Case: Deputy Commissioner, Sales Tax (Law) Board Of Revenue(Taxes Vs. Pio Food Packers

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 year4 under the Kerala General Sales Tax Act, 1963 the assessee claimed that a turnover of Rs. 3, 64,9 representing the purchase of pineapple fruit was not covered by s.) of the Act. It was asserted that the pineapple was converted into pineapple slices, pineapple jam, pineapple squash and pineapple juice. Section) (a) of the Act provides: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 eithershall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax 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, there fore, the case fell within s.. In revision before the Sales Tax Appellate Tribunal, the assessee conceded that pineapple jam andpineapple squashwould be covered by s., and in regard to pineapple juice the Tribunal found that s. 51(a) was attracted. The only question which remained was whether the preparation of pineapple slices fell within s.. 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.

Court's reasoning:
) 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 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 identityA 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. v. The State of Bombay and Others (where raw tobacco was manufactured into bidi patti), A Hajee Abdul Shukoor and Co. v. 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 v. Swasthik Tobacco Factory (raw tobacco manufactured into chewing tobacco) and Ganesh Trading Co. Karnal v. State of Haryana and Another, (paddy dehus ked 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 v. Commercial Tax Officer, Kurnool (where hydrogenated groundnut oil was regarded as groundnut oil) and Commissioner of Sales Tax, U.P., Lucknow v. 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 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 fruitThe comment applies fully in the case before usAlthough a degree of processing is involved in preparing pineapple slices from 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 itThe 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 desiredThere 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.