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PETITIONER: SHAW WALLACE & CO. LTD.

       Vs.

RESPONDENT: STATE OF TAMIL NADU

DATE OF JUDGMENT23/03/1976

BENCH: SINGH, JASWANT BENCH: SINGH, JASWANT RAY, A.N. (CJ)

CITATION:  1976 AIR 1437            1976 SCR  (3) 795  1976 SCC  (3)  17  CITATOR INFO :  RF         1977 SC 879  (28)

ACT:      Tamil Nadu  General Sales  Tax Act,  1959-Sec.  3-First Schedule Entry  21-Fertilizer  mixture  prepared  by  mixing manually some  of chemical fertilizers mentioned in Schedule whether exempted from tax-Whether same marketable-commodity- Whether manufacturing process of relevant consideration.

HEADNOTE:      The appellant  is a  registered dealer  under the Tamil Nadu General Sales Tax Act, 1959. The appellant manufactures and deals  in chemical  fertilizers. The  appellant paid tax under the  Act on  certain chemical  fertilizers  which  are shown as  sub items  1 to  16 of  Serial No. 21 of the First Schedule to  the  Act.  The  appellant  prepared  fertilizer mixtures by  dry-mixing various  chemical fertilizers  which had already  suffered tax.  The appellants claimed exemption for the  turnover in  respect of fertilizers mixtures on the ground that  it cannot  be said  to be a commodity different from the  ingredients composing  it which had been purchased within the  State and  had suffered tax under item No. 21 of the First  Schedule. The  Assessing Officer  disallowed  the exemption. On  appeal the  Appellate Assistant  Commissioner allowed the  exemption on  the ground  that no manufacturing process was involved at the time of preparing the fertilizer mixture and  that the  resultant product  is not  a  product different from  the ingredients  constituting it  which  had already suffered tax.      In an appeal, the Tribunal reversed the decision of the Appellate Assistant  Commissioner and  refused to  grant the exemption. The  Revision Application filed by the appellants to the  Tamil Nadu  High Court was dismissed at the stage of admission on  the ground  that each of the competent article and  the   fertilizer  mixture   have   different   chemical properties of  their own and their use also is different and that, therefore,  it is not possible to treat the fertilizer mixture as the same article as the components themselves.      The appellants contended in appeal by special leave           (1)   As s.  3(2) of  the Act provides for levy of                sales tax  in respect  of goods  mentioned in                the First  Schedule at  the rate  and only at

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              the point  specified thereunder  and  as  the                fertilizer mixtures  are prepared  by  mixing                manually by  means of  shovels  some  of  the                chemical fertilizers mentioned in sub items 1                to 15  in Entry  21 in  the Schedule  without                admixture of any organic manure, they are not                liable to tax inside the State.           (2)  Even if  such  fertilizer  bears  a  specific                commercial name,  for the purpose of the Act,                it has  no  identity  except  as  a  chemical                fertilizer and  secondly the mixing of one or                more chemical  fertilizers cannot  but be the                same  article   entitled  to  application  of                single  point   scheme  in   respect  of  its                ingredients. This  is the natural implication                of  the   expression  ’chemical  fertilizers’                followed by the expression ’that is to say’.      Dismissing the appeal, ^      HELD :  (1) The principal question for determination in these appeals is whether the fertilizer mixtures in question can be  treated as  the same article as chemical fertilizers composing them. A plain reading of s. 3 read with item 21 of the First  Schedule shows  that it  is only  when a chemical fertilizer specified  in sub items 1 to 15 of item No. 21 of the First Schedule is sold in the same condition in which it is purchased that it is not subject to a 796 fresh levy.  Fertilizer mixture it would be noted is not the same article  as the ingredients composing it. It is sold as a different  commercial product.  The question whether there is any  manufacturing process involved in the preparation of any fertilizer  mixture is wholly irrelevant for the present purpose. [798A G-H, 799A]      (2) The  fertilizer mixture  is a  marketable commodity different from  its components,  it is  put to different use and has different properties. [800-G]      State of  Tamil Nadu v. Rallis India, 34 S.T.C. 532 and State of  Tamil Nadu  v. Pyarelal  Malhotra [1976]  3 S.C.R. 168, relied on.

JUDGMENT:      CIVIL APPELATE  JURISDICTION :      Appeal by  Special Leave  from the  Judgment and  Order dated the  5-3-74 of the Madras High Court in Tax Cases Nos. 77 and 78/74.      K.  S.   Ramamurthi  and  A.  T.  M.  Sampath  for  the      Appellant.      S. T.  Desai, A.  V.  Rangam  and  A.  Subhashini;  for      Respondent.      The Judgment of the Court was delivered by      JASWANT SINGH,  J.-These appeals  by special leave from the common  judgment of the Madras High Court dated March 5, 1974, in  Tax Cases Nos. 77 and 78 of 1974 which involve the interpretation of  section 3  and item  No. 21  of the First Schedule to  the Tamil  Nadu General  Sales  Tax  Act,  1959 hereinafter referred  to as  ’the Act’, shall be disposed of by this judgment.      The appellant,  Tvl. Shaw  Wallace & Co. Ltd., a public limited company, is a registered dealer under the Act and is an assessee  on the  rolls of the Commercial Tax Officer IV, Central Assessment  Circle-23, Madras. Amongst other things, the   appellant   manufactures   and   deals   in   chemical

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fertilisers. It  also prepares  fertiliser mixtures. For the assessment years  1969-70 and 1970-71, the appellant claimed exemption on  a  turnover  of  Rs.  2,35,01,129.47  and  Rs. 2,07,94,490.73 respectively  relating to sales of fertiliser mixtures.  The  case  of  the  appellant  was  that  as  the fertiliser mixtures  were prepared  by dry mixing of various chemical fertilisers  (shown as  sub-items (1) to (15) of S. No. 21  of  First  Schedule  to  the  Act)  according  tothe standard formula  approved by the Director of Agriculture at its mixing  works manually  by means  of shovels  and as the resultant product  could not  be  said  to  be  a  commodity different from  the ingredients  composing it which had been purchased within  the State  and had suffered tax under item No. 21  of the  First Schedule to the Act, they could not be taxed again.  The Assessing Officer disallowed the exemption on the  entire turnover  for the  year 1969-70. He, however, allowed exemption  on a turnover of Rs. 1,65,44,223.73 which represented the  mixture sold  after August 6, 1970-the date when the  Tamil Nadu General Sales Tax (Third Amendment) Act (26 of  1970) amending  item 21 of Schedule came into force. On appeal,  the Appellate  Assistant  Commissioner  (CA)  1, Madras City,  found that  part of the ingredients which went into the  production of fertiliser mixtures had suffered tax under the  Act. He,  therefore,  allowed  exemption  on  the turnover which  had suffered  tax by  following the  earlier decision of  the Sales Tax Appellate Tribunal dated July 27, 1972 in  the case  of Rallis  India Ltd.  T. A. 114 of 1971, where it  was held  that there  is no  manufacture  and  the resultant product  viz. manure  mixture is  not a  different product than  the ingredients  constituting  it  which  have already suffered tax. The 797 exemption allowed  by the  Appellate Assistant  Commissioner for  the   years  1969-70   and  1970-71   amounted  to  Rs. 1,20,18,842.80  and   Rs.  42,38,182.90   respectively.  The appellant filed  further appeals  for both  the years  under section 36(1)  of the  Act before  the Tamil  Nadu Sales Tax Appellate Tribunal  against  the  orders  of  the  Appellate Assistant Commissioner.  The State  of Tamil Nadu also filed enhancement petitions.  Since the earlier order of the Sales Tax Appellate  Tribunal dated July 27, 1972 in T. A. No. 114 of 1971 (supra) which was the basis of the relief granted by the Appellate  Assistant Commissioner  was reversed  by  the Madras High  Court vide  its judgment  dated  September  18, 1973, in  T.C. No.  18 of  1973,  the  Sales  Tax  Appellate Tribunal by its orders Nos. 1138/1139 of 1972 dated February 21, 1974  cancelled the  relief granted  to the appellant by the  Appellate   Assistant   Commissioner.   The   appellant thereupon took  the matter  in revision  to the  Madras High Court under  section 38 of the Act but its applications were dismissed at  the stage  of admission by that Court on March 5, 1974 in the light of its earlier judgment dated September 18, 1973  in T.C.  No. 18  of 1973  (Revision No. 6 of 1973) where it was observed:-           "Each of  the component  article  and  the  manure      mixture have different chemical properties of their own      and their  use also is different. It is not, therefore,      possible  to  treat  the  manure-mixture  as  the  same      article as  the components  themselves.... Whether  the      process adopted  (in the preparation of manure mixture)      is manufacture  or otherwise,  if the resultant product      obtained by  mixing the  various articles  of  chemical      fertilisers referred  to  in  item  21  is  sold  as  a      different commercial  product and for a different user,      it has  to be  treated as  a different article from the

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    components".      In rendering  this  decision,  the  Madras  High  Court relied on  the ratio  of the  decision of  its own  Court in Imperial Fertilisers  and Company  v. State of Madras,(1) to the effect  that if  the mixture sold has different chemical properties  and  is  tested  as  a  different  commodity  in commerce, its  sale cannot  be taken  to be a second sale of chemical  fertiliser  merely  because  the  components  have suffered tax at an earlier stage as chemical fertilisers.      After failing  to obtain  a certificate  of fitness for appeal to  this Court,  the appellant  applied  for  special leave to this Court which was granted vide order dated March 15, 1974.      Appearing in  support of  the appeals,  Mr.  Desai  has urged that  as section  3(2) of the Act provides for levy of sales tax  in  respect  of  goods  mentioned  in  the  First Schedule at the rate and only at the point specified therein and chemical  fertilisers which  are specified  in sub-items (1) to  (15) of item No. 21 of the First Schedule to the Act are liable  to tax  at the  point of  first sale  inside the State, the  sales of  fertiliser mixtures which are prepared by  mixing  manually  by  means  of  shovels,  some  of  the aforesaid chemical  fertilisers mentioned  at sub-items 1 to 15 in  the Schedule without ad-mixture of any organic manure are not  liable to  tax inside  the  State.  Mr.  Desai  has further  urged   that  even  if  each  fertilisers  bears  a specified commercial name, for the 798 purpose of the Act, it has no identity except as a ’chemical fertiliser’ and  consequently the  mixture of  one  or  more chemical fertilisers cannot but be the same article entitled to application  of single  point scheme  in respect  of  its ingredients. This,  according to  Mr. Desai,  is the natural implication  of   the  expression   ’chemical   fertilisers’ followed by the expression "that is to say".      The  principal  question  for  determination  in  these appeals is  whether the  fertiliser mixtures in question can be treated  as the  same  article  as  chemical  fertilisers composing them.      For a  proper determination of the contention raised on behalf of the appellant, it is necessary to refer to section 3 of the Act and to item No. 21 of the First Schedule to the Act which run as under:-           "3. Levy of taxes on sales or purchases of goods:-           (1)  Every dealer  (other than  a casual trader or                agent of  a non-resident  dealer) whose total                turnover for  a year is not less than fifteen                thousand rupees  and every  casual trader  or                agent of  a non-resident  dealer, whatever be                his turnover  for the  year, shall  pay a tax                for each year at the rate of (three per cent)                of his taxable turnover .......           (2)  Notwithstanding anything  contained  in  sub-                section (1),  in the  case of goods mentioned                in the first schedule, the tax under this Act                shall be payable by a dealer, at the rate and                only at  the point  specified therein  on the                turnover in  a year  relating to  such  goods                whatever be  the quantum  of turnover in that                year ......."           "Item  21   of  the   First  Schedule  :  Chemical      fertilisers, that is to say:-           (1)  Ammonium sulphate;  (2) Ammonium nitrate; (3)                Urea  (4)   Ammonium  Choloride;  (5)  Sodium                Nitrate; (6)  Calcium Ammonium  nitrate;  (7)

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              super phosphate  single; (8)  super phosphate                triple; (9)  Kotka phosphate  (10) di-calcium                phosphate; (11)  Potassium chloride  (nuriate                of potash);  (12) sulphate  of  potash;  (13)                mone  ammonium  phosphate;  (14)  di-ammonium                phosphate; (15)  bone meal;  (16) any mixture                of one  or more  of the articles mentioned in                items (1  to 15)  and  one  or  more  of  the                organic manures.  Point of  levy  is  at  the                point of first sale in the State, rate of tax                is 31/27."      A plain reading of the above mentioned provisions would show that it is only when a chemical fertiliser specified in sub-items 1  to 15  of item  No. 21 of the First Schedule is sold in  the same condition in which it is purchased that it is not subject to a fresh levy. Fertiliser mixture, it would be noted,  is  not  the  same  article  as  the  ingredients composing it.  It is sold as a different commercial product. It is  put to  a different  use and  has different  chemical properties. As such, it 799 has to  be treated as a different article from its component parts. The   question  whether there  is  any  manufacturing process involved  in  the  preparation  of  any  fertiliser, mixture or whether shovel mixing of the chemical fertilisers amounts to  manufacture or  not is wholly irrelevant for the purpose of the determination of the question before us.      The decision of the Bombay High Court in Nilgiri Ceylon Tea Supplying  Co. v.  The  State  of  Bombay,(1)  on  which reliance is  placed by  counsel for the appellant in support of his  contention has  no bearing on the question before us as the  language of  the proviso  to section.  (8a)  of  the Bombay Sales  Tax Act,  1953 which fell for consideration in that case  is not  the same  as section 3 and item 21 of the First Schedule to the Act before us. It has also to be borne in mind  that we  are not called upon in the instant appeals to consider as to whether the chemical fertilisers which had been purchased  by the assessee had been processed as in the case of  Nilgiri Ceylon  Tea Supplying Co. (supra). The only question before  us, as  already indicated, is as to whether there was  any mixture  of one or more of the articles shown as sub-items  (1) to  (15) of item No. 21. It is admitted by the  appellant  in  the  statement  of  the  case  that  the fertiliser mixture  is prepared  by mixing  various chemical fertilisers and  fillers like  china clay,  gypsom etc. by a shovel. It  cannot also  be  disputed  that  the  fertiliser mixture  is   a  marketable  commodity  different  from  its components, is  put  to  different  use  and  has  different properties.      In the  case of  Imperial Fertiliser  and  Co.  (supra) where the  assessee  purchased  various  items  of  chemical manure referred  to in  item 21 of the First Schedule to the Act and brought about a new product by mixing one or more of the said  articles with  one or  more of the organic manure, the resultant  product, it was held, could not be said to be the same  chemical manure  or fertiliser  which the assessee had  purchased,   as  the   mixture  would   have  different properties of  its own  and it  could not  be said  that  it retained the  same characteristics  or properties  of any of the chemical  manures or  organic manures which went to make up the  resultant mixture.  It was further held in that case that for getting an exemption on the ground that the sale of an article  is a  second or  subsequent  sale,  it  must  be established that  there has been a sale of the same goods at an anterior  point of  time and  if  there  is  no  identity

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between the  product purchased  and the  product sold, it is not possible  to treat  the  sales  of  the  product  by  an assessee as second sales.      In State  of Tamil  Nadu v. Rallis India Ltd.(2) it was held that as manure mixture prepared from one or more of the articles mentioned  in sub-items  (1) to (15) of item No. 21 of the First Schedule has chemical properties different from its components  and its  use is  also different,  it is  not possible to  treat the manure mixture as the same article as the components  themselves. The  following observations made in this decision are pertinent:-           "If the  product obtained  by mixing  the  various      chemical fertilisers  referred to in item 21 is sold as      a different  commercial product  and  for  a  different      user, it has to be 800      treated as  a different  aritcle from  the  components,      whether  the   process  of   such  mixture  is  one  of      manufacture or not".      In State  of Tamil  Nadu  v.  M/s  Pyari  Lal  Malhotra etc.(1) a  bench of  four judges of this Court, to which one of us,  namely, My  Lord the  Hon’ble Chief  Justice  was  a party,  had   occasion  to   consider  the  meaning  of  the expression "that  is to  say" and the tests to be applied in determining whether  the sale of a certain class of goods is subject to  the levy  of single point sales tax. With regard to the  expression "that  is to  say", our  learned brother, Beg, J. who spoke for the Court observed:-           "We think  that the  precise meaning  of the words      "that is  to say"  must vary with the context...... But      in the  context of  single point  sales tax, subject to      special conditions  when imposed on separate categories      of  specified  goods,  the  expression  was  apparently      employed to  specifically enumerate separate categories      of  goods   on  a  given  list.  The  purpose  of  such      specification and enumeration in a statute dealing with      sales tax at a single point in a series of sales would,      very naturally,  be to indicate the types of goods each      of which would constitute a separate class for a series      of sales.  Otherwise,  the  listing  itself  loses  all      meaing and  would very  naturally, be  to indicate thet      ypes of  goods each  of be  without any  purpose behind      it".      In regard  to the  test  for  determining  the  taxable events in  relation to  the sales  tax, same learned brother observed as follows:-           "The mere  fact that the substance or raw material      out of  which it  is made  has also  been taxed in some      other form,  when it was sold as a separate "commercial      commodity, would make no difference for purposes of the      law of sales tax. The object appears to us to be to tax      sales of  goods of each variety and not the sale of the      substance out  of which  they are  made.... As  soon as      separate commercial  commodities change  or  come  into      existence, they  become  separately  taxable  goods  or      entitles for purposes of sales tax.... The law of sales      tax  is   also  concerned   with  "goods"   of  various      descriptions.  It,   therefore,  becomes  necessary  to      determine when  they cease  to be  goods of one taxable      description  and   become  those   of  a   commercially      different category and description".      As in  the instant  cases, the mixtures produced by the appellant are  different from  their component  parts, their properties and  uses are also different and they are sold as different  commercial   products,  the   appellant  was  not

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entitled  to  the  exemption  claimed  by  it.  The  appeals accordingly fail and are dismissed with costs. P.H.P.                                    Appeals dismissed. 801