LexM/S. PUNJAB AROMATICS versus STATE OF KERALA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
{
[2008] 6 S.C.R. 235
M/S. PUNJAB AROMATICS
V.
STATE OF KERALA
(Civil Appeal No. 3160 of 2008)
APRIL 30, 2008
[S.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ.]
A
B
Kera/a General Sales Tax Act, 1963 - s.5A -Appellant-
assessee purchased red oil from unregistered dealers and
converted same into sandalwood oil by removing water content c
and other impurities - Whether the process of such conversion
amounted to consumption/use of red oil in manufacture of
sandalwood oil and attracted levy under s.5A - Held, No, as
"test of irreversibility" not satisfied - The final product i.e.
sandalwood oil could be brought back to the original state,
0
namely, red oil by adding impurities -
Red oil was not
subsumed into sandalwood oil.
Interpretation of Statutes - Fiscal legislation - Held: In
tax matters, Courts have to keep in mind distinction between
approach and principle - Courts have to go by the principle E
involved in the fiscal legislation.
Appellant-assessee purchased red oil from
unregistered dealers and converted the same into
sandalwood oil by removing water content and other
impurities.
F
According to the Department, the said process of
conversion amounted to consumption/use of red oil in
the manufacture of sandalwood oil and attracted levy
under s.5A of the Kerala General Sales Tax Act, 1963.
Per contra, contention of the assessee is that the
process of purification is not manufacture and removal
of impurities by process of filtration did not amount to
consumption/use in the manufacture of sandalwood oil
G
235
H
236
SUPREME COURT REPORTS
[2008) 7 S.C.R.
,.,.
A in terms s.5A of the Act. It was further contended on behalf
of the assessee that the basic structure and composition
of "red oil" remained same even after the purification
process and, therefore, the Department erred in treating
red oil and sandalwood oil as two separate and distinct
B commodities.
'
~
Allowing the appeal filed by the assessee, the Court
HELD: 1.1. When raw-material is converted into a final
product, one of the important tests to be applied to
c ascertain whether the process of conversion amounts to
manufacture is: whether the raw-material is subsumed
into the final product. In the present case, the highest fact-
finding body is Appellate Tribunal under the Kerala
General Sales Tax Act, 1963. After examining the process,
D it came to the conclusion that sandalwood oil (final
product) can be brought back to the original state, namely,
red oil by adding impurities, therefore, the process is
reversible. Therefore, red oil is not subsumed into
sandalwood oil. Keeping in mind this basic test, it is clear
E
that red oil is not consumed/used in the manufacture of
sandalwood oil. Hence, s.5A(1)(a) or (b) of the Act has no
application. [Para 8] [239-G-H; 240-A-B]
1.2. The "test of irreversibility" is an important
criterion to ascertain as to when a given process amounts
F to manufacture. In the present case that test is not
satisfied. In the circumstances, it cannot be said that red
"
oil and sandalwood oil are two separate and distinct
products as held by the High Court overruling the
judgment of the Tribunal. [Para 12] [241-E-F]
G
1.3. In tax matters, Courts have to keep in mind
distinction between approach and principle. The Courts
; .
have to go by the principle involved in the fiscal legislation.
In the present case, the decision of the Tribunal was
objective. It was based on the correct formulation of the
H test of irreversibility involved in the process of
MIS. PUNJAB AROMATICS v. STATE OF KERALA
237
[KAPADIA, J.]
manufacture and, therefore, the High Court was not A
justified in observing that the finding of the Tribunal was
patently absurd and perverse. [Para 17] [242-G-H; 243-A]
Burmah-Shell Oil Storage and Distributing Co. of India
f
Ltd., Beglaum v. Belgaum Borough Municipality, Belgaum AIR
B
,.>
(1963) SC 906 and State of Karnataka v. B. Raghurama Shetty
and Others (1981) 2 SCC 564 - held inapplicable.
Mis. Tungabhadra Industries Ltd. v. The Commercial Tax
Officer, Kurnool - (1961) 2 SCR 14; Shyam Oil Cake Ltd. v.
Collector of Central Excise, Jaipur (2005) 1 SCC 264 and c
The State of Tamil Nadu v. Subbaraj and Co. (1981) 47 STC
30 - referred to.
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3160
of 2008.
From the Judgment and Order dated 21.12.2006 of the D
...
J,
High Court of Kera la at Ernakulam in TRC Nos. 78, 79 of 2003,
St. Rev. Nos. 36Excerpt shown. Read the full judgment & AI analysis in Lexace.