture as raw material or of other components which go into the making of the end product to come within the mischief of the section. Cashew shells do not tend to the making of the end product. Goods used for ancillary purposes like fuel in the process of the manufacture, do not fall within Section 5A(1)(a) of the Act. Cashew shells, therefore, do not attract levy of tax under the said section. The same is the position with regard to the lime shell and consumed stores, which have been used only in the maintenance of the kiln and the factory not used in the manufacture of the end product. The revenue, therefore, was wrong in its contention on this aspect. 10. Support was sought to be obtained from certain observations of this Court in Ganesh Prasad Dixit v. Commissioner of Sales Tax, Madhya Pradesh [1969 3 SCR 490 at page 491] where this Court was dealing with the provisions of Madhya Pradesh General Sales Tax Act, 1959. There the expression used was either consumes such goods in the manufacture of the goods for sale or otherwise . At page 495 of the report Shah, J. speaking for this Court observed as under :- Mr. Chagla for the appellants urged that the expression or otherwise is intended to denote a conjunctive introducing a specific alternative to the words for sale immediately preceding. The clause in which it occurs means, says Mr. Chagla, that by Section 7 the price paid for buying goods consumed in the manufacture of other goods, intended to be sold or otherwise disposed of, alone is taxable. We do not think that that is a reasonable interpretation of the expression either consumes such goods in the manufacture of other goods for sale or otherwise . It is intended by the Legislature that consumption of goods renders the price paid for their purchase taxable, if the goods are used in the manufacture of other goods for sale or if the goods are consumed otherwise. 11. These observations, in our opinion, have no relevance to the present facts of the case. Further this very contention was negatived, though without reference to Ganesh Prasad s case (supra) in the passage set out hereinbefore in Deputy Commissioner of Sales Tax v. Pio Food Products (supra). The expression consumption otherwise must in the context mean consumption of other goods for purposes other than sale. 12. Another contention raised before the High Court was that the goods had been disposed of otherwise than by way of sale within the State and, hence, liable to tax by virtue of Section 5A(1)(b) of the Act. The question, therefore, is whether there is any disposal of these goods in any manner otherwise than by way of sale within the State. Disposal means transfer of title in the goods to any other person. The expression dispose means to transfer or alienate. It was formerly an essential word in any conveyance of land. See Jowitt The Dictionary of English Law and also Webster Comprehensive Dictionary (International Edn.) -Vol. 1, page 368. Clause (b) of the section requires that the goods in question should be transferred to some person otherwise than by way of sale. In this case, there was no evidence of any transfer at all, therefore, there was no disposal of the goods as known to law. The High Court records that admittedly there was no transfer of the cashew shells, the lime shells or the consumed stores in this case. These were used by the assessee himself as fuel in the case of cashew shells for the maintenance of kiln. Sub-clause (b) of Section 5A(1) was, therefore, not applicable. In the background of the facts of this case, the High Court, in our opinion, was right.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We do not think that that is a reasonable interpretation of the expression either consumes such goods in the manufacture of other goods for sale or otherwise . It is intended by the Legislature that consumption of goods renders the price paid for their purchase taxable, if the goods are used in the manufacture of other goods for sale or if the goods are consumed otherwise.11. These observations, in our opinion, have no relevance to the present facts of the case. Further this very contention was negatived, though without reference to Ganesh Prasad s case (supra) in the passage set out hereinbefore in Deputy Commissioner of Sales Tax v. Pio Food Products (supra). The expression consumption otherwise must in the context mean consumption of other goods for purposes other than sale12. Another contention raised before the High Court was that the goods had been disposed of otherwise than by way of sale within the State and, hence, liable to tax by virtue of Section 5A(1)(b) of the Act.The question, therefore, is whether there is any disposal of these goods in any manner otherwise than by way of sale within the. Disposal means transfer of title in the goods to any other person. The expression dispose means to transfer or alienate. It was formerly an essential word in any conveyance of land. See Jowitt The Dictionary of English Law and also Webster Comprehensive Dictionary (International Edn.) -Vol. 1, page 368. Clause (b) of the section requires that the goods in question should be transferred to some person otherwise than by way of sale. In this case, there was no evidence of any transfer at all, therefore, there was no disposal of the goods as known to law. The High Court records that admittedly there was no transfer of the cashew shells, the lime shells or the consumed stores in this case. These were used by the assessee himself as fuel in the case of cashew shells for the maintenance of kiln. Sub-clause (b) of Section 5A(1) was, therefore, not applicable. In the background of the facts of this case, the High Court, in our opinion, was right.