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PETITIONER: DEPUTY COMMISSIONER OF SALES TAX (LAW)

       Vs.

RESPONDENT: N. KANNAN NAIR & ORS.

DATE OF JUDGMENT08/04/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR 1133            1988 SCR  (3) 489  1988 SCC  Supl.  367     JT 1988 (2)   141  1988 SCALE  (1)768

ACT:      Kerala General  Sales Tax  Act, 1963-Section  5A(1)(a)- P.W.D. contractor-Undertakes  contract for  repair of roads- Materials like  sand, bricks  etc. used  by assessee-Whether assessable to purchase tax.

HEADNOTE: %      The  respondent-assessee   a  P.W.D.   contractor   had undertaken certain  contract works  on behalf  of the Public Works Department for repair of roads.      The assessee  was assessed on the purchased turnover of sand, bricks  etc. which  were used for the execution of the work. The  assessment was  upheld by the Appellate Assistant Commissioner.      In the  second appeal  preferred by  the  assessee  the Tribunal found  that it  was necessary  under s.  5A of  the Kerala General  Sales Tax  Act, 1963  to have consumption of the commodity  in the  manufacture of another commodity, the goods purchased  should be  consumed, the consumption should be in  the process of manufacture and the result must be the manufacture of  other goods,  and held  that when  a  P.W.D. contractor was using articles for constructing a sea wall or repairing public  roads there was consumption of a commodity for the  manufacture of  another commodity  and allowed  the appeal.      The High  Court upheld the decision of the Tribunal and rejected the revision preferred by the Revenue.      In the  Special Leave  Petitions to  this Court, it was contended on  behalf of  the Petitioner-Revenue,  that if no manufacturing process  was involved,  the  case  would  fall within the  scope of  s. 5A(1)(a)  of the  Act  because  the statutory provisions spoke not only of goods consumed in the manufacture of other goods for sale but also goods ’consumed otherwise’.      Dismissing the Special Leave Petitions. ^      HELD: Section  5-A (1)(a)  speaks of  goods consumed in the 490 manufacture of  other goods  for purposes  other than  sale.

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[493F]      In the  instant case,  the user  must be  in the  other commodity and the expression ’consumed otherwise’ must be so construed. When  a P.W.D.  contractor is  using articles for constructing  or   repairing  a   public  road   there   was consumption of  a commodity  for the  manufacture of another commodity. [493F]      Deputy Commissioner,  Sales Tax  (Law) Board of Revenue (Taxes) Ernakulam v. Pio Food Packers, [1980] 3 S.C.R. 1271; Ganesh Prasad  Dixit v.  Commissioner of  Sales Tax,  Madhya Pradesh, [1969]  3 S.C.R.  490 and  Deputy  Commissioner  of Sales Tax  (Law), Board  of Revenue  (Taxes),  Ernakulam  v. Thomas  Stephen   &  Ors.   Ltd.,  SLP(C)  Nos.8747-49/1987, referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Special  Leave  Petition (Civil) No. 2867 of 1988 etc.      From the  Judgment and  Order  dated  1.7.1987  of  the Kerala High Court in T.R.C. No. 33 of 1985.      V.J. Francis for the Petitioner.      The Judgment of the Court was delivered by      SABYASACHI MUKHARJI,  J. These  are petitions for leave to appeal  under Article  136 of  the Constitution  from the decision of  the High  Court of  Kerala. The  revenue is the petitioner before  the High  Court. The  respondent  is  the assessee. The  respondent is  a P.W.D.  contractor.  He  had undertaken certain  contract works  on behalf  of the Public Works Department. He had executed agreements with the P.W.D. for repair  of roads.  The question involved is, whether the materials used  by the  assessee for the said purpose can be taxed under  purchase tax  under Section  5A of  the  Kerala General Sales  Tax Act, 1963 (hereinafter called ’the Act’). The relevant provisions of Section 5A(1), (a), (b), (c), (2) and (3) of the Act are as follows:                "5A. 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: 491           (a) consumes  such goods  in  the  manufacture  of           other foods for sale or otherwise; or           (b) disposes  of such  goods in  any manner  other           than by way of sale in the State; or           (c) despatches them to any place outside the State           except as  a direct  result of sale or purchase in           the course of interstate trade or commerce, shall,           whatever be  the quantum  of the turnover relating           to such  purchase for  a  year,  pay  tax  on  the           taxable turnover  relating to  such  purchase  for           that year at the rates mentioned in section 5.                (2)  Notwithstanding  anything  contained  in           subsection (1),  a dealer  (other  than  a  casual           trader  or   agent  of   a  non-resident   dealer)           purchasing goods,  the sale  of which is liable to           tax under  section. 5,  shall not be liable to pay           tax under  section (1) if his total turnover for a           year is less than (twenty thousand rupees);           Provided that  where the  total turnover  of  such           dealer for  the  year  in  respect  of  the  goods           mentioned in  clause (i)  of  sub-section  (1)  of

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         section 5  is not  less  than  two  thousand  five           hundred rupees,  he shall  be liable to pay tax on           the taxable turnover in respect of these goods.                (3) Notwithstanding anything contained in the           foregoing provisions  of this  section,  a  dealer           referred  to  in  subsection  (I),  who  purchases           goods, the  sale of  which is  liable to tax under           clause (ii)  of sub-section  (I) of Section 5, and           whose total  turnover for  a year is not less than           (twenty thousand rupees) but not more than twenty-           five thousand rupees may, at his option instead of           paying the  tax in  accordance with the provisions           of  sub-section   (I),  pay   tax  (at  the  rate)           mentioned in  clause (i)  of  sub-section  (I)  of           section 7  in accordance  with the  provisions  of           that section."      The assessee  was assessed  on the purchase turnover of sand, bricks,  etc. which were used for the execution of his work. The  assessment was  upheld by the Appellate Assistant Commissioner.  In   the  second   appeal  preferred  by  the assessee, the  Tribunal found that the assessee was a P.W.D. Contractor. He had obtained an amount of 492 Rs.1,01,372 as  per bills from the Executive Engineer (Roads and Buildings). According to the assessing officer an amount of Rs.27684.13  was the  purchase value  of articles used by the assessee for the execution of these contracts and so the assessing officer  had assessed  this turnover  to tax under Section 5A  of the  Act. The  Tribunal  found  that  it  was necessary under  the said  Section 5A  of the  Act  to  have consumption of  the commodity  in the manufacture of another commodity, the  goods  purchased  should  be  consumed,  the consumption should  be in the process of manufacture and the result must  be the  manufacture of  other goods. Therefore, according to  the Tribunal,  when a  P.W.D.  Contractor  was using some articles for constructing a Sea Wall or repairing a public  road, there was consumption of a commodity for the manufacture of  another commodity. This conclusion logically follows from  the observations  and ratio  of this  Court in Deputy  Commissioner,  Sales  Tax  (Law)  Board  of  Revenue (Taxes) Ernakulam v. Pio Food Packers, [1980] 3 S.C.R. 1271, where Pathak,  J. as the learned Chief Justice then was held that when pineapple fruit is processed into pineapple slices for the  purpose of  being sold  in sealed cans, there is no consumption of  the original pineapple fruit for the purpose of manufacture within the meaning of section 5A(1)(a) of the Kerala General  Sales Tax  Act, 1963. He further observed at pages 1276 and 1277 of the report as follows:           "Although a  degree of  processing is  involved in           preparing  pineapple   slices  from  the  original           fruit, the  commodity  continues  to  possess  its           original identity,  notwithstanding the removal of           inedible  portions,  the  slicing  and  thereafter           canning it  on adding  sugar to preserve it. It is           contended for  the Revenue  that pineapple  slices           have  a  higher  price  in  the  market  than  the           original fruit  and that  implies that  the slices           constitute a  different commercial  commodity. The           higher price,  it seems  to us, is occasioned only           because of  the labour  put into  making the fruit           more readily  consumable and  because of  the  can           employed to contain it. It is not as if the higher           price  is   claimed  because  it  is  a  different           commercial commodity.  It is  said that  pineapple           slices appeal  to a  different sector of the trade

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         and that  when  a  customer  asks  for  a  can  of           pineapple slices  he has  in mind  something  very           different from  fresh pineapple fruit. Here again,           the distinction in the mind of the consumer arises           not from  any difference in the essential identity           of the  two, but  is derived from the mere form in           which the fruit is desired. 493                Learned counsel for the Revenue contends that           even if  no manufacturing process is involved, the           case still  falls within  section 5A(1)(a)  of the           Kerala  General   Sales  Tax   Act,  because   the           statutory  provision  speaks  not  only  of  goods           consumed in  the manufacture  of other  goods  for           sale but also goods consumed otherwise. There is a           fallacy in the submission. The clause, truly read,           speaks of  goods consumed  in the  manufacture  of           other goods  for sale  or goods  consumed  in  the           manufacture of other goods for purposes other than           sale."      The Tribunal  accepted the  assessee’s contentions  and allowed the  appeal. The  High Court  upheld the decision of the Tribunal  and rejected the revision. Hence this petition for leave  to appeal.  We are  unable to  see any ground for interference. The  position is  clear from  the decision  of this Court  in Pio  Food Packers  (supra). It  was contended before us that if no manufacturing process was involved, the case would fall within the scope of Section 5-A(1)(a) of the Act because the statutory provisions spoke not only of goods consumed in the manufacture of other goods for sale but also goods ’consumed other wise’.      Reliance for  that was  placed on  the decision of this Court in  Ganesh Prasad  Dixit v. Commissioner of Sales Tax, Madhya Pradesh,  [1969] 3  S.C.R. 490.  It is,  however, not possible to accept this contention.      In the  decision of  Pio Food  Packers (supra),  it was observed  that  the  clause,  truly  read,  spoke  of  goods consumed in  the manufacture  of other  goods  for  purposes other than  sale. In  the instant  case, the user must be in the other  commodity and the expression "consumed otherwise" must be  so  construed.  This  contention  was  specifically considered by  this Court  in S.L.P. (Civil) Nos. 8747-49 of 1987-Deputy  Commissioner  of  Sales  Tax  (Law),  Board  of Revenue  (Taxes),  Ernakulam,  judgment  delivered  on  14th March, 1988.      In the aforesaid view of the matter, there is no ground to interfere  with the  order of the High Court. The Special Leave Petitions fail and are accordingly dismissed. N.V.K.                                  Petitions dismissed. 494