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PETITIONER: DEPUTY COMMISSIONER OF SALES TAX ETC. ETC.

       Vs.

RESPONDENT: A.B. ISMAIL ETC. ETC.

DATE OF JUDGMENT15/04/1986

BENCH: KHALID, V. (J) BENCH: KHALID, V. (J) BHAGWATI, P.N. (CJ) OZA, G.L. (J)

CITATION:  1987 AIR 1885            1986 SCR  (2) 522  1986 SCC  Supl.  218     JT 1986   427  1986 SCALE  (1)789  CITATOR INFO :  D          1988 SC 992  (9)

ACT:      Kerala General  Sales Tax  Act,  1963  :  s.  5-A(1)(a) Mutton  produced  after  slaughtering  goats  and  sheeps  - Whether ’other goods’ assessable to tax.      Words and  Phrases :  "Goat  and  Sheep"  and  "Mutton" Meaning of.

HEADNOTE:      Section 5-A(1)(a)  of the Kerala General Sales Tax Act, 1963 provides  for levy  of purchase  tax  on  the  purchase turnover of  a dealer  who in  the course  of  his  business purchases goods,  the sale or purchase of which is liable to tax under  that Act,  in circumstances  in which  no tax  is payable under  s.5 and  then  consumes  such  goods  in  the manufacture of other goods for sale or otherwise.      The  respondents   purchase   goats   and   sheep   for slaughtering them and then sell the meat they get after such slaughter. They  were assessed  by the  assessing officer to sales tax  on their  purchase turnover  of goats  and  sheep under s.  5-A (1)(a)  on the  assumption that they converted the animals  into  meat  by  the  manufacturing  process  of slaughtering. The  Appellate Officer and the Tribunal agreed with the assessing officer. The High Court, however, quashed the assessment  orders  holding  that  the  meat  got  after slaughtering the  animals was  not ’other  goods’ within the meaning of the section.      In these  appeals by  certificate by  the Department it was contended  for  the  respondents  that  they  were  only processing live  goat and  sheep into mutton by killing them and cutting  them into pieces and that in this process there was neither consumption nor a manufacture, nor production of ’other goods’.      Allowing the appeals, the Court, 523 ^      HELD :  1. The three ingredients of s. 5-A(1)(a) of the Kerala General  Sales Tax Act, 1963 are : (i) consumption of the goods;  (ii) process  of manufacture involved, and (iii)

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production of  other goods distinct from the original goods. [525 B]      2. When goats and sheep are converted into meat, "other goods" within  the meaning  of s.  5-A(1)(a) of the Act came into being,  in as  much as the slaughter of the animals and their conversion into meat is the consequence of consumption of goats  and sheeps,  wherein a  process of manufacture can also be inferred. [525 F-G]      3. Both  in commercial  circles and  in common parlance "goats and  sheep" and  "mutton" are  two  different  things having a  distinct individuality of their own, one different from the other, for when goats and sheep undergo the process of slaughtering,  meat, hides and skins - something entirely different from the original goods, are produced by consuming the animals in the said process. [525 E; 527 F]      In the  instant case  the High  Court was  in error  in holding that  "goods" and  "meat" were  the same and that no consumption was involved in converting goats into meat. [529 E-F]      K. Cheyyabba v. State of Karnataka, [1980] 45 S.T.C. 1, approved.      Anwar Khan  Mahboob v. State of Bombay, [1960] 1 S.T.C. 698, referred to.      Deputy Commissioner,  Sales-tax (Law)  Board of Revenue (Taxes) Ernakulam  v. Pio Food Packers, [1980] 3 S.C.R. 1271 and Chiranjit  Lal Anand  v. State of Assam and Anr., [1985] A.I.R. S.C. 1387, distinguished.

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1161 of 1979 etc.      From the  Judgment and  Order dated  13.6.1978  of  the Kerala High Court in T.R.C. 130 of 1977.      K.M.K. Nair for the Appellants. 524      N. Veerappa,  V.J. Francis  and S. Balakrishnan for the Respondents.      The Judgment of the Court was delivered by      KHALID, J.  The short question that falls to be decided in these  appeals, by certificate, against the Judgment of a Division Bench of the Kerala High Court, is whether goat and sheep and  the meat got after slaughtering them are the same for the  purpose of  sales-tax in the State. The High Court, disagreeing with  the Sales-tax Appellate Tribunal held them to be the same goods.      2. It  is the  admitted case  in these appeals that the respondents purchase  goat and  sheep for  slaughtering them and then  sell the meat they get after such slaughter. It is also admitted  that live  stock will  be  goods  within  the meaning of  the Kerala  General Sales-tax  Act (the  Act for short).  The  respondents  submitted  nil  returns  claiming exemption  on   the  sales   turnover  of   meat  and  skin. Assessments were  completed  accepting  these  nil  returns. Subsequently the  assessees were  informed that the purchase turnover of  goats and  sheep had  escaped levy of tax under Section 5-A  of the Act. After necessary hearing, assessment orders were passed, holding that the assessees converted the animals into  meat by  a manufacturing  process, within  the meaning of Section 5-A of the Act. The Appellate Officer and the Tribunal  agreed with  this  finding  of  the  assessing officer. The  assessee took the matter before the High Court and challenged the assessment orders. The High Court quashed the assessment  orders and  held that  the  meat  got  after

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slaughtering the  animals will  not be  ’other goods’ within the meaning  of Section  5-A. Hence  these  appeals  by  the State.      3. For  a proper understanding of the dispute raised in these cases  it is ncessary to read Section 5-A(1)(a) of the Act which alone is relevant for our purpose.           "5. 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 either- 525           (a) consumes  such goods  in  the  manufacture  of           other goods for sale or otherwise;" The Section  speaks of  three ingredients,  the existence of which alone,  will attract  levy of  tax.  They  are  :  (i) consumption  of   the  goods  (ii)  process  of  manufacture involved and  (iii) production  of other goods. The question before us  is whether  these ingredients  are  present  when goats and  sheep are slaughtered and converted into meat for sale.  The   assessee’s  contention   is  that  he  is  only processing live  goat or  sheep into  mutton by killing them and cutting  them into pieces and that in this process there was neither  consumption nor a manufacture nor production of other goods . C      4. Before  dealing with  the authorities,  cited at the Bar, it would be useful to consider, unaided by authorities, the i  question whether  ’goats and  sheep’ and ’mutton’ are the same  goods known  to commercial  circles and  in common parlance. We  will see  how a  common man  understands these expressions. If  a person  goes to a butcher’s shop and asks for mutton  he will  not be  given  goats  not  will  he  be satisfied with goats. Equally so when he intends to purchase goats he will not be satisfied if mutton is supplied to him. This is  because the  two, both in commercial circles and in common parlance,  are two different things having a distinct individuality of their own, one different from the other. It would therefore  be wrong  to assume,  as the High Court has done, that  these two  goods are  the same.  What happens is that when goats and sheep converted into meat, "other goods" within the  meaning of  the Section  come into  being. It is true that  to attract Section 5-A, two other ingredients are also to  be satisfied,  namely consumption  and manufacture. Consumption is  a word of wide import. It denotes the taking in of  something, to  convert that  something into  another. Here the  slaughter of the animals and their conversion into meat is  the consequence  of consumption of goats in a legal sense. In such conversion, a process of manufacture can also be inferred.  The important  ingredients of this Section, of course, is the bringing into existence of other goods, after consumption and  manufacture, which  are distinct  from  the original goods.  Lifeless mutton is, by any standard, "other goods" different from "goat and sheep".      5. The  High Court  rested its conclusion on a decision of 526 the same  High Court  reported in  41 S.T.C.  364. Without a detailed discussion,  the High Court, relying upon the above decision held as follows :           ".....  We  have  given  the  matter  our  careful           attention;  and   we  have   again  given  careful           consideration to the elaborate arguments in regard           to the  processes involved  in the transaction and           their effect in the light of the provisions of the

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         section, especially  as one  of us was not a party           to the  earlier  Division  Bench  ruling.  We  are           clearly of  the view  that the  Tribunal  was  not           correct in  the view  that it  took, and  that  it           cannot be  said that  there  was  a  "consumption"           resulting in  the "manufacture"  of "other  goods"           within the meaning of the section......... "      The High  Court then  referred to  a  decision  of  the American Supreme  Court reported  in 207  US  556,  and  the decisions reported  in 20  S.T.C. 261 and 40 S.T.C. 350, and observed as follows :           "...... In the commercial sense, viz. in the sense           known to  the commercial world, we do not think it           can be  said that the meat exposed for sale in the           market after  cutting  or  slaughtering  goats  or           sheep can  be said  to  have  been  ’manufactured’           after ’consuming’  the goat  or  sheep.  The  meat           exposed for sale is still of goat or sheep, in the           same way  as dressed  chicken is still chicken, or           the sliced,  canned and  packed pineapple is still           pineapple prepared  from the  raw fruit  after the           minimal process for making it marketable...... "      We are  constrained to  hold that  the approach  of the High Court  to the  facts of  the  case  was  incorrect  and reliance on  the decisions  referred to  above was wrong. In the American  case the  question was  whether chicken killed and dressed after plucking its feathers and throwing out its entrails  and  kept  in  cold  storage  was  a  manufactured product, different from chicken. The Court there held that a chicken  killed   and  dressed   is  still   a  chicken.  We respectfully agree  with this  conclusion. A  chicken killed and a dressed chicken are both 527 chicken and  both are  known to  the ordinary man as well as commercial world  as chicken. By removal of the feathers and entrails the dressed chicken is made ready for the table. There is  no process  of manufacture and bringing into being an item  different from the original goods, In 20 S.T.C. 261 the Court  had to  deal with  prawn pulp  made  out  of  raw prawns. The  Court held  that there  was neither consumption nor manufacture  involved in  making the prawn pulp and that in the  process of conversion, goods distinct from raw prawn was not  produced when  prawn pulp  came into  being. In  41 S.T.C. 364,  the goods  involved were  pineapple and  sliced pieces of  pineapple. They  are clearly the same goods. This Court approved  this finding  when the State took the matter in appeal before this Court. C      6. This  Court held  in Anwar  Khan Mahboob v. State of Bombay, [1960]  11 S.T.C. 698 that conversion of raw tobacco into beedis  by removing  stem and  dust which  in  turn  is required  for   the  manufacture   of  beedis   amounted  to consumption of raw tobacco attracting tax liability. More or less similar  is the  case before  us. There  is  clearly  a process of  consumption in  converting goats  into mutton by which goods different from the original goods are produced.      7.  The   Karnataka  High  Court  had  to  consider  an identical question  as the  one now  raised before  us in K. Cheyyabba v.  State of  Karnataka, [1980]  45 S.T.C.  1 with reference to Section 6 of the Karnataka Sales-tax Act, 1957. The Court held that dealers in that case who purchased sheep and goat in the course of their business under circumstances in which  no tax  was leviable  under Section 5 of that Act, were liable to pay tax on the purchase price under Section 6 of the  Act, as  they consumed the goats and sheep by way of slaughtering them  to produce  mutton, hides  and skins,  as

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part of their business activities. We approve the conclusion in this case.      8. The  respondents relied  upon the  decision of  this Court in  the case  of Deputy  Commissioner, Sales tax (Law) Board of  Revenue (Taxes)  Ernakulam v.  Pio  Food  Packers, [1980] 3  S.C.R. 1271.  In that  case this  Court upheld the assessee’s plea  that raw  pineapple,  when  converted  into slices, did  not  change  its  identity  so  as  to  attract liability to tax on the plea that raw pineapple was consumed in manufacturing  sliced pineapple. While upholding the plea of the  assessee, this  Court laid  down the  tests In  such cases as follows : 528           "The  generally  prevalent  test  is  whether  the           article produced  is regarded  in  the  trade,  by           those who  deal in  it, as  distinct in  indentity           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 print           where commercially it can no longer be regarded as           the original  commodity but  instead is recognised           as a  new and distinct article that fl manufacture           can be  said to  take place.  Where  there  is  no           essential difference  in identity  between  the  n           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 of  a degree  of processing,  it           must be  regarded as  still retaining its original           identity.           A 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 skin constituted a different commodity from           dressed hides and skins with different physical           properties). The State of Madras v. Swastik           Tobacco Factory (raw tobacco manufactured           into chewing tobacco) and Ganesh Trading Cb.           Karnal v. State of Haryana and Anr., (paddy           dehusked into rice)..... "      It  cannot   be  doubted  that  pineapple  f  Nit  when converted into  slices does not lose its identity or becomes a new 529 product.  Both  of  them  are  known  as  pineapple  in  the commercial circle  as also  in common  parlance. That is not the case here.      9. Considerable  support was  sought by the respondents from a  decision of  this Court  in Chiranjit  Lal Anand  v.

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State of  Assam &  Anr., 1985  A.I.R. S.C.  1387. That  case related to  an item  called ’meat on hoof’. In that case the dealer had  submitted a  tender to supply among others ’meat on hoof’  to the  Central Reserve  Police Units  within  the State of  Assam. In  that case,  the dealer was assessed for the purchase  of meat on hoof which is a name used mainly by the military for a ’live goat’. The contention of the dealer was that since meet was exempted from sales tax by the Assam Act, ’meet on hoof’ should also be exempted from assessment. This court  after considering the contention in the peculiar facts of  that case,  held that meet on hoof would also come within  the   exemption  and   set  aside   the  assessment, disagreeing with  the High Court. In our view, the principle enunciated in  that decision  has to  be applied only to the fact of that case because the goods involve in that case was ’meet on hoof’ and meet was exempt from assessment under the Act. It  would not,  therefore, be  proper to  rely upon the said decision  decided purely  on the  facts of that case in deciding the  present cases.  Here goats and sheep undergo a process viz.,  slaughtering, and  then comes  into existence meat, hides  and skin  by consuming  the goat  in  the  said process, the  end product being something entirely different from the  original goods.  The High Court was, therefore, in error in holding that goat and meat are the same and that no consumption was  involved in converting goats into meat. The High Court  confused the  issue when  it said that "the meat exposed for  sale is  still of  the goat  and sheep". Nobody disputes that the meat is of the goat and of the sheep. What is to  be seen  is whether  meat and  goat are the same. The High Court  fell in  an error  when it  used the  expression "meat of the goat" while discussing the facts of the case.      lO. In  the result,  we set  aside the  judgment of the High Court,  allow these  appeals, restore  the order of the Tribunal, but in the circumstances of the case with no order as to costs. P.S.S.                                      Appeals allowed. 530