The Judgment of the Court was delivered by

K.K Usha, J.:— These tax revision cases at the instance of the assessee arise out of two orders of the Kerala Sales Tax Appellate Tribunal, Addl. Bench, Kottayam. Relevant assessment years of T.R.C Nos. 198, 209, 288 and 281 of 1994 are 1981–82, 1982–83, 1983–84 and 1984–85 respectively. Appeals in respect of these years were disposed of by the Tribunal by a common order dated 17.11.1992 T.R.C Nos. 299 and 301 of 1994 arise out of a common order dated 8.12.1992 Relevant assessment years are 1980–81 and 1985–86.

2. The common question arising in these tax revision cases is whether chilli powder, coriander powder and turmeric powder are different and distinct goods from chilli, coriander seeds and turmeric. Following a bench decision of this Court in Ambika Provision Stores v. State Of Kerala, 1987 (2) KLT 99 : (1987) 67 STC 170, the tribunal held that chilli powder, coriander powder and turmeric powder are different and distinct goods from chilli, coriander seeds and turmeric. The revision petitioner/assessee contended that since (1987) 67 STC 170 has been overruled by a Full Bench of this Court in Narriputhiris Pickle Industries v. State Of Kerala, 1993 (1) KLT 486 : (1994) 92 STC page 1, the findings of the tribunal on the above issue are to be reversed. When the matter came up for consideration before a Bench of this Court the learned Government Pleader contended that the Full Bench decision is no longer good law, in view of the later decision of the Supreme Court in Rajastan Roller Flour Mills Association v. State of Rajastan, (1993) 91 STC 408. Reliance was also placed by the learned Government Pleader on Krishna Chander Dutta (Spice) Pvt, Ltd. v. Commercial Tax Officer (1994) 93 STC Page 180, and Chillies Exports House Ltd. v. Commissioner Of Income Tax, (1997) 5 SCC 157. In view of the above submission made by the learned Government Pleader, these tax revision cases were referred by the Bench for consideration of a larger Bench by a common order dated 1.9.1997 In 1987 (2) KLT 99 : (1987) 67 STC 170, a Bench of this Court upheld the finding entered by the Sales Tax Appellate Tribunal that chillies and coriander and their powder are commercially distinct and different commodities. The learned Judges took the view that when chilli was turned into chilli powder and coriander into coriander powder, the original commodities underwent a change, giving rise to chilli powder and coriander powder. They can no longer be regarded as chilli and coriander. A new and distinct commodity emerged out of the manufacturing process. It was held that chilli powder and coriander powder are distinct and different from chilli and coriander, both in common parlance and in commercial circles.

3. A Full Bench of this Court in 1993 (1) KLT 486 : (1994) 92 STC 1 overruled the above decision. In the majority judgment rendered by Chief Justice M. Jagannadha Rao (as His Lordship then was) it was held that when chillies are converted into chilli powder, they essentially and substantially remain the same commodities and are therefore not taxable under Entry 27 of the First Schedule, once again when sold in the powdered form. The above conclusion was arrived at by applying the substantial identity test. It was held that when chillies are made into powder, they do not change in “substantial identity and character” or “essential nature”. There is only a change in the form and no change in the substantial identity. In the dissenting judgment by K.S Paripooman, J. (as His Lordship then was) it was held that chilli powder is distinct and different from chilli, both in common parlance and commercial world Or circles. According to the learned Judge, it is plausible to state that the identity test is only one of the aspects to be borne in mind in evaluating whether the original commodity has ceased to be and a new commodity or goods has resulted or is produced with a new label of user as understood in common parlance or in the commercial world.

4. It was brought to our notice by counsel appearing for both parties in this case that the appeals filed by the State of Kerala against the judgment in 1993 (1) KLT 486 : (1994) 92 STC page 1 was dismissed by the Supreme Court by order dated 19th March, 1998 after these tax revision cases were referred for consideration by larger Bench. The above order of the Supreme Court is reported as State of Kerala v. Namputhir is Pickle Industries, (1998) 6 KTR 414. It reads as follows:

“The question in these cases is whether chilli and chilli powder are different products, both exigible to sales tax. The chilli powder is produced from chillies on which sales tax under the same entry has been paid. Whether, the chilli powder is the result of a process of manufacture which the chillies have under gone and whether chilli powder is a commodily commerrially distinct from chillies are questions of fact to answer which the party proposing that the chilly powder is also exigible to tax must place relevant evidence before the appropriate taxing authority. In the instan t case, the sales tax authorities should have placed such material to establish that the chillies underwent some process or manufacture and that the end product, namely chilli powder, was recognised by those who dealt in it as being distinct from chillies. They did not do so. Upon this ground alone, therefore, we decline to interfere with the judgments under appeal. The appeals are, accordingly, dismissed with no order as to costs.”

5. Shri. V.V Asokan, Special Government Pleader (Taxes), pointed out that a reading of the order of the Supreme Court would clearly show that the Supreme Court has not by the dismissal of the appeal approved the dictum laid down in the majority judgment in 1993 (1) KLT 486 : (1994) 92 STC 1. On the other hand, the learned Government Pleader points out, a reading of the order would show that the test that has to be applied is whether chilli powder is the result of a process or manufacture which the chillies have undergone and whether chilli powder is a commodity commercially distinct from chillies. In other words, the question to be considered is whether chilli powder was recognised by those who dealt in it as being distinct from chillies. It was found that the sales-tax authorities had not placed any material in the above case to establish that chillies underwent some process or manufacture and that the end product, namely, chilli powder was recognized by those who dealt in it as being distinct from chillies. According to the learned Government Pleader, it was not substantial identity test that was applied in the above case by the Supreme Court.

6. The learned Government Pleader further submits that in the light of the decision of the Supreme Court in (1994) 93 STC 180, there cannot be any dispute regarding the question turmeric and turmeric powder are not identical. In the above mentioned case the question that arose for consideration was whether pepper and pepper powder were the same goods. The Supreme Court came to the conclusion that as far as whole black and white pepper and pepper powder are concerned, they are the same goods, whether applying the functional test or the test of common parlance/commercial parlance. The analogy of paddy and rice or of wheat and wheat powder is not apt Paddy or wheat is not consumed as such. They are consumed only after milling them into rice or flour, as the case may be. But as far as the pepper is concerned, it is used equally in whole as well as powdered form. Reference was also made to the wording of the notification. Then coming to the question of turmeric and turmeric powder, the Supreme Court observed as follows:

“So far as turmeric and turmeric powder is concerned, the position is not identical, applying the functional test.”

7. But, for the reason that turmeric was described in the relevent notification in the same manner as black and white pepper it was held the turmeric and turmeric powder must also be treated as same goods. In the light of the above, the learned Government Pleader contended that as far as turmeric and turmeric powder are concerned, they cannot be treated as same goods, in the absence of a provision in the Schedule to the Kerala General Sales Tax Act similar to the notification referred therein.

8. The learned counsel appearing on behalf of the assessee contended that there is no justification in taking the view that turmeric and turmeric powder are different goods. According to the learned counsel, if the test of substantial identity and character is applied, turmeric and turmeric powder are to be taken as one and the same.

9. We have gone through the assessment orders and orders passed by the appellate authority and the tribunal. It is seen that no evidence had been adduced by the revenue in support of its contention. The tribunal accepted the contention raised by the revenue merely by following the decision of this Court in (1987) 67 STC 170. The tribunal has not referred to any evidence regarding the process or manufacture undergone by chilli or coriander seeds on the basis of which it could enter the finding that the chilli powder and coriander powder are different from chilli and coriander seeds. Under such circumstances, we are of the view that the matter has to be remitted to the tribunal, as far as the chilli and chilli powder and coriander and coriander powder are concerned, to consider the question afresh after giving opportunities to both sides to adduce necessary evidence.

10. We find that a similar course was resorted to by the Apex Court in Chillies Exports House Ltd. v. Commissioner Of Income Tax (1997) 5 SCC 157 also. The above case arose under the provisions of Income Tax Act, 1961. The question that came up for consideration was whether the assessee, a public limited company, carrying on business of export of chillies is an industrial company as defined in the Finance Act and therefore, entitled to concessional rate of tax. The High Court of Madras declined the claim. The Supreme Court set aside the judgment and remitted the matter to High Court for de novo consideration according to law. While doing so, it was observed that the ultimate conclusion as to whether the assessee was carrying on the business of processing of goods would depend upon the consideration of all relevant materials available in the case. After purchasing the chillies the assessee sorted and graded them as per Agmark specifications. Better quality chillies were picked up and sorted out for export and before export they were clipped and stemmed and subjected to fumigation under expert technical hands in order to prevent deterioration and with a view to give better polish and appearance and during that process they were treated with methyl bromide. Their Lordships took the view that a better investigation into the different activities carried on by the assessee which resulted in making the goods fit for export is necessary and how far the cumulative effect of those activities will amount to “the processing of goods” should be arrived at in the light of the various decisions referral in the judgment As mentioned earlier, the appeal filed from 1993 (1) KLT 486 : (1994) 92 STC 1 was also dismissed only on the ground that relevant evidence had not been placed before the appropriate taxing authority to show that chilli powder was result of process or manufacture which the chillies have undergone and whether chilli powder is a commodity commercially distinct from chillies.

11. As far as turmeric and turmeric powder are concerned, we are of the view that they are distinct commodities. Turmeric gets consumed when it is powdered and in its place new goods/commodities emerge. The turmeric powder so emerging has a higher utility than the commodity consumed. Commercially speaking turmeric powder is different from turmeric. In State of Karnataka v. Raghurama Shetty, (1981) 47 STC 369 the Supreme Court had occasion to consider a similar issue regarding paddy and rice. It was then observed as follows:

“..A manufacturer also consumes commodities which are ordinarily called raw materials when he produces semi-finished goods which have to undergo further processes of production before they can be transformed into consumer's goods. At every such intermediate stage of production, some utility or value is added to goods which are used as raw materials and at every such stage the raw materials are consumed. Take the case of bread. It passes through the first stage of production when wheat is grown by the farmer, the second stage of production when wheat is converted in to flour by the miller and the third stage of production when flour is utilised by the baker to manufacture bread out of it. The miller and the baker have consumed wheat and flour respectively in the course of their business.”

12. The above decision was followed in (1993) 91 STC 408 while holding that wheat and flour are distinct and different commodities. The relevant observation is as follows:—

“Applying the reasoning adopted hereinabove, it must be held that when wheat is consumed for producing flour or maida or suji, the commodities so obtained are different commodities from wheat. The wheat loses its identity. It gets consumed and in its place new goods/commodities emerge. The new goods so emerging have a higher utility than the commodity consumed. They are different goods commercially speaking.”

13. In (1994) 93 STC 180 the Supreme Court while holding that pepper and pepper powder are one and the same commodity by applying the functional test, it was observed that wheat as such is not consumed by the consumer, it can be consumed only after powdering the same. But it is not so in the case of pepper. Pepper as such can be consumed by the ultimate consumer. But in the case of turmeric it is not so consumed. Thus applying the functional test also turmeric and turmeric powder are not the same goods. As far as turmeric and turmeric powder are concerned, we uphold the finding of the tribunal that they are different commodities. We, therefore, set aside the finding of the tribunal that chilli and chilli powder, coriander and coriander powder are different commodities and remit the matter for fresh consideration by the tribunal in the light of the observations contained in this judgment

14. The tax revision cases are partly allowed as above.