Deputy Commissioner of Sales-tax (law), Board of Revenue (taxes), Ernakulam v. Shiphy International, Alleppey

-·-1 SABYASACHI MUKHARJI, J. Special leave granted. This is an appeal against the judgment and order of the High Court of Kerala dated 10th of November, ·1986. By the impugned judgment the High Court has dismissed the Tax Revision Case filed at the instance of the Sales-tax authority. The asssessee-respondent he· rein had purchased fresh frog legs and after removing the skin, wash- ing and removing dirt etc. and freezing it for the purpose of avoiding G decomposition and decay, the said frog legs were exported. The asses· see·claimed that they were entitled to the benefit of section 5(3) of the Central Sales-tax Act, 1956. In order to appreciate the question it is necessary to refer to the findings of the Tribunal. The Tribunal found that what was purchased H 100 SUPREME COURT REPORTS 11988] 3 S.C.R. A by the assessee was fresh frog legs and, after freezing it for the purpose of avoiding decomposition and decay, it was exported. It was, there­ fore, held by the Tribunal that what was purchased as fresh frog legs was exported by the assessee. It was contended on behalf of the State that what was purchased was fresh frog legs and the same was not exported as such without freezing it. The tribunal held that only frozen frog legs were exported. Therefore, if followed that what was pur­ chased and exported was one and the same commodity. The frozen frog legss did not undergo, any material change in character. The identity of the frog legs remained unchanged as such. In that view of the matter the Tribunal held that the assessee was entitiled to the benefit of section 5(3) of the aforesaid Act. The High Court accepted this.view. In our opinion the question is concluded by a decision of this Court in M/s. Sterling Foods v. State of Karnataka and another, 11986] 3 S.C.C. 469. That was a decision of a Bench of three learned Judges rendered on 21st July, 1986. There the Court was concerned with D Shrimps, prawns and lobsters locally purchased for complying with export orders and after the p;ocess of cutting their heads and tails, peeling, deveining, cleaning, freezing and packing, exported these .outside India·under prior contract of sale. It was held that after such processing, shrimps, prawns and lobsters retained their original identity and did not become different commodities. It was, therefore, E held that the assessee was entitled to exemption from tax under section 5(3) of the Central Sales Tax Act, 1956 in respect of purchase turnover of shrimps, prawns and lobsters, the purchases being of the same commodities which were exported. There, the question was whether shrimps, prawns and lobsters subjected to processing like cutting of heads and tails, peeling, deveining, cleaning and freezing ceased to be F the same commodity or become different commodity for the purpose of the Central Sales Tax Act. This Court expressed the view that the test applied for the purpose of determining whether a commodity sub­ jected to processing retained 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 G regarded, commercially and in the trade as same as the original commodity. Every processing does not bring about a change in the character and identity of the commodity. The nature and extent of processing may vary from one case to another and indeed there may be several H stages of processing and perhaps different kinds of processing at each ,-1 .. BOARD OF REVENUE v. SHIPHY INTERNATIONAL [MUKHARJI. J:i 101 stage. With each process suffered, the original 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 re­ garded as the original commodity but instead is recognised as a new and distinct commodity that it can be said that a new commodity, distinct from the original, has come into being. The test is whether in the eyes of those dealing in the commodity or in commercial parlance the processed commodity is regarded as distinct in character and identity from the original commodity. See in this connection the observations of this Court in Deputy Commissioner of Sales Tax v. Pio Food Packers, [1980] 3 S.C.R. 1271. Applying that test in M/s. Sterling Foods v. State of Karnataka & Anr. (supra) the Court had found that processed or frozen shrimps, prawns and lobsters were commercially regarded as the same commo­ dity as raw shrimps; prawns and lobsters. These are in common parlance known as shrimps, prawns and lobsters. There was no essential difference between raw shrimps, prawns and lobsters and processed or frozen shrimps, prawns and lobsters. The only difference was that processed shrimps, prawns and lobsters were ready for the table while raw shrimps, prawns and lobsters were not, but still both are. in commercial parlance, shrimps, prawns and lobsters. The aforesaid view also finds ample support from the decision of the Supreme Court of the United States in East Texas Motor Freight Lines v. Frozen Food Express 100 L Ed. 917 at 923, where the question was whether dressed and frozen chicken was a commercially distinct article from the orginial chicken. The United States Supr"._me Court held that it was not a commercially distinct article but was commer­ cially and in common parlance the same article as chicken. The United States Supreme Court held that killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasteurising, homogenizing, adding vitamin concentrates, standardising and bottling. Applying the aforesaid tests to the facts of this case, we are clearly of the opinion that the High Court was right on the facts found by the Tribunal in this case that frozen frog legs is same as fresh frog legs, the process was only to prevent decomposition. Reliance was placed on behalf of the revenue on a decision of the same Bench of three learned Judges of this Court in the case of Deputy \J-1 Commissioner of Sales Tax and another v. A.B. Ismail and others, [1986] Suppl. S.C.C. 218. This was a decision prior to the decision in Sterling Foods, (supra) which as we have mentioned before was rendered on 21st July, 1986 and this decision was rendered on 15th April, 1986. In the subsequent decision no reference was made to the previous one because the facts were entirely different. There it was the sale of meat, hides and skin, got after slaughtering goat and sheep. It was held that it was taxable under section 5A(1)(a) of the Kerala General Sales Tax Act. It was further held that goats and sheeps are distinct from meat, hides and skins. The process of conversion from goat and sheep into mutton, hides and skin involves consumption and manufacture resulting in production of goods different from the origi­ nal goods. It was held that consumption was a word of wide import. It denoted the taking in of something, to convert that something into another. In that case, goats and sheeps underwent a process viz., slaughtering, and then came into existence meat, hides and skin. The slaughter of the animals and their conversion into meat was the conse­ quence of consumption of goats in a legal sense. In such conversion, a process of manufacture could also be inferred. There the Court con­ sidered the goat and sheep different from mutton from commerciai circle and common parlance. But that is not as in the case of frozen frog legs and fresh frog legs and these are essentially the same commodity. In the aforesaid view of the matter, we are of the opinion that the High Court was right in the view it took. The appeal is accordingly dismissed. There will be no order as to costs. N.P.V. Appeal dismissed. " \. \