STERLING FOODS, A PARTNERSHIP FIRM REPRESENTED BY ITS PARTNER SHRI RAMESH DALPATRAM versus THE STATE OF KARNATAKA & ANR.

Citation: [1986] 3 S.C.R. 367 · Decided: 21-07-1986 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

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STERLING FOODS, A PARTNERSHIP FIRM REPRESENTED 
' 
BY ITS PARTNER SHRI RAMESH DALPATRAM 
v. 
1HE STATE OF KARNATAKA & ANR. 
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JULY 21, 1986 
t 
[P.N. BHAGWATI, C.J., V. KHALID AND G.L. OZA JJ.] 
._..._ 
Sales tax-Exigibility to tax-Whether shrimps, prawns and lob-
sters subjected to processing like cutting of heads and tails, peeling, 
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deveining, cleaning and freezing cease to he the same commodity and 
becomes a different commodity for the purpose of the section 5(3) of 
Central Sales Tax Act, 1956 and therefore exigible to Purchase tax 
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under section 5(3)(b) read with entry 13a of Third Schedule to the 
Karnataka Sales Tax Act, 1957 as amended. 
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The appellants are a partnership firm car,rying on business as 
dealers in shrimps, prawns and lobsters and other sea food products. 
They are registered as a dealer both under the Karnataka Sales Tax 
Act, 1957 and the Central Sales Tax Act, 1956. The appellants in the 
course of their business purchase shrimps, prawns and lobsters locally - E 
for the purpose of complying with orders for export and they cut the 
heads and tails of the shrimps prawns and lobsters purchased by them, 
peel, devein and clean them and after freezing and packing them in 
cartons, they export them to foreign buyers outside India under prior 
contracts of sale. The appellants tiled their statement of monthly turn-
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over for the month of April 1982 before the Assistant Commissioner of 
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Commercial Taxes, Mangalore and claimed total exemption from tax in 
respect of the purchase turn-over of shirmps, prawns and lobsters un-
der the Karnataka Sales Tax Act, 1957. The Assistant Commissioner of 
.£ommercial Taxes rejected the said claim by his two assessment orders 
and issued two notices of demand for Rs.52,610.71 and Rs.44,237.88 
respectively against the appellants. The appellants, thereupon, filed a 
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writ petition in the High Court of Karnataka challenging all the said 
orders and notices of demand and sou~ht appropriate direction, order 
or writ restraining the respondents from Imposing or collecting pur-
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chase-tax on purchase torn-over of shrimps, prawns and lobsters under 
the Karnataka Sales Tax Act, 1957. The writ petition was dismissed by 
the High Court, but having regard to the importance of the question 
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368 
SUPREME COURT REPORTS 
[1986] 3 S.C.R. 
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involved a certificate under Article l 33 of the Constitution was granted 
by the High Court. 
Allowing the appeal, the Court 
HELD: 1.1. In order to attract the applicability of sub-section 
(3) of section 5 of the Central Sales Tax Act, 1956, it is necessary that 
the goods which are purchased by an assessee for the purpose of com-
plying with the agreement or order for or in relation to export, must be 
the same goods which are exported out of the territory of India. The 
words "those goods" in sub-section (3) are clearly referable to "any 
goods" mentioned in the preceding part of the sub-section and, there-
fore, the goods purchased by the assessee and the goods exported by 
him must be the same. If by reason of any processing to which the goods 
may be subjected after purchase, they change their identity so that 
commercially they can no longer be regarded as the original goods, but 
instead become a new and different kind of goods and then they are 
exported, the purchases of original goods made by the assessee cannot 
be said to be purchases in the course of export. 
1.2 The test which has to be applied for the purpose of determin-
ing whether a commodity subjected to processing retains its original 
character and identity is as to whether the processed commodity is 
regarded in the trade by those who deal in it as distinct in identity from 
the original commodity or it is regarded, commercially and in the trade, 
the same as the original commodity. It is not every processing that 
brings about change in the character and identity of a commodity. The 
nature and extent of processing may vary from one case to anot.her and 
indeed there may be several stages of processing and perhaps different 
kinds of processing at each stage. With each process suffered. the origi-
nal commodity experiences 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 the original commodity but instead is 
recognised as a new and distinct commodity that it can be said that a 
new commodity, dis

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