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PETITIONER: CHOWGULE & CO. PVT. LTD. & ANR.

       Vs.

RESPONDENT: UNION OF INDIA & OTHERS(AND VICE VERSA)

DATE OF JUDGMENT25/11/1980

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. TULZAPURKAR, V.D. PATHAK, R.S.

CITATION:  1981 AIR 1014            1981 SCR  (2) 271  1981 SCC  (1) 653  CITATOR INFO :  R          1986 SC 662  (33)  RF         1988 SC 113  (5)  R          1988 SC2237  (6)  R          1991 SC2125  (9,11,12)  E          1991 SC2222  (21,22,23)

ACT:      Central Sales  tax Act, 1956, section 8(3) (b) and rule 13-Whether the blending of ore whilst loading it in the ship by means  of the  Mechanical Ore  Handling Plant constituted manufacture or processing of ore for sale within the meaning of section  8(3)(b) of  the  Act  and  Rule  13-Whether  the process of  mining, conveying  the mine  ore from the mining site to the river side carrying out by barges to the harbour and then  blending and  loading it into the ship through the Mechanical Ore  Handling Plant  constituted  one  integrated process of  mining and  manufacture Or  process of  ore  for sale, so that that items of goods purchased for use in every phase of  these integrated  operations could  be said  to be goods purchased  for use  in  mining  and  manufacturing  or processing of  ore for  sale falling  within the  scope  and ambit of section 8(3) (b) and Rule 13.

HEADNOTE:      The assessee  is a Private Limited Company, carrying on business of  mining iron  ore and  selling it  in the export market after  dressing, washing,  screening and blending it. The extraction  of iron  ore in some of the mines is carried on by mechanised process and at others by manual labour. The entire activity of the assessee consisted of seven different operations,  one  following  upon  the  other,  namely.  (i) extraction of  ore from  the mine; (ii) conveying the ore to the dressing  plant; (iii)  washing, screening  and dressing the ore;  (iv) conveying  of the  ore from the mine site, to the river side; (v) transport of the ore from the river side to the  harbour by means of barges; (vi) stacking of the ore at the  harbour in  different stock  piles according  to its physical and chemical composition; and (vii) blending of the ore from  different stock piles with a view to producing ore of the  required specifications and loading it into the ship by means of the Mechanised Ore Handling Plant.

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    Under Section  8(1)(b) of  the Central  Sales Tax  Act, 1956 the  assessee would  be liable  to pay,  in respect  of goods purchased for use "in the manufacture or processing of goods for  sale in  mining", a lower rate of sales tax at 3% of his  turnover, if  it is  granted, under  section 7(3), a Certificate of  Registration by Sales Tax Officer specifying the class or classes of goods for the purpose of sub-section (1) of section 8 read with Rule 13.      The assessee,  therefore, made  an application  to  the Sales Tax  Officer for inclusion of 36 items of goods in the certificate of  registration on  the ground that these items of goods  were being  purchased by  it for use in mining ore and processing  it for  sale in the export market, and hence they were  goods falling  within section  8(3)(b) of the Act and Rule  13. The Sales Tax Officer granted certificate only in respect of 11 items and disallowed 25 items. In revision, the Assistant Commissioner, Sales Tax, took the same view of the Sales Tax 272 A Officer,  reviewed all  the 25  items disallowed and found that six  more items  to be  eligible for certification. The further  revision  before  the  Government  carried  by  the assessee  failed.   Thereupon  the  assessee  filed  a  writ petition in  the court  of Judicial  Commissioner, Goa.  The Judicial Commissioner agreed with the views of the Sales Tax Authorities but on his scrutiny found that 4 more items, out of 19  items rejected,  to be  eligible  for  certification. Hence, the  appeals by special leave, one by the assessee in respect of  all the  15 items  and another  by the  Union of India regarding  the 4  items found  to be  in order  by the Judicial Commissioner.      Allowing the  appeal of  the assessee,  dismissing  the appeal of Union of India and remitting the matter to the Tax Authorities for  further scrutiny of the 14 items pressed by the assessee, the Court ^      HELD: (I)  Applying the test laid down in M/s. Pio Food Packers [1980]  3 SCR  p. 1271, namely, "Does the processing of  the   original  commodity   bring   into   existence   a commercially different  and distinct  commodity  ?",  it  is clear that  the  blending  of  different  qualities  of  ore possessing different chemical and physical composition so as to   produce   ore   of   the   contractual   specifications cannot be  said to involve the process of manufacture, since the  ore   that  is   produced  cannot   be  regarded  as  a commercially new  and distinct  commodity from  the  ore  of different specifications  blended together. What is produced as a  result of  blending is  commercially the same article, namely, ore,  though with  different specifications than the ore which  is blended  and hence  it cannot be said that any process of  manufacture is  involved in  blending  of  c-re. [279G, 280B-D]      The Deputy  Commissioner of  Sales Tax  v.M/s. Pio Food Packers, [1980] 3 SCR p. 1271, applied.      (2) Where  any commodity  is subjected  to a process or treatment with a view to its "development of preparation for the market".  it would amount to processing of the commodity within the  meaning of  sec. 8(3)(b) and Rule 13. The nature and extent  of processing may vary from case to case; in one case the  processing may  be slight and in another it may be extensive; but  with each  process suffered,  the  commodity would experience  a  change.  What  is  necessary  in  order characterize  an  operation  as  "processing"  is  that  the commodity must,  as a  result of  the operation,  experience some change. In this sense word "processing" in section 8(3)

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(b) and  Rule 13  should be  understood as  it has  not been defined in the Act. [280E, G-H, 281A-B]      Om Prakash  Gupta v.  Commissioner of Commercial Taxes, 16 Sales Tax Cases 935 (Cal.), approved.      (3) The  blending of  ore  in  the  course  of  loading through  the  Mechanical  Ore  Handling  Plant  amounted  to "processing" of ore within the meaning o section 8(3)(b) and Rule 13  and the  Mechanical Ore  Handling Plant fell within the description of "machinery, plant, equipment" used in the processing of ore for sale. Therefore, if any items of goods were purchased  by the assessee as being intended for use as "machinery, plant,  equipment. tools,  spare-parts,  stores, accessories, fuel  or lubricants"  for  the  Mechanical  Ore Handling Plant,  they would be eligible for inclusion in the Certificate of Registration of the assessee. [282X 283A-B] 273      Diverse quantities of ore possessing different chemical and physical  compositions are  blended together  to produce ore of  the  requisite  chemical  and  physical  composition demanded by  the foreign purchaser and obviously as a result of this  blending, the  quantities of  ore mixed together in the course  of loading  through the  Mechanical Ore Handling Plant experience  change in  their respective  chemical  and physical compositions,  because what  is  produced  by  such blending  is  ore  of  a  different  chemical  and  physical composition. When  the chemical  and physical composition of each kind  of ore  which goes  into the blending is changed, there can  be no  doubt that the operation of blending would amount to  "processing" of  ore within  the meaning  of sec. 8(3)(b) and  Rule 13.  It is no doubt true that the blending of ore  of diverse  physical  and  chemical  composition  is carried out by the simple act of physically mixing different quantities  of   such  ore  on  the  conveyor  belt  of  the Mechanical Ore  Handling Plant.  But it  is immaterial as to how the  blending is  done and  what process is utilised for the purpose  of blending.  What is  material to  consider is whether the  different quantities  of ore  which are blended together in the course of loading through the Mechanical Ore Handling Plant  undergo any  change in  their  physical  and chemical composition  as a  result of  blending. Whatever be the means  employed for  the purpose  of  carrying  out  the operation,  it  is  the  effect  of  the  operation  on  the commodity that  is material  for the  purpose of determining whether the  operation  constitutes  "processing".  [281B-E, 212G-H]      Nilgiri Ceylon Tea Supplying Co. v. State of Bombay, 10 Sales Tax Cases 500 (Bom.) overruled.      (4). The machinery, vehicles, barges and other items of goods purchased  by the  assessee for  use in  carrying  the mined ore  from the  mining site  to the river side and from the river  side to  the Marmagoa  harbour  fall  within  the description of  goods intended  for use in processing of ore for sale  within the meaning of sec. 8(3)(b) and Rule 13. If any of these items of goods are purchased by the assessee as being intended  for use  as  "machinery,  plant,  equipment, tools, spare-parts, stores, accessories, fuel or lubricants" in carrying  the mined ore from the mining site to the river side and  from the  river side to the Marmagoa harbour, they would  qualify   for  inclusion   in  the   Certificate   of Registration. [285D-E] F      The process  of mining  comes to  an end  when  ore  is extracted from  the mines,  washed, screened  and dressed in the dressing  plant and  stacked at  the mining site and the goods purchased  by the  assessee for  use in the subsequent operations  could   not  therefore   be  regarded  as  goods

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purchased for  use "in mining". The requirement of sec. 8(3) (b) and  Rule 13 is that the goods must be purchased for use "in mining"  and not  use "in the business of mining". It is only the items of goods purchased by the assessee for use in the actual mining operation which are eligible for inclusion in the certificate of registration under this head and these would not  include good purchased by the assessee for use in the operations  subsequent to the stacking of the ore at the mining site. [283C-E]      Where a  dealer is  engaged both in mining operation as also in processing the mined ore for sale, the two processes being inter-dependent, it would be essential for carrying on the operation of processing that the ore should 274 be carried from the mining site, mined ore for sale, the two processes being  inter-dependent, it  would be essential for carrying on  the operation of processing that the ore should be carried  from the  mining site where the mining operation comes to an end to the place where the processing is carried on and  that would  clearly  be  an  integral  part  of  the operation of  processing and  if  any  machinery,  vehicles, barges and  other items  of goods  are used for carrying the ore from  the mining  site to  the place of processing, they would clearly  be goods  used in processing of ore for sale. In the  present case,  the mining  of ore  is  done  by  the assessee with  a view  to processing  the milled ore through the Mechanical  Ore Handling  Plant at  the Marmagoa harbour and the  entire operation  of mining  ore and processing the mined ore  is one integrated process of which transportation of the  mined ore  from the  mining  site  to  the  Marmagoa harbour is an essential part.  [284A-D]      Indian  Copper  Corporation  Ltd.  v.  Commissioner  of Commercial Taxes, 15 STC 259 (SC), followed.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1632 of 1973 and 167 of 1974.      From the  Judgment and  Order dated 29th April, 1972 of the Judicial  Commissioner, Goa,  Daman and Diu at Panaji in Special Civil Application No. 60 of 1970.      R. V. Patel and Mrs. Ali Verma for the Appellants in CA No. 1632/73 and for the Respondent in CA 107/74.      V. S.  Desai, B.  B. Ahuja  and M.  N. Shroff  for  the Appellants in  CA 107/74  and  for  the  Respondent  in  CA. 1632/73.           The Judgment of the Court was delivered by      BHAGWATI, J.  These two  appeals by  special leave  are directed against  a judgment  of the  Judicial Commissioner, Goa, Daman and Diu, partly allowing a writ petition filed by Chowgule &  Co. Pvt.  Ltd. (hereinafter  referred to  as the assessee) for  quashing an order of the Lieutenant Governor, Goa, Daman  and Diu  dated 22nd  August 1970.  The  question which arises  for determination  in these  two appeals  is a short one  but in  order to appreciate the arguments bearing upon it, it is necessary to state a few facts giving rise to the controversy between the parties.      The assessee  is a  private limited company carrying on business of  mining iron  ore and  selling it  in the export market after  dressing, washing,  screening and blending it. The assessee  owns mines  at Sirigao, Pale and various other places in  the territory  of Goa. The extraction of ore from the mines  at Sirigao  and Pale  is carried on by mechanised process while  the extraction of ore from the other mines is

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done by  manual labour.  When the  ore is extracted from the mines it 275 is carried  to  the  dressing  plant  where  it  is  washed, screened and  dressed and  then it  is stacked at the mining site from where it is carried by conveyor belts to the river side for  being carried  by barges  to the Marmagoa harbour. Before the  ore is carried from the mining site to the river side, its  chemical  as  well  as  physical  composition  is ascertained by  taking  samples  and  testing  them  in  the laboratories at  each major mine and this process is carried on every  day round  the clock  in order  to  ascertain  the chemical and  physical composition of the ore which comes to Marmagoa,  harbour.   Since  the   chemical   and   physical composition of  the ore  varies from  mine to  mine and even within the  same mine itself, intra mine blending of the ore is carried out at the mining site with a view to arriving at a certain  specified chemical and physical composition. When the ore  carried by  barges arrives at the Marmagoa harbour, it is  stacked in  different  stockpiles  according  to  its chemical and  physical composition. Since the assessee sells the ore  only in  the export market, it has to supply ore to the foreign  buyers in  accordance with  the  specifications required by  them and  therefore it is required to carry out blending of  the ore  mined by  it in  such a  manner as  to produce  ore   of  the   required  chemical   and   physical composition. This  operation of  blending is  carried out by the assessee,  not before  the loading  of the  ore into the ship, but  in the  process of  loading  itself  through  the mechanical ore  handling plant.  What is  done  is  to  draw different quantities  of ore  from different stock piles and put them  together in  the mechanical  ore handling plant so that they  get blended  in the  process of  loading and  the blended ore which is actually loaded into the ship is ore of the  contractual  chemical  and  physical  composition.  The mechanical ore handling plant thus performs a dual function, namely,  blending   of  ore   from  different   stock  piles containing  ore   of   different   chemical   and   physical composition and loading of the blended ore into the ship for delivery to  the foreign  buyers. It  will thus be seen that the entire  activity of  the assessee  is broadly  divisible into seven  different operations,  one  following  upon  the other, namely,  (i) extraction  of ore  from the  mine; (ii) conveying the  ore to  the dressing  plant;  (iii)  washing, screening and  dressing the  ore; (iv)  conveying of the ore from the  mine site  to the river side; (v) transport of the ore from  the river  side to the harbour by means of barges; (vi) stacking  of the  ore at the harbour in different stock piles according  to its  physical and  chemical composition, and (vii)  blending of  the ore  from different  stock piles with a  view to producing ore of the required specifications and loading  it into the ship by means of the mechanised ore handling plant.  The question  is whether goods purchased by the assessee for use in the above operations could be said 276 to be  goods  purchased  for  use  "in  the  manufacture  or processing of  goods for sale or in mining" so as to attract the lower  rate of  sales tax  under section  8(1)(b) of the Central Sales Tax Act, 1956.      It would  be convenient  at this  stage to  set out the relevant provisions  of the  Central  Sales  Tax  Act,  1956 (hereinafter referred to as the Act) which have a bearing on the question  before us. Section 6 provides that, subject to the other  provisions contained  in the  Act,  every  dealer shall be  liable to  pay tax  under the  Act on all sales of

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goods other  than electrical  energy effected  by him in the course of  interstate trade  or commerce  during  any  year. Section 7  provides for  registration of  dealers  and  sub- section (1)  of this section states that every dealer liable to pay  tax under  the Act  shall make  an  application  for registration to  such authority  in the appropriate State as the  Central   Government  may   specify  and   every   such application  shall   contain  such  particulars  as  may  be prescribed. Sub-section  (3) of section 7 enacts that if the authority to  whom an  application under  sub section (1) is made is satisfied that the application is in conformity with the provisions  of the Act and the Rules made thereunder, he shall register  the applicant and grant to him a certificate of registration  in the  prescribed form which shall specify the class  or classes  of goods  for the  purposes  of  sub- section (1)  of section  8. Section 8 provides inter alia as under and  we are  setting out here the relevant part of the section as it stood at the material time:           "Sec. 8(1):  Every dealer, who is in the course of      inter State trade or commerce-           (a)  sells to the Government any goods; or           (b)  sells to  a registered  dealer other than the                Government goods  of the description referred                to in sub section (3),           shall be  liable to  pay tax under this Act, which      shall be 3 per cent of his turn-over.           (3) The  goods referred  to in  clause (b) of sub-      sec.(1)-           (b)   x  x x  are goods  of the  class or  classes                specified in  the certificate of registration                of the registered dealer purchasing the goods                as being  in tended  for re-sale  by  him  or                subject to  any rules  made  by  the  Central                Government in  this behalf, for use by him in                the manufacture or processing of 277                goods for  sale  or  in  mining,  or  in  the                generation or  h distribution  of electricity                or any other form of power. Section 13  confers rule  making authority  on  the  Central Government and  by clause  (e) of  sub-section (1)  of  that section, the  Central Government is authorised to make rules providing for  "the enumeration  of goods  or class of goods used in  the manufacture  or processing of goods for sale or in  mining   or  in   the  generation   or  distribution  of electricity or  any other  form of  power." Pursuant  to the authority  conferred   by  this   provision,   the   Central Government has  made Rule  13 which at the material time was in the following terms:           Rule 13:  The goods  referred to  in clause (b) of      sub sec.(3) of section 8, which a registered dealer may      purchase, shall be goods intended for use by him as raw      materials,  processing   materials,  machinery   plant,      equipment, tools,  stores,  spare  parts,  accessories,      fuel or lubricants, in the manufacture or processing of      goods for  sale or  in mining,  or in the generation of      distribution  of  electricity  or  any  other  form  of      power." " The  assessee made an application to the Sales Tax Officer on 14th September 1967 for inclusion of 36 items of goods in the certificate  of registration  on the  ground that  these items of  goods were being purchased by it for use in mining ore and  processing it  for sale  in the  export market, and hence they  were goods  falling within  section 8(3) (b) and Rule 13. It is obvious that if this application were granted

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and the  items of  goods mentioned  in the  application were specified in  the certificate  of registration,  the  dealer selling these  goods to the assessee in the course of inter- State trade  or commerce  would be  liable to  pay sales tax only at  the rate  of 3  per cent  of the  turnover of these sales and  the assessee  in its turn would have to reimburse the selling  dealer only  at the  rate of  3 per cent of the sale price,  where as  otherwise the amount payable would be at a  much higher  rate. The assessee therefore pressed this application before  the Sales  Tax Officer  with  a  certain amount of  vehemence, but the Sales Tax Officer by his order dated 4th  March 1968  granted specification only in respect of 11  items and disallowed the remaining 25 items. The view taken by  the Sales Tax Officer was that the blending of ore which  was  done  in  the  course  of  loading  through  the Mechanical Ore  Handling Plant did not amount to manufacture or processing  of ore  and, therefore,  the  only  goods  in respect of  which specification  could  be  claimed  by  the assessee in  the  certificate  of  registration  were  goods purchased for  use in mining and since the process of mining came to  an end  when ore  was extracted  from the mines and washed, screened 2-57 SCI/81 278 and dressed  in the dressing plant and stacked at the mining site, the  goods purchased  by the  assessee for use only in these operations  were eligible  for being  specified in the Certificate of  Registration and  no the goods purchased for use in  any of  the subsequent  operations including bending and loading  through the  Mechanical Ore Handling Plant. The Sales Tax Officer held that only l l items of goods could be regarded as  goods purchased  for  use  in  mining  and  the remaining 2  I  ems  of  goods  did  not  fall  within  this description and hence were not includable in the Certificate of  Registration.   The  assessee   preferred   a   revision application, but the Assistant Commissioner of Sales Tax who heard the  revision application,  took the  same view as the Sales Tax  Officer in  regard to me nature of the operations carried on by the assessee and holding that the assessee was entitled to  inclusion in the Certificate of Registration of only those  items of  goods which  were purchased for use in the process  of mining (which ended with the stacking of the ore at  the mining site after extraction, washing, screening and dressing),  he examined  the 25  items disallowed by the Sales Tax  Officer with reference to this criterion and came to the conclusion that 6 out of these 25 items were eligible for inclusion  in the  Certificate of  Registration  and  he accordingly allowed  the revision  application in respect of these 6 items and rejected it in respect of the remaining 19 items. The  assessee thereupon carried the matter further in revision to  the Government  of Goa,  Daman and Diu, but the Lieutenant Governor  on behalf of the Government agreed with the view  taken by  the Assistant  Commissioner of Sales Tax and rejected the revision application by an order dated 22nd August 1970.  This led  to the  filing of a writ petition by the assessee  in the  Court of the Judicial Commissioner for quashing  the  Order  of  the  Government  and  .  directing inclusion of  the remaining  19 items  in the Certificate of Registration. The  Judicial Commissioner  took the same view as the  Sales Tax Authorities in regard to the nature of the operations carried  on by  the assessee,  but gave relief to the assessee  in respect  of 4  items of goods on the ground that they  were goods  purchased for  use in  the process of mining and  were therefore  liable to  be included  in   the Certificate of Registration. The result was that 15 items of goods ultimately  remained unincluded  in the Certificate of

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Registration. It is not necessary to reproduce here these 15 items of  good in  respect of  which the  application of the assessee was  disallowed but  it is sufficient to state that they were  items Nos.  1, 2,  3, 5, 6, 8, 9, 10, 12, 14, 15, 16, 17,  19 and 20 in the list Ex. No. 6. The assessee being aggrieved by  the disallowance  of these  15 items preferred Appeal No. 1632 of 1973 after obtaining certificate from the Court of  the Judicial  Commissioner. Item 9 which consisted of "Safety Boards and 279 Posters" was  not pressed  at the  hearing of the appeal and hence the  controversy between the parties before us centred round the  remaining 14 items of goods only and the question is whether  these  14  items  of  goods  were  eligible  for inclusion in  the Certificate  of Registration. The Union of India also  felt aggrieved  by the  Order  of  the  Judicial Commissioner allowing 4 items of goods to be included in the Certificate of  Registration and  hence it  preferred Appeal No.  107   of  1974   against  the  Order  of  the  Judicial Commissioner to  the extent  to which it was adverse against it.      There are  two  questions  which  primarily  arise  for consideration in  these appeals. One is whether the blending of ore  whilst loading  it in  the  ship  by  means  of  the Mechanical Ore  Handling Plant  constituted  manufacture  or processing of ore for sale within the meaning of sec.8(3)(b) and Rule  13 and the other is whether the process of mining, conveying the  mined ore  from the  mining site to the river side, carrying it by barges to the Marmagoa harbour and then blending and loading it into the ship through the Mechanical Ore Handling  Plant constituted  one integrated  process  of mining and  manufacture or  processing of  ore for  sale, so that the  items of goods purchased for use in every phase of this  integrated  operations  could  be  said  to  be  goods purchased for  use in mining and manufacturing or processing of ore  for sale  falling within  the  scope  and  ambit  of section 8(3)  (b) and  Rule 13.  We  shall  begin  with  the consideration of the first question, not because it has been formulated as  a first  question by  us, but  because on the answer to  it depends  to a large extent the decision of the second question.      The point  which arises  for  consideration  under  the first question  is as  to whether  blending of  ore  in  the course of  loading it  into the  ship through the Mechanical Ore Handling  Plant constituted manufacture or processing of ore.    Now  it is  well settled  as  a  result  of  several decisions of this Court, the latest being the decision given on 9th May, 1980 in Civil Appeal No. 2398 of 1978-The Deputy Commissioner of  Sales Tax  v. M/s Pio Food Packers that the test for determining whether manufacture can be said to have taken place  is whether  the commodity which is subjected to the process  of manufacture can no longer be regarded as the original commodity,  but is recognised in the trade as a new and distinct  commodity. This  Court speaking through one of us (Pathak,  J.) pointed  out: "Commonly  manufacture is the end result  of one  or  more  processes  through  which  the original com- 280 modity 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

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the original  commodity but  instead is  recognised as a new and distinct  article that a manufacture can be said to take place." The test that is required to be applied is; does the processing of  the original commodity bring into existence a commercially  different   and  distinct   commodity?  On  an application of  this test,  it is clear that the blending of different qualities of ore processing differing chemical and physical composition so as to produce ore of the contractual specifications cannot  be said  to involve  the  process  of manufacture, since  the  ore  that  is  produced  cannot  be regarded as  a commercially  new and distinct commodity from the ore  of different  specifications blended together. What is produced as a result of blending is commercially the same article, namely,  ore, though  with different specifications than the  ore which  is blended  and hence it cannot be said that any  process of  manufacture is involved in blending of ore.      It still remains to consider whether the ore blended in the course  of loading  through the  Mechanical Ore Handling Plant can  be said to undergo processing when it is blended. The answer  to this  question depends  upon what is the true meaning  and   connotation  of   the  word  "processing"  in sec.8(3)(b) and  Rule 13.  The word  has not been defined in the Act  and it  must therefore  be interpreted according to its plain  natural meaning.  Websters’ Dictionary  gives the following meaning of the word "process", "to subject to some special process  or treatment,  to subject  (especially  raw material)  to  a  process  of  manufacture,  development  or preparation for  the market etc., to convert into marketable form as live stock by slaughtering, grain by milling, cotton by spinning,  milk by  pasteurizing fruits and vegetables by sorting and  repacking." Where  therefore any  commodity  is subjected to  a process  or treatment  with a  view  to  its "development  or   preparation  for  the  market",  as,  for example, by  sorting and repacking fruits and vegetables, it would amount  to processing  of  the  commodity  within  the meaning of  sec.8(3) (b)  and Rule 13. The nature and extent of processing  may vary  from case  to case; in one case the processing may be slight and in another it may be extensive; but  with   each  process   suffered,  the  commodity  would experience a change. Wherever a commodity undergoes a change as a  result of  some operation performed on it or in regard to it,  such operation  would amount  to processing  of  the commodity. The nature and extent of the change is not mate 281 rial. It  may be  that camphor powder may just be compressed into camphor  cubes by  application of  mechanical force  or pressure without addition or admixture of any other material and yet  the operation  may amount  to processing of camphor powder as  held by  the Calcutta  High Court  in Om  Parkash Gupta v. Commissioner of Commercial Taxes, What is necessary in order  to characterise  an operation  as "processing"  is that the  commodity must,  as a  result  of  the  operation, experience some  change. Here,  in the present case, diverse quantities of ore possessing different chemical and physical compositions are  blended together  to produce  ore  of  the requisite chemical  and physical composition demanded by the foreign  purchaser   and  obviously  as  a  result  of  this blending, the quantities of ore mixed together in the course of  loading   through  the  Mechanical  Ore  Handling  Plant experience change  in their respective chemical and physical compositions, because  what is  produced by such blending is ore of  a different  chemical and physical composition. When the chemical  and physical  composition of  each kind of ore which goes  into the  blending is  changed, there  can be no

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doubt  that  the  operation  of  blending  would  amount  to ’processing’ of  ore within the meaning of sec. 8(3) (b) and Rule 13.  It is  no doubt  true that  the blending of ore of diverse physical and chemical compositions is carried out by the simple  act of physically mixing different quantities of such ore on the conveyor belt of the Mechanical Ore Handling Plant. But  to our  mind it  is immaterial  as  to  how  the blending is  done and  what  process  is  utilised  for  the purpose of blending. What is material to consider is whether the different  quantities of  ore which are blended together in the course of loading through the Mechanical Ore Handling Plant undergo  any change  in their  physical  and  chemical composition as  a result  of blending  and so  far  as  this aspect of  the question  is concerned,  it is  impossible to argue that they do not suffer any change in their respective chemical and physical compositions.      The Revenue  however relied  on  the  decision  of  the Bombay High  Court in  Nilgiri Ceylon  Tea Supplying  Co. v. State of  Bombay. The assessees in this case were registered dealers in tea under the Bombay Sales Tax Act, 1953 and they purchased in  bulk diverse  brands of  tea and  without  the application of  any mechanical  or chemical process, blended these brands  of different  qualities according to a certain formula evolved  by them  and sold  the tea  mixture in  the market. The  question arose before the Sales Tax Authorities whether the different brands of tea purchased and blended by the assessees for the 282 purpose of  producing the  tea mixture could be said to have been ’processed’  after the  purchase within  the meaning of the proviso  to sec.  8(a), so  as to preclude the assessees from being  entitled to  deduct from  their turn-over  under section 8(a)  the value  of the  tea purchased  by them. The High Court  of Bombay  held that the different brands of tea purchased  by   the  assessees  could  not  be  regarded  as ’processed’ within  the meaning of the proviso to clause (a) of sec.  8, because  there  was  "not  even  application  of mechanical force  so  as  to  subject  the  commodity  to  a process, manufacture,  development or  preparation" and  the commodity remained  in the  same condition.  The argument of the Revenue  before us  was that this decision of the Bombay High Court was on all fours with the present case and if the blending of  different brands  of tea  for  the  purpose  of producing a tea mixture in accordance with a formula evolved by the  assessees could  not be  regarded as ’processing’ of tea, equally  on a  parity of  reasoning, blending of ore of different chemical  and physical  compositions could  not be held to  constitute ’processing’ of the ore. Now undoubtedly there is  a close  analogy between  the facts of Nilgiri Tea Company’s case  and the facts of the present case, but we do not think  we can  accept the  decision of  the Bombay  High Court in  the Nilgiri  Tea Company’s case as laying down the correct law.  When different brands of tea were mixed by the assessees in Nilgiri’s Tea Company’s case for the purpose of producing a  tea mixture  of a  different kind  and  quality according to  a formula  evolved by  them, there was plainly and indubitably  processing of  the different brands of tea, because these  brands of  tea experienced,  as a  result  of mixing qualitative  change, in  that the  tea mixture  which came into  existence was  of different  quality and  flavour than the  different  brands  of  tea  which  went  into  the mixture. There  are it  is true,  some observations  in  the judgment of the Bombay High Court which seem to suggest that if instead  of manual  application of  energy in  mixing the different brands  of tea,  there  had  been  application  of

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mechanical force  in producing  the tea  mixture, the  Court might  have   come  to  a  different  conclusion  and  these observations were  relied upon by the assessee, since in the present  case   the  lending  was  done  by  application  of mechanical force,  but we  do not  think that is the correct test to  be applied  for the  purpose of determining whether there is  ’processing’. The question is not whether there is manual application  of energy  or there  is  application  of mechanical force.  Whatever be  the means  employed for  the purpose of  carrying out  the operation, it is the effect of the operation  on the  commodity that  is material  for  the purpose of  determining whether  the operational constitutes ’processing’. We  are clearly  of the view that the blending of ore  in the  course of loading through the Mechanical Ore Handling Plant amounted to ’processing’ of ore within the 283 meaning of  sec. 8(3) (b) and Rule 13 and the Mechanical Ore Handling Plant  fell within  the description  of "machinery, plant, equipment" used in the processing of ore for sale. It must therefore  follow as  a necessary corollary that if any items of  goods were  purchased by  the  assessee  as  being intended for  use as  "machinery, plant,  equipment,  tools, spare-parts, stores,  accessories, fuel  or lubricants"  for the Mechanical  Ore Handling  Plant, they  would be eligible for inclusion  in the  Certificate of  Registration  of  the assessee.      The question  which then  arises is as to whether items of goods  purchased by  the assessee for use in carrying the ore from  mining site  to the  river side and from the river side to  the Marmagoa  harbour could  be said  to  be  goods purchased for  use in  mining or  in processing  of ore  for sale. Now  there can  be no doubt, and indeed this could not be seriously disputed that the process of mining comes to an end when  ore is  extracted from the mines, washed, screened and dressed  in the dressing plant and stacked at the mining site and  the goods purchased by the assessee for use in the subsequent operations  could not  therefore be  regarded  as goods purchased for use ’in mining’. The requirement of sec. 8(3) (b) and Rule 13 is that the goods must be purchased for use ’in  mining’ and not use ’in the business of mining’. It is only the items of goods purchased by the assessee for use in the  actual  mining  operation  which  are  eligible  for inclusion in the certificate of registration under this head and these  would not include goods purchased by the assessee for use  in the operations subsequent to the stacking of the ore at  the mining  site. This  view finds  support from the decision of  this Court in Indian Copper Corporation Limited v. The Commissioner of Commercial Taxes.      But the  claim of  the assessee  for including  in  the Certificate of Registration items of goods purchased for use in carrying  ore from mining site to the river side and from river side  to the  Marmagoa harbour was not based solely on the ground  that these  items of goods are purchased for use ‘in mining’.  The alternative contention of the assessee was that  these   items  of  goods  are  purchased  for  use  in processing of  ore for  sale. The  assessee  submitted  that mining of  ore and  processing it for the purpose of sale by carrying out  blending through  the Mechanical  Ore Handling Plant constitute one integrated process and carrying the ore from the  mining site  to the  river side and from the river side to  the Marmagoa  harbour where the processing is being done, is part of this integrated process and hence the items of goods  purchased for  use in  this latter  operation  are eligible for  inclusion in  the Certificate of Registration. We think there is great force in this submission of the

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284 assessee. Where a dealer is engaged both in mining operation as also  in processing  the mined  ore  for  sale,  the  two processes being  interdependent, it  would be  essential for carrying on  the operation of processing that the ore should be carried  from the mining site mined ore for sale, the two processes being  inter-dependent, it  would be essential for carrying on  the operation of processing that the ore should be carried  from the  mining site where the mining operation comes to end to the place where the processing is carried on and that  would clearly be an integral part of the operation of processing  and if  any machinery,  vehicles, barges  and other items  of goods are used for carrying the ore from the mining site  to the  place of processing, they would clearly be goods  used in  processing of ore for sale. It is obvious that, in  the present case, the mining of ore is done by the assessee with a view to processing the mined ore through the Mechanical Ore  Handling Plant  at the  Marmagoa harbour and the entire  operation of mining ore and processing the mined ore is one integrated process of which transportation of the mined ore from the mining site to the Marmagoa harbour is an essential part and, in the circumstances, it is difficult to see how  the machinery,  vehicles, barges and other items of goods used  for transporting  the mined  ore from the mining site  to   the  Marmagoa   harbour  can   be  excluded  from consideration on  the ground that they are not goods used in processing of  ore for  sale. The  decision of this Court in Indian Copper  Corporation case (supra) is directly in point and  completely   supports  this  conclusion  which  we  are inclined to  reach on  principle. The  assessee in that case was a  company which  mined copper and iron ore from its own mines, transported  the ore  to its factory and manufactured finished products  from the ore for sale. There were several questions which arose for consideration, before the Court in regard to  the assessees’  claim for  inclusion  of  certain items of goods in its certificate of registration and one of them was whether the locomotives and motor vehicles used for removing ore from the place where the mining operations were concluded to the factory where the manufacturing process was going on,  could be said to be goods intended for use in the manufacture or  processing of  goods  for  sale  within  the meaning of  sec. 8(3)  (b) and Rule 13. This Court held that they were  goods falling within this description so as to be entitled to  inclusion in the Certificate of Registration of the assessee  and Shah,  J. speaking  on behalf of the Court gave the following reasons for taking this view           "We are also of the opinion that in a case where a      dealer is  engaged both in mining operations and in the      manufacturing process-the  two processes  being  inter-      dependent-it would  be impossible  to exclude  vehicles      which are used for 285      removing from the place where the mining operations are      concluded  to   the  factory  where  the  manufacturing      process starts.  It appears  that the process of mining      ore and manufacture with the aid of ore copper goods is      an integrated  process and there would be no ground for      exclusion from  the vehicles  those which  are used for      removing  goods   to  the   factory  after  the  mining      operations are  concluded. Nor  is there any ground for      excluding  locomotives   and  motor-vehicles   used  in      carrying  finished   products  from  the  factory.  The      expression "goods intended for use in the manufacturing      or processing of goods for sale" may ordinarily include      such vehicles as are intended to be used for removal of

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    processed goods  from  the  factory  to  the  place  of      storage. If  this be the correct view, the restrictions      imposed by  the High  Court in  respect of the vehicles      and also  the spare parts, tyres and tubes would not be      justifiable."      These reasons  apply with  equal force  in the  present case and strongly support the conclusion that the machinery, vehicles, barges  and other  items of goods purchased by the assessee for  use in  carrying the mined ore from the mining site to  the river  side and  from the  river  side  to  the Marmagoa  harbour  fall  within  the  description  of  goods intended for  use in  processing of  ore for sale within the meaning of  sec. 8(3) (b) and Rule 13. If any of these items of goods are purchased by the assessee as being intended for use as  "machinery, plant,  equipment,  tools,  spare-parts, stores, accessories,  fuel or  lubricants" in  carrying  the mined ore  from the  mining site  to the river side and from the river  side to  the Marmagoa harbour, they would qualify for inclusion in the Certificate of Registration.      It is in the light of this discussion that the question whether the  14 items  of goods  disallowed by the Sales Tax Authorities and  the Judicial  Commissioner are eligible for inclusion in  the Certificate  of  Registration  has  to  be decided. We  do not however think any useful purpose will be served by ourselves examining each of these 14 items for the purpose of  deciding whether,  according to  the  principles enunciated by  us, any  of them qualifies for being included in the  Certificate of  Registration. That is a matter which can appropriately be decided by the Sales Tax Officer in the light of  the principles  laid down  by us  and it  need not occupy our time here. We accordingly allow the appeal of the assessee and  direct the  Sales Tax Officer to examine these 14 items  of  goods  and  determine  in  the  light  of  the principles laid  down in  this judgment whether any of these 14  items   of  goods  is  liable  to  be  included  in  the Certificate of Registration. So far as the 286 appeal of  the Union  of India is concerned, we do not think that the Judicial Commissioner was in error in giving relief to the  assessee in respect of 4 items of goods, since these items of  goods were  clearly goods  intended for use in the process of  mining and  were rightly directed to be included in the  Certificate of Registration. The appeal of the Union of  India   will  accordingly  stand  dismissed.  Since  the assessee has  substantially succeeded,  the  fair  order  of costs would  be that  the Revenue  must pay the costs of the assessee throughout. V.D.K.                              C.A. 1632/73 allowed and                                        C.A. 107/74 dismissed 287