A. Sambasiva Rao, C.J.
1. Is cashew kernel exigible to sales tax at the point of first purchase in the State when the cashewnut from which it has been taken out had already been subject to tax under item 12 of the Second Schedule to the A.P. General Sales Tax Act, 1957 This is the question which is uniformly posed in all these 14 cases, both writ petitions as well as tax revision cases.
2. Fortunately, there is no dispute in regard to the facts in any one of these matters. All the petitioners are dealers in cashew kernel. They purchased the kernel from dealers who had purchased the cashewnut and brought out the kernel from it and who had also paid sales tax on the cashewnut purchases since they were the first purchasers in the State. The assessment year is 1974-75 in all these cases. There is now a demand on all these dealers that they should pay tax on their purchases of cashew kernel also. This was resisted by them on the ground that the cashewnut had already suffered taxation but the assessing authorities did not agree with them. The Sales Tax Appellate Tribunal also, when some of the cases were taken to it, declined to accede to the contention of the petitioners. That is how these writ petitions and tax revision cases have arisen.
3. The Tribunal and the sales tax authorities held the view that kernel is a different commodity from cashewnut and that both of them are liable to be taxed at the point of their first purchases in the State. Indeed, that is the point of view urged before us also by the learned Government Pleader for Commercial Taxes. Learned Counsel for the petitioners, on the other hand, vigorously argued that cashewnut and kernel are not different commodities and that, in fact, in common and commercial parlance, no distinction is made between the two. Therefore, the principal question that will have to be decided is whether cashewnut and kernel mentioned in item 12 of the Second Schedule are different commodities and are separately taxable.
4. Sri M. Suryanarayana Murthy, one of the petitioners' Learned Counsel, raised the three following contentions: (1) Cashewnut and kernel are not two different commodities but, in substance, are one commodity. (2) Cashewnut includes and contains kernel and, when the former has been taxed, the latter cannot be separately taxed. (3) In any case, when two views on the meaning of an entry in taxation law is possible, the courts should adopt that view which is favourable to the assessee. It is immediately seen that the first two points overlap each other. A supplementary argument based on construction was also raised by Sri Suryanarayana Murthy suggesting that the word 'and' occurring between cashewnut and kernel should be construed as 'or' and, therefore, if one is taxed, the other escapes taxation.
5. This argument was put before us somewhat differently by Sri D. Venkatappayya Sastry, another Learned Counsel for the petitioners, that the use of the word 'and', even if it is construed as an adjunctive, is not conclusive and, it is used only to avoid ambiguity and to ensure exhaustive enumeration of the goods belonging to the category of 'cashewnuts'. Sri Dasaratharama Reddi, also appearing for some of the petitioners, reinforced the aforesaid arguments by pointing out that after the 1974 amendment, taxation was intended to be levied on cashewnuts at a single point and that both cashewnuts and kernel are used in item 12 to remove ambiguity.
6. In the Andhra Pradesh General Sales Tax Act, 1957, the charging provision is Section 5. As Sub-section (1) stands now, if a dealer's turnover is not less than Rs. 25,000, he is required to pay a tax on his total turnover at the rate of four paise in a rupee. It is patent that Sub-section (1) does not exclude the possibility of taxation on the same goods at more than one point. In order to introduce a single point taxation on certain goods, Sub-section (2) has been made. According to Clause (a) thereof, despite the provision in Sub-section (1), tax shall be levied on the goods mentioned in the First Schedule at the rates and only at the point of sale specified as applicable thereto, effected in the State by the dealer selling them, on his turnover of sales in each year relating to such goods irrespective of the quantum of turnover. To put it in other words, this part of Sub-section (2) avoids double taxation on the goods mentioned in the First Schedule and prescribes rates of tax leviable at the point of sale effected in the State as specified in that schedule. Clause (b) of Sub-section (2) refers to goods in the Second Schedule and lays down that tax shall be levied on them at the rates and only at the point of purchase specified as applicable thereto, effected in the State by the dealer purchasing them. Clause (c) of Sub-section (2) deals with goods mentioned in the Fifth Schedule. Third Schedule contains the declared goods in respect of which a single point tax only is leviable under Section 6. These are the goods which are declared as goods of general importance under Section 14 of the Central Sales Tax Act. Fourth Schedule contains goods exempted from tax under Section 8. The proviso to Sub-section (4) of Section 5 says that in respect of the same transaction, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed. The second part of the same proviso lays an embargo against imposition of tax on any dealer who has been taxed in respect of the purchase of any goods when he sells the same goods.
7. Cashewnut and kernel occur in the Second Schedule and they are placed in item 12. Item 12 did not exist in the Second Schedule till 1974. By virtue of Section 14 of the A.P. General Sales Tax (Second Amendment) Act, 1974 (Act 5 of 1974), an amendment to the Second Schedule was effected with effect from 1st March, 1974, whereunder items 11 to 18 were added. Item 12 then introduced reads thus:
Description of goods Point of levy Rate of tax12 Cashewnut and At the point of first purchase 4 paise in thekernel. in the State. rupee.
8. Read in the light of Clause (b) of Section 5(2) 'cashewnut and kernel' are taxable only at the point of first purchase in the State. In contradistinction to a general sales tax levied under Section 5(1) on the total turnover, Sub-section (2) insists on single point taxation. While Clause (a) of Sub-section (2) fixes that single point as point of sale in regard to goods in the First Schedule, Clause (b) limits taxation only at the point of first purchase in the State on goods mention-ed in the Second Schedule.
9. This single point taxation on some of the goods was recommended by the National Council of Applied Economic Research in their report on 'Review of Sales Tax in Andhra Pradesh' of June, 1971. In the Report, the committee examined the commodities then taxed under multi-point to see which, among them, were amenable to be taxed under single point in accordance with the criteria which they had laid down. After such review, they listed as many as 63 items recommending their transfer from multi-point to single point. The 57th item of the list is 'cashew and its kernel'. Accepting some of those recommendations, the 1974 amendment was brought about. We have referred to this circumstance only to give the historical background for including 'cashewnut and kernel' in the Second Schedule and not as an aid to the construction of the item. The fact however remains that by including 'cashewnut and kernel' in the Second Schedule, the legislature decided to levy tax only at the point of first purchase in the State on cashewnut and kernel.
10. Under item 12 of the Second Schedule cashewnut and kernel are taxable only at the point of first purchase in the State. The intention of the legislature is therefore discernible that cashewnut and kernel should be taxed on their first purchase in the State. It is difficult to think that the legislature wanted to tax both the first purchases of cashewnut and kernel taken out of the cashewnut which had already been subjected to tax. The intention of the legislature appears to be not to make any distinction between cashewnut and kernel and to make the first purchase point of that commodity in the State taxable, whether it was in the form of cashewnut or kernel. This understanding of the item is strengthened by the ordinary and commercial name given to the commodity in day to day life. The popular meaning of 'cashewnut', as it is understood in the commercial world, is generally its kernel. When a purchaser goes to a market and asks for cashewnut, he means its kernel and, in fact, the vendor gives him kernel when he asks for cashewnut. Cashewnut and kernel are not separately defined in the Act or in the schedule. Particularly, in a taxing statute, the meaning given to a commodity in common parlance and commercial field should be accepted. If authority is needed for this proposition, vide the Madras decision in Deputy Commissioner (Sales Tax) v. Akbar Alikhan and Abdul Ruheem & Co [1971] 27 S.T.C. 167 and the Supreme Court's decision in Mangulu Sahu Ramahari Sahu v. Sales Tax Officer [1973] 32 S.T.C. 494 (S.C.). In the latter case, the question arose whether chillies and lemons are vegetables. The Supreme Court held that, going by the meaning given in common parlance, chillies and lemons are vegetables. In our understanding, therefore, cashewnut and kernel occurring in item 12 are used, not in any distinctive and separate sense, but in the way as they are understood in common and commercial parlance to indicate the same commodity, viz., both cashewnut and its inside.
11. It is true that, on occasions, the word 'and' can be understood as 'or' as laid down by the Supreme Court in Krishna Coconut Co. v. East Godavari Coconut and Tobacco Market Committee, A.I.R. 1967 S.C. 973 and Ishwar Singh v. State of U.P, A.I.R. 1968 S.C. 1450. Be that as it may, in items in the Second Schedule the adjunctive and disjunctive words like 'and' and 'or' appear to have been used rather indiscriminately. The word 'or' is used only in item 17, while the word 'and' is used in items 5, 7, 11, 12, 13 and 19, which items have been introduced under Act 49 of 1976.
12. It is true that this Court held in Baliah Setty v. State of Andhra Pradesh [1962] 13 S.T.C. 726 that butter and ghee as mentioned in item 5 are different commodities because butter on conversion undergoes physical and chemical changes and becomes ghee and also because even in the popular meaning and concept they are different. Likewise the word 'and' is used between green gram and black gram in item 11. Both of them are different commodities. But it is worthy of note that the same word 'and' occurs in item 7 between palmyrah fibre and stalks. It is common knowledge that fibre is only a piece taken out of palmyrah stalks. It is unthinkable that fibre can be separately taxed when palmyrah stalks, out of which fibre has been made, had already been taxed. We have referred to these different items only to point out that the word 'and' has not been used by the legislature to denote only a conjunctive meaning. Therefore, occurring of the word 'and' in item 12 need not mislead us. As it does in item 7, it only removes the ambiguity by putting into item 12 also the goods belonging to the same nature and category. Palmyrah fibre and stalks in item 7 and cashewnut and kernel in item 12 belong to the same category each and the word 'and' is used between them to give an exhaustive enumeration of the goods belonging to the same category and to remove ambiguity. Whether they are in the form of cashewnut or kernel, they are of the same kind and once they have been subjected to tax at first purchase, the other form cannot be taxed.
13. This takes us to the important question whether cashewnut and cashew kernel are two distinct and separate commodities. As we have pointed out, cashew kernel is not a distinct commercial commodity from cashewnut. The petitioners would have it that cashewnut cannot be used unless kernel is prepared out of it. On the other hand, the revenue's case is that cashewnut is dried and cashew kernel is taken out after breaking open the shell of the nut. Therefore, there is a process of taking out the kernel involved and, consequently, kernel is a separate commodity from cashewnut. It is of common knowledge that cashewnut is different from its fruit and kernel is the inside portion of the nut. The cashew fruit is put to one use while kernel, which is called 'cashewnut' in commercial parlance, is put to a different use. May be some sort of processing is involved in removing the outer crust of the nut and taking out the kernel. But it is difficult to postulate that kernel is distinctively a separate commercial commodity from cashewnut. It is undoubted that kernel is the essential part of cashewnut and does not undergo any chemical change on removal of the shell.
14. However, reliance was placed by the lower authorities and also by the learned Government Pleader before us on State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory [1953] 4 S.T.C. 205 (S.C.) and Hajee Abdul Shukoor & Co. v. State of Madras [1964] 15 S.T.C. 719 (S.C.). The problem as to whether cashewnut and kernel are different commodities or not arose in the first of the two cases before the Supreme Court only in an incidental manner. The principal question which fell for decision in that case was as to the scope of Article 286(1)(b) and the amplitude of the exemption postulated by that clause in Article 286(1). The court decided by a majority view that Clause (1)(b) of Article 286 requires as a condition of the exemption that the export must be of the goods whose sale or purchase took place in the course of export. What was involved there was the purchase of cashewnut and export of its kernel. It was clearly decided by the majority that the purchases of cashewnut were not covered by the exemption postulated by Clause (1)(b) of Article 286 even if there was no difference between the raw materials purchased, viz., cashewnuts and the manufactured goods, viz., kernels, which were exported. In this context, it was incidentally taken note of by the majority opinion that the High Court had found that the raw cashewnuts and kernels manufactured out of them by various processes, partly mechanical and partly manual, were not commercially the same commodity. It is immediately seen that whether both are the same commodity or not did not really arise for decision in the case, because the learned Judges, who were in majority, had already expressed the view that the purchases of cashewnut were not covered by the exemption. Consequently, the distinction between cashewnut and its kernel, which had not been commercially the same commodity, was only incidental and did not really arise for decision in the case. Moreover, the learned Judges clearly pointed out at page 217 that the finding of the High Court was not seriously disputed before them. With the consequence it can be safely taken that it was not a conclusion by the Supreme Court as to the respective natures of cashewnut and its kernel. Reliance was also placed by the revenue's Learned Counsel on another decision of the Supreme Court in Hajee Abdul Shukoor & Co. v. State of Madras [1955] 6 S.T.C. 654 where the question arose as to whether tanned hides and skins were different from raw hides and skins. In that connection, Raghubar Dayal, J., who spoke for the court, only referred to the State of Travancore-Cochin's case [1953] 4 S.T.C. 205 (S.C.) and observed that it was held there that raw cashewnuts become a different commodity commercially after the application of certain process as a result of which they are converted into edible kernels.
15. We do not think that these incidental references by the Supreme Court to cashewnut and kernel would detract from the view we have taken. Further, these observations of the Supreme Court were with specific reference to the Travancore-Cochin Act. On the other hand, there are several decisions of this Court and some other High Courts, which lend support to the view we have taken. We will briefly refer to them.
16. Firstly, taking up the decision of the High Court of Andhra in Motilal Hariprasad and Brothers v. State of Andhra [1955] 6 S.T.C. 654 Subba Rao, C.J., and Satyanarayana Raju, J. (as they then were), held, while construing Rules 4(2), 18(1) and (2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, that groundnut included kernel. They observed that groundnut is a more comprehensive term, which obviously takes in kernel and the word 'groundnut' was used to connote both the shell and the kernel within it. It may be noticed that in the same rule the comprehensive word 'cashew' was used.
17. The Kerala High Court in Swasti Cashew Industries (P.) Ltd. v. State of Kerala [1961] 12 S.T.C. 691 held that the word 'cashew' includes 'cashew kernel'. It is well to remember that, in the present item, the word 'cashew', which may take in also the fruit, is not used but only cashewnut and kernel. The obvious intention is to treat both of them as one commodity.
18. Likewise, the High Court of Andhra Pradesh held in Motilal Hari Prasad & Bros. v. State of Andhra [1959] 10 S.T.C. 20 and Berar Oil Industries v. Deputy Commissioner of Commercial Taxes [1959] 10 S.T.C. 199 that the expression 'groundnut' takes in 'groundnut kernel' as well.
19. In K. Seshagiri Pai & Co. v. Deputy Commissioner of South Kanara [1961] 12 S.T.C. 629 the Mysore High Court held that since oil can be extracted from coconut, it is an 'oil-seed' within the meaning of Section 14(vi) of the Central Sales Tax Act. In the course of the discussion, the learned Judges pointed out that a coconut, as ordinarily understood, is the coconut grown on the top of a coconut tree with its husk and shell.
20. In State of Madras v. Saravana Pillai [1956] 7 S.T.C. 541 the question was whether arecanuts are horticultural produce. The learned Judges observed that the assessee gathered the arecanuts while they were still raw, then peeled them and thereafter sliced, boiled and dried. It was only after this process that arecanuts were fit to be marketed and there was no market for them as gathered from the trees. Despite all this it was held in the case that the goods thus processed and thereafter sold by the assessee were only subjected to the minimum processing absolutely necessary for their sale and, therefore, what the assessee sold still retained its character as horticultural produce. The same reasoning applies with equal force to cashew kernel....
21. The Supreme Court held in Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 S.T.C. 827 (S.C.) that hydrogenated oil continues to be 'groundnut oil' notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil.
22. We would like to add that cashewnut is processed only for the purpose of making it usable. Therefore, when the kernel is used it is commercially called 'cashewnut'.
23. We may also usefully refer to the recent decision of the Supreme Court in Alladi Venkateswarlu v. Government of Andhra Pradesh [1978] 41 S.T.C. 394 (S.C) where it was held that puffed and parched rice, though some process was involved, continued to be rice.
24. In the light of the foregoing consideration, we are clearly of the opinion that 'cashewnut' and 'cashew kernel' are essentially the same commodity though some sort of processing is involved to take the kernel out of the cashewnut.
25. In any case, even if there is any ambiguity about the meaning of item 12--we do not think that any such ambiguity exists--and more than one interpretation is possible, that interpretation which is beneficial to the subject must be adopted. Hegde, J., speaking for the Supreme Court, in Controller of Estate Duty v. R. Kanakasabai [1973] 89 I.T.R. 251 at 257 (S.C.) observed :
If a taxing provision is ambiguous and is reasonably capable of more than one interpretation, that interpretation which is beneficial to the subject must be adopted. This is a well-accepted rule of construction.
26. Therefore, even if two constructions are possible, we are inclined to adopt that construction which is beneficial to the assessee, viz., that item 12 deals only with cashewnut, whether in the form of cashewnut or in the form of kernel.
27. It follows, therefore, that kernel cannot be independently taxed when cashewnut from which it has been taken out had already been subjected to tax as per item 12 of the Second Schedule. As we have stated, it is common ground that the cashewnut in all those cases had already been subjected to tax. Therefore, the cashewnut kernel with which we are now concerned in all these tax revision cases and writ petitions cannot be taxed again under item 12 of the Second Schedule.
28. The tax revision cases and the writ petitions are accordingly allowed. Having regard to the circumstances of the case, we direct the parties to bear their own costs. We fix a consolidated Advocate fee of Rs. 750.