The Deputy Commissio... v. Neroth Oil Mills Com...

P. Subramonian Poti, A.C.J:— This is a revision by the Deputy Commissioner of Sales Tax (Law) against the order of the Kerala Sales Tax Appellate Tribunal, Trivandrum, holding that the exemption claimed by the assessee in regard to the turnover of prawns purchased for the purpose of sale occasioning export of such prawns out of India has to be allowed. Section 5(1) of the Central Sales Tax Act specifies that a sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Sub-section (3) of the section provides that notwithstanding anything contained in sub-section (1) the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.

2. Prawns are purchased by the assessee locally. They are cleaned, peeled, processed and packed as prawns for sale by export outside India. No doubt the purchases by the assessee are not purchases which occasion the export of the goods but they are purchases preceding the sale occasioning the export of the goods and if so section 5(3) will apply to render the sales as in the course of export and outside the scope of taxation by the State law.

3. On the approach that the goods purchased by the assessee are not the same goods as that are exported the sales tax authorities sought to tax the purchases. Sub-section (3) will apply if the export is of those goods, the term “those” indicating the goods which were the subject of purchase preceding the sale occasioning the export. In other words there should be identity of goods. The contention of the revenue is that such identity is lost by reason of the process to which the goods are subjected to. The Sales Tax Appellate Tribunal following the decision of the Supreme Court of India in Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63 (SC) negatived the contention raised on behalf of the sales tax department and held that though prawns are subjected to processing, namely, peeling, cleaning, grading, cooking, freezing, etc., they are only exported as prawns and that, after curing. The case before the Supreme Court was a case of pineapple being converted into pineapple slices and dealing with this the Supreme Court held thus:

“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 and the case does not fall within section 5A(1)(a) of the Kerala General Sales Tax Act, 1963. Although 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 it.

Section 5A(1)(a) of the 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 there may be several stages of processing and 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 identity.”

4. We may also notice that the Supreme Court in that decision referred to East Texas Motor Freight Lines v. Frozen Food Express 100 L Ed 917, where the U.S Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken. Killing, dressing and freezing a chicken was found not to result in a change of the commodity. It was no more drastic a change than the change which takes place in milk from pasteurizing, homogenizing, adding vitamin concentrates, standardising and bottling.

5. Commercially prawns which are purchased by the assessee and prawns exported after processing for the purpose of such export are one and the same commodity as rightly held by the Sales Tax Appellate Tribunal. We see no reason to interfere. The revision is dismissed.

6. The learned counsel for the revision petitioner makes an oral application under article 134-A of the Constitution for certificate for leave to appeal to the Supreme Court of India.

7. We see no substantial question of law of general importance which needs to be decided by the Supreme Court arising in the case.

8. Leave declined.

9. Petition dismissed.