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Krishna Chander Dutta (Spice) Private Limited v. Commercial Tax Officer And Others
Factual and Procedural Background
The appellant, a dealer in the State of West Bengal, purchases whole black pepper and whole turmeric, converts them into pepper powder and turmeric powder, and sells the processed goods. The assessing authorities levied sales tax on the appellant under the West Bengal Sales Tax Act, 1954 (“1954 Act”) on the footing that the powders are distinct commercial commodities from the whole spices. The West Bengal Taxation Tribunal upheld that assessment. The present appeal before the Supreme Court challenges the Tribunal’s judgment.
Legal Issues Presented
- Whether black/white pepper powder is the same “goods” as whole black/white pepper for the purpose of single-point taxation under the West Bengal Sales Tax Act, 1954.
- Whether turmeric powder is the same “goods” as whole turmeric under the 1954 Act.
- If the answers are affirmative, whether the appellant’s sales of the powders, having been preceded by a taxable first-point sale of the whole spices, are exempt from further sales tax and whether the appellant is consequently not required to register as a dealer.
Arguments of the Parties
Appellant's Arguments
- Whole pepper and pepper powder, and whole turmeric and turmeric powder, are commercially the same goods; the powder is merely another form of the same commodity.
- Since the whole spices had suffered tax at the first point of sale, further tax on the powders would amount to double taxation, contrary to the single-point scheme of the 1954 Act.
- Relied on Alladi Venkateswarlu v. State of A.P. and CST v. D.S. Bist to contend that mere change in physical form (e.g., rice to puffed rice) does not create new goods.
State of West Bengal's Arguments
- Grinding whole spices into powder results in commercially distinct goods, analogous to the relationship between wheat and wheat flour.
- Cited Rajasthan Roller Flour Mills Assn. v. State of Rajasthan, Ganesh Trading Co. v. State of Haryana, and State of Karnataka v. B. Raghurama Shetty to submit that a change effected by a manufacturing process can create different taxable goods.
- Emphasised the words “that is to say” in the relevant notification to suggest legislative intent to treat powdered forms as separate commodities.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Alladi Venkateswarlu v. State of A.P., (1978) 2 SCC 552 | Parched and puffed rice are merely different forms of rice and not distinct goods for taxation. | Accepted. Used as an analogy to hold that powdered pepper and whole pepper (and likewise turmeric) remain the same commodity. |
| CST v. D.S. Bist, (1979) 4 SCC 741 | Products obtained by simple processing may not constitute new goods. | Accepted as supportive of the appellant’s contention that form change alone does not create new goods. |
| Rajasthan Roller Flour Mills Assn. v. State of Rajasthan, 1994 Supp (1) SCC 413 | “That is to say” in Section 14(i) of the CST Act confines the entry to goods expressly mentioned, excluding their products. | Distinguished. Court held the decision inapposite; the notification language and usage pattern of pepper/turmeric differ from wheat-flour context. |
| Ganesh Trading Co. v. State of Haryana, (1974) 3 SCC 620 | Grinding wheat into flour results in a commercially different commodity. | Not followed. Court found the wheat-flour analogy “not apt” because whole pepper/turmeric are themselves directly consumable like their powdered forms. |
| State of Karnataka v. B. Raghurama Shetty, (1981) 2 SCC 564 | Successive processing of wheat into flour and bread yields different goods at each stage. | Not followed. Same reasoning as above; consumption patterns of pepper/turmeric differ from wheat. |
Court's Reasoning and Analysis
The Supreme Court applied both the functional test (how the article is put to use) and the common/commercial parlance test.
- Pepper: Consumers and traders use pepper in whole, broken, or powdered form interchangeably for the same culinary purpose. Notification No. 885-F.T. (1-5-1955) expressly groups “black and white pepper … whole, broken, ground or powdered” within a single entry. Consequently, whole pepper and pepper powder constitute identical goods.
- Turmeric: Although the functional test might suggest a closer link between turmeric and its powder, the notification describes turmeric in language identical to pepper and Notification No. 1915-F.T. (10-5-1963) imports that description by reference. The Court therefore treated whole turmeric and turmeric powder as the same goods.
- The wheat/paddy analogies advanced by the State were rejected: paddy and whole wheat are not consumed in their original form, whereas pepper and turmeric are directly usable both whole and powdered.
- The phrase “that is to say” in the notifications was interpreted as referring to the botanical nomenclature, not as a legislative device to carve out separate taxable categories for powdered forms.
Holding and Implications
HELD: Appeals allowed; the judgment of the West Bengal Taxation Tribunal is set aside.
Because whole pepper and turmeric had already borne tax at the first point of sale, their powdered forms are not liable to a further levy when sold by the appellant. The appellant, therefore, is not required to register as a dealer for these transactions. The decision turns on the specific language of West Bengal notifications and does not announce a broad new doctrine beyond similar fact patterns.
B.P Jeevan Reddy, J.— In this appeal preferred against the judgment of the West Bengal Taxation Tribunal, the question is whether sales of turmeric powder and pepper powder obtained from whole turmeric and whole pepper are exigible to sales tax under West Bengal Sales Tax Act, 1954 (1954 Act). The principal Act levying sales tax in the State of West Bengal, of course, is the Bengal Finance (Sales Tax) Act, 1941. By a Notification No. 885-F.T., dated 1-5-1955, issued under Section 25 of the 1954 Act, the Governor of West Bengal specified and notified certain commodities including turmeric and pepper, with the result that the said commodities ceased to be governed by the 1941 Act and came within the purview of the 1954 Act. The notification, insofar as it is relevant, reads thus:
“No. 885-F.T. — 1-5-1955.— Whereas the Governor is of opinion that it would be in the public interest that the commodities mentioned below, being commodities liable hitherto to taxation under the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941), should be taxed under the West Bengal Sales Tax Act, 1954 (West Bengal Act IV of 1954);
Now, therefore, in exercise of the power conferred by Section 25 of the West Bengal Sales Tax Act, 1954 (West Bengal Act IV of 1954), the Governor is pleased hereby to specify such commodities under that section.
The commodities referred to above:
(1) (Omitted as unnecessary).
(2) Black and white pepper, known as gol mirch, that is to say, the berry of the plant “Piper Nigrum”, whole, broken, ground or powdered, or of any other form or description whatsoever;
(3) Turmeric, known locally as haridra or halud, that is to say, the product obtained from the plant ‘Curcuma Longa’, whole, broken, ground or powdered, or any other form or description whatsoever;
(4) (Omitted as unnecessary);
(5) (Omitted as unnecessary).”
2. By another Notification No. 1915-F.T., dated 10-5-1963 issued under Section 4 of the 1954 Act, the Governor of West Bengal notified the rates of tax on several commodities including black and white pepper and turmeric. Insofar as it is relevant, it reads thus:
“No. 1915-F.T. — 10-5-1963.— In exercise of the power conferred by Section 4 of the West Bengal Sales Tax Act, 1954 (West Bengal Act IV of 1954), the Governor is pleased hereby to fix in respect of the notified commodities specified in Column 2 of the table below, the rates specified in the corresponding entries in Column 3 of the said table as the rates at which tax under the said Act shall be paid by a dealer on his turnover.
Sl. No. Notified commodity Rate of tax 1, 2 & 3 (Omitted as unnecessary). 4. Betel-nuts, black and white Pepper, Turmeric, Cloves and Cinnamon or Cassia, as specified in Notification No. 885-F.T., dated 1-5-1955. Four per centum
5 to 16 — (Omitted as unnecessary).
This will take effect from the 10th day of May, 1963.”
(emphasis supplied)
3. It is the common case of the parties before us that under the 1954 Act, the tax is a single point tax leviable at the first point of sale.
4. The appellant says that he purchases whole black pepper and whole turmeric within the State of West Bengal and converts them into pepper powder and turmeric powder for sale. His contention is that black pepper and pepper powder and similarly turmeric and turmeric powder are one and the same goods and inasmuch as whole black pepper and whole turmeric suffered tax when it was sold by the selling dealer to the appellant, the powders derived from them are not exigible to tax when sold by him. For the same reason, he says, he need not register himself as a dealer under the Act. The department, however, took the view that pepper and pepper powder and similarly, turmeric and turmeric powder are different goods and, therefore, the pepper powder and turmeric powder when sold by the appellant are exigible to tax. The Tribunal has upheld the contention of the Revenue.
5. Dr Shanker Ghosh, learned counsel for the appellant relied upon the decisions of this Court in Alladi Venkateswarlu v. State of A.P (1978) 2 SCC 552, (1978) 41 STC 394 and CST v. D.S Bist (1979) 4 SCC 741, (1980) 1 SCR 593 in support of his submission that pepper and pepper powder and turmeric and turmeric powder are one and the same goods. He submitted that pepper is sometimes used in its original form and sometimes in its powdered form. Similarly, turmeric is also used sometimes in its original form and sometimes after converting it into powder. According to learned counsel, pepper powder is but a form of pepper and similarly turmeric powder is but only a form of turmeric. They are not different goods. Counsel submitted that just as parched rice and puffed rice are different forms of rice (Alladi Venkateswarlu (1978) 2 SCC 552, (1978) 41 STC 394), so is the pepper powder a form of pepper and turmeric powder a form of turmeric.
6. The learned counsel for the State of West Bengal, on the other hand, submitted that pepper and pepper powder and similarly turmeric and turmeric powder are two different goods just as wheat and wheat flour are different goods. The learned counsel relied upon the recent decision of this Court in Rajasthan Roller Flour Mills Assn. v. State of Rajasthan 1994 Supp (1) SCC 413, (1993) 3 Scale 600 in support of his submission. He also relied upon the decisions of this Court in Ganesh Trading Co., Karnal v. State of Haryana (1974) 3 SCC 620, (1973) 32 STC 623 and State of Karnataka v. B. Raghurama Shetty (1981) 2 SCC 564, (1981) 47 STC 369. In the latter case, learned counsel pointed out, it has been held that when wheat is ground into flour, wheat is consumed in the manufacture of wheat flour and a different product emerges and similarly, when wheat flour is baked as a bread, there emerges yet another different goods. Learned counsel, therefore, submitted that on the same analogy when pepper and turmeric are ground into powder, they change their shape and emerge as different goods.
7. We are of the opinion that so far as whole black and white pepper and pepper powder is 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. Nobody consumes paddy as it is. Similarly, no one eats whole wheat. They are consumed after milling them into rice or flour, as the case may be. But so far as the pepper is concerned, it is used equally in whole as well as powdered form. It is for this reason perhaps that the entry in Notification No. 885-F.T. dated 1-5-1955 speaks of “black and white pepper — whole, broken, ground or powdered or of any other form or description whatsoever”. It is equally significant that the Notification No. 1915-F.T., dated 10-5-1963 refers to these commodities “as specified in Notification No. 885-F.T., dated 1-5-1955”. Black and white pepper “as specified in Notification No. 885” means black and white pepper, whether whole, powdered, broken or in any other form.
8. So far as turmeric and turmeric powder is concerned, the position is not identical, applying the functional test. But inasmuch as turmeric is also described in Notification No. 885 in the same manner as black and white pepper and also because Notification No. 1915 refers to it with reference to the said earlier notification, we are inclined to say that turmeric and turmeric powder must also be treated as same goods.
9. Shri Santosh Hegde, learned counsel for the State of West Bengal submitted that the use of the words “that is to say” in items (2) and (3) in Notification No. 885-F.T. serve to indicate that broken, ground or powdered pepper is different from pepper. Support is sought to be derived from the decision of this Court in Rajasthan Roller Flour Mills Assn. 1994 Supp (1) SCC 413, (1993) 3 Scale 600 where the meaning of the said words was dealt with with reference to Section 14(i) of the Central Sales Tax Act. It was held in the said decision that the said words had the effect of limiting the operation of Section 14 to the goods specifically mentioned thereunder and not to their products. In other words, it was held that when Section 14(i)(iii) mentioned wheat, it meant wheat alone and not the products of wheat like flour, maida and suji. We do not see how the said decision assists the argument of the learned counsel. In items (2) and (3) of Notification No. 885-F.T., the words “that is to say” seem to refer to the botanical expression following the said words. Be that as it may, the said words cannot, by any stretch of imagination, be taken to indicate that broken, powdered or any other form of pepper are different goods from pepper.
The appeals are allowed accordingly. The judgment of the West Bengal Taxation Tribunal is set aside. There shall be no order as to costs.
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