ORDER
Chandurkar, C.J.
1. A common question of law which arises in all these writ petitions is, whether the cashewnut and cashew Kernels are the same goods for purposes of section 5(3) of the Central Sales Tax Act, 1956. These petitions can, therefore, be conveniently disposed of by a common judgment.
2. Admittedly, the petitioners in the several petitions export cashew Kernel after they process raw cashewnut purchased by them. We may take an illustrative case of the assessment of petitioners in W.P. No. 3968 of 1982. They were assessed to sales tax under the provisions of the Tamil Nadu General Sales Tax Act, 1959. We may briefly refer to the facts in that petition.
3. For the assessment year 1976-77 the petitioners were assessed on taxable turnover of Rs. 37,93,816.11. At the time of assessment, the purchase of cashewnut and sales turnover of cashewnut shell was found to be as follows :
Rs. Ps.1st purchase of cashewnuts .... 28,54,925.24Inter-State purchase of cashewnut .... 5,19,687.002nd purchase of cashewnut .... 4,00,785.25Sales turnover of cashew shell .... 18,418.62--------------37,93,816.11---------------
Before the Assessing Officer, namely, the Deputy Commercial Tax Officer, exemption was claimed by the assessee in respect of the entire cashewnut purchase turnover on the ground that the purchases were made to do export to foreign countries in accordance with the Central Sales Tax Act, hereinafter referred to as the Central Act. The assessing Officer found that the conditions of section 5(3) of the Central Act which was introduced with effect from 1st April, 1976 were satisfied and they were eligible for exemption claimed by them for the sale to foreign countries effected during the assessment year 1976-77. The taxable turnover under the said Sales Tax Act was computed only at Rs. 18,416 and this turnover was held taxable at the rate of 4 per cent under section 3(1) of the Act. The sales tax was computed at Rs. 737. This assessment order was made on 15th May, 1979.
4. On 26th February, 1982, a notice was sent to the assessee that the assessing officer proposed to revise the assessment for the assessment year 1976-77, as the cashew kernel which had been exported was of a different commodity than the cashewnut which was purchased by the assessee. According to the assessing officer, therefore, the condition required for invoking the benefit of section 5(3) of the Central Act was not satisfied. The notice specified that the total taxable turnover was provisionally determined as Rs. 28,73,343.86 and that the assessee was entitled to raise objections if any to the proposal for revising the assessment. The assessing officer then passed an order on 15th April, 1982 taking the view that petitioners had purchased raw cashewnuts (with shell) subjected them to a manufacturing process, extracted oil, and after sorting them into different grades, exported them. Therefore, the cashewnut with shell and kernel were two different and distinct commodities, which cannot be equated as 'identical goods' as claimed by the assessee. Thus taking the view that what has been exported was different from what was purchased and that cashew kernel was commercially different, the authority found there was change in the identity of the goods. Consequently, the taxable turnover was determined at Rs. 28,73,344. This included cashew husk of the value of Rs. 8,499, the cashewnut turnover being taxable at 5 per cent and the cashew husk turnover being taxable at 4 per cent. A demand for Rs. 20,113 was made by the Deputy Commercial Tax Officer. A separate notice of demand under rule 18(a) of the Tamil Nadu General Sales Tax Rules, 1959, was also sent to the assessee on the same day. W.P. No. 3968 of 1982 is filed challenging the validity of this assessment.
5. Several petitions have been filed in this Court by the assessees who purchased cashewnut and in whose assessments it was originally held that the sales of cashew kernel were not taxable under the Tamil Nadu General Sales Tax Act, but on a second look at the matter, the taxing authorities reopened the assessments on the ground that cashewnuts and cashew kernels are commercially two different goods and the assessees were not entitled to the benefit of section 5(3) of the Central Act. These petitions which have been filed fall in different categories. Some of these petitions are directed at notices for reopening the assessment issued under section 16 of the Tamil Nadu Sales Tax Act and some of them are directed at the assessment orders, as the one in W.P. No. 3968 of 1982. There are some petitions where the assessees are for the first time now sought to be made liable on the basis that the cashewnut and cashew kernel are commercially different commodities. In some cases for the assessment year 1976-77 to 1979-80 the appellate authority had accepted the contention of the assessees that the purchase of cashewnuts were not liable to tax having regard to the provisions of section 5(3) of the Central Act. But the revisional authority, namely, the Joint Commissioner for Commercial Taxes, in exercise of his revisional jurisdiction under the said Act has issued notices requiring the assessees to show cause at to why the order of the appellate authority should not be set aside. There are yet some petitions in which the petitioners are challenging the notices issued under rule 18(ii) of the said rules where in the cases of the assessees who were allowed to file the monthly return the assessing officer declines to accept the return submitted by the assessees and has issued notices under rule 18(ii) of Tamil Nadu General Sales Tax Rules with the avowed purpose of requiring the assessee to pay sales tax in respect of cashewnut.
6. As already pointed out, the common question which arises in these several petitions is whether for the purposes of section 5(3) of the Central Act, exported cashew kernel can be held to be the same goods which in this case were cashewnuts which was purchased by the assessee for purposes of taking the cashew kernel by subjecting the cashewnuts to a process by which the cashew kernel is taken out of the hard cover in which the cashew kernel is by nature enclosed. The process by which cashew kernel is released from the cashewnut, is a well known process which is sometimes carried out manually and sometimes mechanically. The process involved which is given to us in writing by the learned Advocate-General is as follows :
'Processing of cashew kernel from cashewnuts. - Cashewnut is projected and visible outside the fruit, unlike the other nuts which are enclosed inside the fruit. These raw cashewnuts purchased from agriculturists are first dried to remove moisture. They are then roasted by expert labourers, who see to it that the nuts are roasted to the required level without getting spoilt. Then the roasted nuts are split by another set of expert labourers to remove the coating shell and to obtain the kernels. These kernels are covered with thin brown skin known as testa. To remove this testa heat treatment is given in a specialised oven called 'Borma'. The kernels are then entrusted to a band of expert labourers who manually remove the testa which gets separated in the Borma Oven. This removal of testa is a very delicate operation as also the Borma Oven process. Then finally the marketable kernel emerges. These are then graded as white wholes, splits, broken, butts, etc. The resultant product is the goods that are exported.
It is not as if introducing raw nuts at one end of a machine, pressing a button, one gets the required product, viz., graded cashew kernel. The process involved is a delicate one and done only by expert labourers and in so many stages. This cannot by any stretch of imagination called 'minimum processing'. In fact the processing involved is a chain of more than one operation and takes more time than even milling of paddy.
The dealer after exporting the graded cashewnut kernel according to the required specifications, can dispose of the other grades at his will anywhere. In the above process the bye-products obtained are cashew shells, cashew testa and cashew shell oil which are all items having a variety of uses and have a good local market.'
The process through which the raw cashewnuts are passed before the edible kernels are obtained has been judicially noticed in a decision of the Supreme Court in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205. That was an appeal against the judgment of the then Travancore-Cochin High Court, which had gone into the nature of the process. Referring to the process as found by the high Court, Das, J., in his judgment at page 247 observed as follows :
'The High Court has, on remand, enquired into the process of manufacture through which the raw cashewnuts are passed before the edible kernels are obtained. The High Court, in its judgment on remand, goes minutely into the different processes of baking or roasting, shelling, pressing, pealing, and so forth. Although most of the process is done by hand, part of it is also done mechanically by drums. Oil is extracted out of the outer shells as a result of roasting. After roasting the outer shells are broken and the nuts are obtained. The poison is eliminated by pealing off the inner skin.'
The judgment of the High Court is reported in Bombay Company Ltd. v. State [1952] 3 STC 91.
7. At this stage, it is necessary to refer to the provisions of section 5 of he Central Sales Tax Act. Section 5(3) was introduced by Act 103 of 1976 with effect from 1st April, 1976. The object of introducing section 5(3) was to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export if such last sale or purchase took place after and was for the purpose of complying with, the agreement or order for, or in relation to, such export. The object of section 5(3) of the Central Act was considered by the Supreme Court in Consolidated Coffee Ltd. v. Coffee Board, Bangalore : [1980]3SCR625 in which the Supreme Court pointed out that section 5(3) formulated a principle of general applicability in regard to all penultimate sales provided they satisfy the specified conditions mentioned therein and that it has been enacted to extend the exemption from tax liability under the Act not to any kind of penultimate sale but only to such penultimate sale as satisfied the two conditions specified therein, namely, (a) that such penultimate sale must take place (i.e., become complete) after agreement or order under which the goods are to be exported and (b) it must be for the purpose of complying with such agreement or order and it is only then that such penultimate sale is deemed to be a sale in the course of export.
8. On a reading of section 5(3) of the Central Act, it is clear that an additional condition which is required to be satisfied is with reference to the kind of goods, the export of which is dealt with by section 5(3) or the same goods which are referred to earlier. The words which appear in section 5(3) are 'last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India. 'Section 5(3) of the Central Act refers to export of 'those goods' and reference is obviously to the goods referred to earlier. Indeed this is not disputed by Mr. V. Ramachandran, who appears on behalf of the several assessees. However, Mr. Ramachandran was at pains to point out that merely because the cashew kernel is separated from the cashewnut, the goods exported, i.e., cashew kernel, do not cease to be the same goods, i.e., the cashewnuts. The argument appears to be that the specific purpose of enacting section 5(3) was to avoid tax on exports and if that was the avowed object of introduction of section 5(3), then if it is permissible, the inter-pretation must be so given to section 5(3) that the exporter of cashew kernel is not deprived of the exemption from local sales tax, which is contemplated by section 5(3). The argument at first sight appears to be quite attractive because it is contended that cashewnut has two components, namely, the outer cover and the inner cashew kernel, and if one out of these two components, namely, the cashew kernel is exported, the cashew kernel does not become a different commodity as the kernel is already inside the cashewnut. The argument is that even after separating the cashew kernel from the outer cover, the cashew kernel remains in the same form, as it was before the cashewnut was subjected to the process of roasting and breaking up for taking the cashew kernel from the cashewnut, and therefore, the cashew kernel must be treated as goods having the same identity as before. Heavy reliance is placed by the learned counsel for the petitioners on the decision of the Supreme Court in Deputy Commissioner of Sales Tax, Board of Revenue, Ernakulam v. Pio Food Packers : 1980(6)ELT343(SC) and the decision of the Andhra Pradesh High Court in Singh Trading Company v. Commercial Tax Officer, Srikakulam [1979] 44 STC 1, which also referred to some other decisions and which have also been relied upon by the learned counsel for the petitioners. In these decisions articles like pepper, rice, raw-bone and tamarind though subjected to different processes to make them commercially salable have not been treated as being different from the original article. On the other hand, the learned Advocate-General has contended that the question as to whether cashewnut is different from cashew kernel and whether cashew kernel is commercially a different commodity, has been authoritatively adjudicated upon in the decision in The State of Travancore-Cochin v. The Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205. It is further pointed out by the learned Advocate-General that this view of the Supreme Court has been re-affirmed on two later occassions in Anwarkhan Mehboob Co. v. The State Bombay (Now Maharashtra) : [1961]1SCR709 and A. Hajee Abdul Shukoor and Co. v. The State of Madras : [1964]8SCR217 . While relying on the decision of the Andhra Pradesh High Court in Singh Trading Co. v. Commercial Tax Officer, Srikakulam [1979] 44 STC 1, the learned counsel for the petitioners also contended that the Division Bench of the Andhra Pradesh High Court has distinguished the decision of the Supreme Court in the The State of Travancore-Cochin v. The Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205, and we should, therefore, follow the view taken by the Andhra Pradesh High Court. In the case of Deputy Commissioner of Sales Tax v. Pio Food Packers : 1980(6)ELT343(SC) , the question which fell for consideration before the Supreme Court was, whether, when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans, is there is no consumption of the original pineapple fruit for the purpose of manufacture with the result that the provisions of section 5A(1)(a) of the Kerala Act, which corresponds to section 7A of the Tamil Nadu General Sales Tax Act and pointed out that section 5A(1)(a) of the Kerala Act envisages the consumption of commodity in the manufacture of anther commodity. Laying down the test for determining whether the commodity is consumed in the manufacture of another, the Supreme Court observed as follows :
'There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a 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 article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity.'
Therefore, the Supreme Court in the above case laid down a definite criterian that where as a result of processing a commodity which is differently recognised commercially than the original commodity comes into being, then there is a manufacture of another commodity and the original commodity can be said to be consumed. On the facts of that case, the Supreme Court however has held after referring to the process to which the raw pineapple was subjected before it was marketed in the forms of sliced pineapple that the pineapple fruit is not consumed in the manufacture of pineapple slices. The process to which the pineapple was subjected to was that the pineapple was washed and then the inedible portions like the end crown, the skin and the inner core are removed; thereafter the fruit is sliced and the slices are filled in cans, sugar is added as a preservative, the cans are sealed under temperature and then put in boiling water for sterilisation relying on his process when it was contended on behalf of the State of Kerala that the pineapple slices have a higher price than the market price of the original fruit, and that implies that the slices constitute a different commodity, the Supreme Court pointed out that the higher price was not claimed because it was a different commercial commodity and that when the 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. The conclusion reached by the Supreme Court that pineapple slices were not the result of any process of manufacture and that pineapple was not consumed in such process essentially turns on the fact that a dealer and consumer regard both as pineapple and the only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling. That was why as put by the Supreme Court 'on a total impression' the pineapple slices were held to possess the same identity as the original pineapple fruit. The test to decide whether one article has the same identity as the other even after subjecting the original article to a process is therefore well-settled. Indeed even on an earlier occasion, a similar test has been formulated by the Supreme Court in Ganesh Trading Co., Karnal v. State of Haryana : AIR1974SC1362 . That was a case where the question was whether paddy and rice were goods of the same identity and it was contended that merely because paddy was dehusked and rice produced, there is no change in the identity of the goods. While dealing with the question whether paddy and rice were identical goods, the Supreme Court observed as follows :
'Now, the question for our decision is whether it could be said that when paddy was dehusked and rice produced, its identity remained. It was true that rice was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking. It had changed its identity. Rice is not known as paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods.'
This decision was later followed by the Supreme Court in State of Karnataka v. B. Raghurama Shetty : [1981]3SCR280 whereagain this question as to whether paddy retained its identity when it was dehusked and converted into rice arose for consideration. The test laid down in Ganesh Trading Co. v. State of Haryana : AIR1974SC1362 was relied on. Therefore, the question as to whether the cashewnut retained its identity as cashewnut when it was subjected to the process of baking or roasting, shelling, pressing, pealing and so forth has necessarily to be decided on determining whether cashewnut and cashew kernel are commercially different commodities. It can hardly be disputed that cashew-nuts are imported in large quantities even from abroad. The very fact that the petitioners themselves order and purchase cashewnuts and later on sell cashew kernels would show that the cashewnut is commercially an article in its own right. When this cashewnut is subjected to the required process, whether manually or mechanically, the product which comes out is by itself a different commercially recognised article, which can be sold and exported in that form. A cashew kernel undoubtedly is enclosed within the outer hard cover, when the cashewnut is purchased. But when it is released out of the hard cover, it gains a new identity as a different commodity than the cashewnut. This new article is also commercially recognised as being different from the cashewnut. Therefore, applying the test of identity of the article being commercially different after being subjected to a certain process it is obvious that the cashewnut and kernel are commercially different articles.
9. We may also point out that the petitioners in W.P. No. 3968 of 1982 are described as 'Direct Exporters and Importers of Cashew Kernels, Raw Cashewnuts, Cashew Shell liquid, etc.' This description is to be found in the correspondences which is a part of the original assessment records of the petitioners which are produced before us. Even while filing the return of turnover, they have separately given the figures for purchases of raw cashewnuts and sales of cashew shell. There are also agreements with the foreign importers which are for the export of fried cashew kernels of good sound merchantable quality. It can hardly be disputed that when the raw cashewnut is subjected to the necessary process for taking the cashew kernel out of it, the process leaves behind cashew shells and sometime even oil is manufactured out of these shells. It is therefore obvious that, when the petitioners purchase cashewnuts and export cashew kernels, they are not exporting the same goods which they had earlier purchased.
10. In the State of Travancore-Cochin v. The Shanmugha Vilas Cashewnut Factory [1953] 4 STC 205 the question which fell for decision was, whether the cashewnut purchases made by the factory were within the exemption of article 286 of the Constitution of India. At page 217 of the report, the majority judgment of the Supreme Court contains the conclusions. These conclusions are as follows :
'(1) Sales by export and purchases by import fall within the exemption under article 286(1)(b). This was held in the previous decision.
(2) Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs frontier are not within the exemption.
(3) Sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs frontier are within the exemption, assuming that the State-power of taxation extends to such transactions.'
After setting out these propositions, the Supreme Court then went on to consider whether the cashewnut purchases made by the factory were within the exemption under article 286. While dealing with this specific question the Supreme Court found that the purchases made by the factory fell into three categories, namely,
(1) Purchases made in the local market;
(2) Purchases made from the neighbouring districts of the State of Madras; and
(3) Imports from Africa.
While dealing with the transactions which fell in the first category, namely, purchase made in the local market, the Supreme court accepted the finding of the High Court that the purchases of raw goods whether foreign or Indian were all made with the object of exporting their kernels though there were some negligible sales in the local market or what are called 'factory rejects'. The High Court had also found that the bulk of the kernels were in fact exported by the respondents themselves, a small quantity being sold by the respondents to other exporters who also subsequently exported the same. The Supreme Court then went on to observe as follows :
'Thus, on the whole, the respondents could be said to have purchased the raw nuts for the purpose of exporting the kernels and to have actually exported them. But, it will be seen, the purchases are not covered by the exemption on the construction we have placed on clause (1)(b) even if the difference between the raw materials purchased and the manufactured goods (kernels) exported is to be ignored. It may, however, be mentioned here that the High Court has found that the raw cashewnuts and the kernels manufactured out of them by various processes, partly mechanical and partly manual, are not commercially the same commodity. This finding, which is not seriously disputed before us, would be an additional ground for rejecting the claim to exemption in respect of these purchases, as the language of clause (1)(b) clearly 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.'
These observations clearly show that the assessee in that case was held not entitled to the benefit of the exemption under article 286(1)(b) because the cashewnuts and the kernels were not commercially the same commodity. The mere fact that the finding recorded by the High Court was not disputed by the assessee does not detract from the fact that the view taken by the Supreme Court was that the two commodities being commercially different, the assessee was not entitled to the benefit of exemption under article 286(1)(b) of the Constitution of India. In the same judgment the question was considered by Das, J., in a separate but concurring judgment. We have reproduced earlier a part of the observations relating to the process to which the cashewnuts are subjected to before cashew kernels can be obtained. In that same paragraph referring to the effect of the process, Das, J., has observed (at page 247) as follows :
'........ By this process of manufacture the respondents really consume the raw cashew and produce new commodities. The resultant products, oil and edible kernels, are well-recognised commercial commodities. They are separate articles of commerce quite distinct from to raw cashewnuts. Indeed, it is significant that the respondents place orders for 'cashewnuts' but orders are placed with them for 'cashewnut' kernels. In the circumstances, 'the goods' exported are not the same as the goods purchased. The goods purchased locally are not exported. What are exported are new commodities brought into being as a result of manufacture. There is a transformation of the goods. The raw cashews are consumed by the respondents in the sense that a jute mill consumes raw jute, or a textile mill consumes cotton and yarn. The raw cashews not being actually exported the purchase of raw cashews cannot be said to have been made 'in the course of' export so as to be entitled to immunity under clause (1)(b).'
The above observation will clearly indicate that Das, J., has positively held independent of the findings of the High Court that the cashew kernels are commercially different commodities than the cashewnuts. This decision was considered in a later decision of the Supreme Court in Anwarkhan Mehboob Co. v. State of Bombay : [1961]1SCR709 . The question which fell for consideration before the Supreme Court in that case related to an assessee who manufactured bidis was required to pay purchase tax on certain purchases of tobacco made by it in the State of Bombay. The contention was that the assessment was illegal, inasmuch as the transactions were purchases outside the State of Bombay within the meaning of article 286(1)(a) of the Constitution read with the explanation, and that the transactions took place in the course of inter-State trade and commerce within the meaning of article 286(2) of the Constitution. The case of the petitioner petitioner therein was that the purchased tobacco was delivered to the petitioner within the State of Bombay as a direct result of the purchase and that after its delivery, the tobacco was intended to be sent to the State of Madhya Pradesh to be manufactured as bidis in that place, and all that was used to be done by the purchase of tobacco in the State of Bombay was to have the sstems and dust removed from the tobacco and such removal of the waste material like stems and earth, did not, according to the assessee, amount to consumption of tobacco. It was also argued that the tobacco which was despatched to the head office after removal of the waste material was not an article 'commercially different' from the tobacco purchased form the cultivators. The case of the State of Bombay was that after purchasing raw tobacco from the cultivators in the State of Bombay, the assessee subjected the raw tobacco so purchased to a process leading to its conversion into bidi pattis, for immediate use in the manufacture of bidis and that marketable value of raw tobacco and bidi pattis differs and that both these were commercially different articles. Holding that when tobacco was delivered in the State of Bombay for the purpose of changing into commercial article, namely, bidi patti, and the delivery was for the purpose of consumption and therefore, the sales must be held to have taken place inside the State of Bombay, the Supreme Court referred briefly to the observations of Das, J., in State of Travancore-Cochin v. The Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205 and observed that the conversion of a commodity into a different commercial commodity by subjecting it to some processing, is consumption within the meaning of the Explanation to article 286 of the Constitution of India no less than the final act of user when no distinct commodity is being brought into existence but what was brought into existence is being used up. The Supreme Court pointed out that when a commodity is converted into a commercially different commodity its former identity is destroyed and so there is destruction of the substance. It was pointed out that whenever a commodity is so dealt with as to change it into another commercial commodity there is consumption of the first commodity within the meaning of the Explanation to article 286. It was then observed as follows :
'....... This aspect of consumption was pointed out by Das, J. (as he then was), in State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory : [1954]1SCR53 of the report. The purchase there was of raw cashewnuts. Discussing the question whether the delivery of these nuts in Travancore was for the purpose of consumption in that State, Das, J., observed :-
'The raw cashewnuts, after they reach the respondents, are put through a process and new articles of commerce, namely, cashewnut oil and edible cashewnut kernels, are obtained. It follows, therefore, that the raw cashew-nut is consumed by the respondents in the sense I have mentioned.' Das, J., here proceeded on the view that using a commodity so as to turn it into a different commercial article amounts to consumption within the meaning of the Explanation to article 286(1)(a) - a view which he has earlier indicated at page 110 of the report.'
In Anwarkhan Mehboob Co. v. State of Bombay : [1961]1SCR709 the Supreme Court therefore approved the view of Das, J., as he then was, that raw cashewnuts and kernels are different articles of commerce.
11. There is a later decision in Hajee Abdul Shukoor & Co. v. State of Madras : [1964]8SCR217 where the question which fell for consideration before the Supreme Court was whether hides and skins in the untanned conditions are different articles of merchandise than tanned hides and skins. The argument was that hides and skins whether tanned or untanned constituted one commodity. This contention was rejected and it was held that hides and skins in the untanned condition were undoubtedly different articles of merchandise than tanned hides and skins. Reference was made at page 728 to the decision in Shanmugha Vilas Factory's case [1953] 4 STC 205 where raw cashewnuts were held to be different commodity commercially after the application of certain process as a result of which they are changed into edible kernels. Relying on this decision, the Supreme Court observed that it was therefore not correct to say that the process of tanning brings about no change in the raw hides and skins and that therefore both types of hides and skins form one commodity.
12. Undoubtedly, the decision of the Andhra Pradesh High Court supports the view which is canvassed before us by Mr. Ramachandran, learned counsel appearing on behalf of the petitioner. A Division Bench of the Andhra Pradesh High Court in Singh Trading Co. v. Commercial Tax Officer, Srikakulam [1979] 44 STC 1 has positively taken the view that though cashew kernel is taken out by drying out and breaking open the shell of the nut and that involves a certain process, still it cannot be said that cashewnut and kernel are two different commercial commodities. The view which the Division Bench took was that cashewnut is subjected to that kind of process only to make the kernel usable. While it cannot be disputed that the process to which the cashewnut is subjected is to make kernel usable, with respect, we are not inclined to agree with the view of the Division Bench that the cashewnut and kernel are not two different commercial commodities. The use to which a cashew kernel is put can be achieved only after it is separated from the the cashewnut and if the cashew kernel while it is inside the hard cover cannot be used in the same manner in which it can be used once it is taken out, that condition, in our view, is enough to indicate that commercially the cashew kernel is an entirely different article from cashewnut. The decision of the Supreme Court in Shanmugha Vilas Factory's case [1953] 4 STC 205 was cited before the Division Bench of the Andhra Pradesh High Court. That decision was however distinguished by the Division Bench on the ground that the problem as to whether cashewnut and kernel are different commodities or not arose before the Supreme Court only in an incidental manner. According to the Division Bench the principal question which fell for decision in that case was as to the scope of the article 286(1)(b) and the amplitude of the exemption postulated by that clause in article 286(1). Nothing the fact that what was involved there was the purchase of cashewnut and export of its kernel, the Division Bench was of the view that 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. According to the Division Bench, the Supreme Court merely incidentally took not in 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 difficult to agree with the Division Bench of the Andhra Pradesh High Court when they took the view that the question whether the cashewnut and kernel are the same commodity or not did not really arise for consideration in that case, because the learned Judges who were in majority had expressed the view that the purchase of goods, viz., cashewnuts were not covered by the exemption. It is also difficult to agree with the view taken by the Division Bench of the Andhra Pradesh High Court that the distinction between cashewnut and its kernel which are commercially not the same commodity was only incidental and did not really arise for decision in that case. The Division Bench also referred to the fact that the finding of the High Court was not seriously disputed before the Supreme Court. Thus the Division Bench took the view that it can be safely taken that the Supreme Court had not given a decision as to the respective nature of cashewnuts and its kernel. We have reproduced in extenso the relevant observations from the majority judgment as well as the observations of Das, J., (as he then was). Undoubtedly, the Supreme Court was concerned with the construction of article 286 of the Constitution, but the judgment of the Supreme Court shows that the finding of the High Court that cashewnuts and kernels were not commercially the same commodity was one of the grounds on which the Supreme Court held that the factory was not entitled to exemption under article 286, 'as the language of clause (1)(b) clearly 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'. It would not therefore be correct to say that the question whether the two articles were commercially different did not directly fall for consideration before the Supreme Court. It would be wholly improper for us to ignore the observations of the Supreme Court that cashewnuts and kernels were commercially different articles. It also appears that the pertinent observations of Das, J., where an independent consideration was made as to whether cashewnuts and kernels were different articles of commerce were not considered by the Division Bench of the Andhra Pradesh. The Andhra Pradesh High Court while disposing of the case observed that the Supreme Court merely referred to the decision of the High Court and that incidental references by the Supreme Court to cashewnuts and kernel would not prevent the High Court from taking a different view. With respect, we are unable to agree with the distinction which was sought to be drawn by the Division Bench when the decisions of Supreme Court in Shanmugha Vilas Cashewnut Factory's case [1953] 4 STC 205 and in Hajee Abdul Shukoor & Co's case : [1964]8SCR217 were cited before it. Having read the decisions of the Supreme Court in Shanmugha Vilas Cashewnuts Factory's case [1953] 4 STC 205, Anwarkhan Mehboob Co's case : [1961]1SCR709 and Hajee Abdul Shukoor & Co's case : [1964]8SCR217 , we are of the considered view that the cashew kernel and cashewnut are different articles of commerce is not now open to debate.
13. Though it is not necessary to discuss the question whether the cashewnuts and kernel are different articles of commerce, we may refer to the other decisions on which reliance was placed and in which the question of identity of a commodity, before and after it was subjected to some process has been decided.
14. In Swasti Cashew Industries Private Ltd. v. State of Kerala [1961] 12 STC 691 the Division Bench of the Kerala High Court has held that the word 'cashew' in rule 4(2)(c) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, includes 'cashew kernels' as well and therefore 'cashew kernel' is liable to sales tax under the Madras General Sales Tax Act, 1939. This decision does not seem to be of any assistance to the petitioners because the question which fell for consideration in that case was as to the scope of the work 'cashew' and both the kernel and cashewnut were held to be two different commodities.
15. In State of Tamil Nadu v. Pyare Lal Malhotra : 1983(13)ELT1582(SC) the Supreme Court held that entry 4 in Schedule II notified under section 14 of the Central Sales Tax Act, 1956, as originally worded [prior to its amendment by Amendment Act (61 of 1972)] was meant to enumerate separately taxable goods and not just to illustrate what was just one taxable substance, viz., 'iron and steel'. It was held that each sub-item in entry (iv) is a separate taxable commodity for purpose of sales tax and each of them forms a separate species for each series of sales although they may all belong to the genus 'iron and steel', and therefore, manufactured goods consisting of 'steel rounds, flats, angels, plates, bars' or similar goods in other forms and shapes could be taxed again even if the material out of which they were made had already been subjected to sales tax once as iron and steel scrap.
16. In Commissioner of Sales Tax v. Bombay Traders [1976] 38 STC 286 it was held by the Division Bench of the Bombay High Court that the fried and salted cashewnuts prepared by the assessees could not be said to be a different commodity from plain cashewnuts and the finding of the Tribunal that even after the plain cashewnut was fried and salted by the assessees, they still continued to be the same commercial commodity, namely, cashewnuts and the process or activity applied on the cashewnuts could not be said as 'manufacture' within the meaning of the term in section 2(17) of the Bombay Sales Tax Act was accepted.
17. In Alladi Venkateswarlu v. Government of Andhra Pradesh : [1978]3SCR190 the Supreme Court held that the parched rice and puffed rice are rice within the meaning of entry 66(b) of the First Schedule to the andhra Pradesh General Sales Tax Act, 1957, because the term 'rice' was held to be wide enough to include rice in its various forms, edible or inedible.
18. In State of Tamil Nadu v. Subbaraj & Co. [1981] 47 STC 30 a Division Bench of this Court, while dealing with section 7A(1)(a) of the local Sales Tax Act, held that when raw bones were converted into crushed bones by a process of breaking the bones in a disintegrator into pieces and if in the process the assessee obtained bone grist, bone meal, fluff horns, and hoof, which were sold locally, section 7A(1)(a) was not attracted. This conclusion was arrived at on the basis of the decision in Deputy Commissioner of Sales Tax, Board of Revenue, Ernakulam v. Pio Food Packers : 1980(6)ELT343(SC) .
19. In Deputy Commissioner of Sales Tax, Ernakulam v. Sheth Brothers [1983] 52 STC 40, a Division Bench of the Kerala High Court held that garbling is process which makes pepper fit to be introduced into the export market and merely because pepper purchased by an exporter is subject to process, the process being one of cleaning and making it presentable for the export market, it will not cease to be the pepper it was and, therefore, where the assessee purchases pepper and after the process of garbling, export such pepper, the purchase is a purchase in the course of export.
20. The last decision relied upon by the learned counsel for the petitioners was the decision in Commissioner of Sales Tax v. Jayantilal Mannilal [1983] 52 STC 188 in which the Madhya Pradesh High Court has held that even after removal of seeds from tamarind the goods possessed the same identity and there was no change in the identity or form of the goods.
21. We have exhaustively discussed the test which is to be applied to determine whether an article which is produced as a result of another article being subjected to a process is commercially a different article or not. The cases relied upon by the learned counsel for the petitioners to which we have briefly referred to above must be taken as application of that test, and it is, therefore, not necessary for us to discuss those cases in detail. Essentially the question whether two articles are commercially different will depend upon the facts of each particular case. Having considered the matter at length, we are of the view that the cashewnut and cashew kernel must be treated as commercially different articles. The petitioners would not, therefore, be entitled to the benefit of section 5(3) of the Central Act.
22. Mr. Ramachandran has then contended that the notice for reopening the assessment and even revised assessment must be held to be bad because section 16 of the Tamil Nadu General Sales Tax Act, under which the power is sought to be exercised by the assessing authority goes beyond the purpose of the Act. It may be pointed out that the constitutional validity of section 16 of the Tamil Nadu General Sales Tax Act has not been challenged before us. The ground which is sought to be made out before us is that section 16 treats alike all cases of reopening of assessment, that is, where there is a concealment or non-furnishing of correct particulars by the assessee or where the assessment is sought to be reopened because of change of opinion on the part of the assessing authority or there is some information with regard to the position of law on which the assessing authority finds that there is an infirmity in the assessment orders - in all these cases the learned counsel contends that there is a period of five years which has been provided and assessment can be reopened within a period of five years. The argument obviously is based on the provisions for reopening of assessment under the Income-tax Act. Section 147 and 148 of the Income-tax Act provides for the reopening of an assessment by the Income-tax Officer. Under clause (a) of section 147, the assessment can be reopened where the Income-tax Officer has reason to believe that by reason of the omission of failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year. Section 147(b) enables the Income-tax Officer to reopen assessment if in consequence of information in his possession he has reason to believe that income chargeable to tax has escaped assessment for any assessment year.
23. Section 149 prescribes time-limit for the issue of notice under section 147(a) and section 147(b). Now it is difficult to see how the provisions of sections 147 and 149 become relevant for determining whether the assessments could be reopened under section 16 of the Tamil Nadu General Sales Tax Act, 1959. Section 16(a) of the Act which alone is relevant for our purpose reads as follows :
'16. (1)(a) Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax, the assessing authority may, subject to the provisions ofa sub-section (2), at any time within a period of five years from the expiry of the year to which the tax relates, determine to the best of its judgment the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary and after giving the dealer a reasonable opportunity to show cause against such assessment.'
Section 16(1)(a) makes a reference to sub-section (2) and sub-section (2) provides for a penalty to be levied in a case where, while making the assessment under section 16(1)(a), the assessing authority is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer, and in such a case there is discretion in the assessing authority to levy by way of penalty a sum which shall not be less than 50 per cent and which shall not be more than one hundred and fifty per cent of the tax so assessed. As we have already pointed out the constitutional validity of section 16 has not been challenged. The provision of reopening of assessment is a common feature in any tax legislation. In the case of Tamil Nadu General Sales Tax Act, the power under section 16(1)(a) can be exercised not 'for any reason' if the whole or any part of the turnover of business of dealer has escaped assessment to tax. Therefore, the only circumstance on which an assessment can be reopened is that the whole or any par of the turnover of business of dealer has escaped assessment to tax. The power under section 16 is a wide power. The only condition is that the assessing officer must be satisfied that the turnover has escaped assessment. The scope of section 16 has been considered by this Court in Yercaud Coffee Curing Works Ltd. v. The State of Tamil Nadu [1977] 40 STC 531. A Division Bench of this Court in that decision has held that under section 16 of the Tamil Nadu General Sales Tax Act, 1959, it is competent for the assessing authority in a reassessment proceeding to assess an item of turnover which had been omitted to be taxed earlier for any reason and the authority has, therefore, power to reassess a turnover even though in the return that turnover was included and the officer then thought that it was exempt. The Division Bench has referred to the earlier decision of a Full Bench of this Court in State of Madras v. Louis Dreyfus and Company Ltd. [1955] 6 STC 318, where the Full Bench observed as follows :
'The 'escape' that serves as the foundation of the jurisdiction to reopen an assessment is that of 'turnover' and not, be it noted, an assessment. 'Turnover' escapes when it is not noticed by the officer either because it is not before him by reason of an inadvertence, omission or deliberates concealment on the part of the assessee, or because of want of care on the part of the officer the turnover though in the books has not been taken notice of. This would be the natural and normal meaning of the expression 'turnover which has escaped' in rule 17(1).'
The provisions of rule 17(1) which was construed by the Full Bench were in substance similar to the provisions of section 16 of the said Act. For the purpose of convenience, we may quote the relevant part of rule 17(1) which reads as follows :
'17. (1) If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to the tax in any year ............... the assessing authority or licensing authority, as the case may be, may, at any time within the year or the years next succeeding that to which the tax or licence fee relates, assess the tax payable on the turnover which has escaped assessment or levy the licence fee, after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary.'
On the terms of section 16(1)(a) as well as in view of the decision of the Bench in Yercaud Coffee Curing Works Ltd.'s case [1977] 40 STC 531, it is obvious that once it is shown that the turnover has escaped assessment power is vested in the assessing authority to determine afresh the turnover which has escaped assessment and assess the tax payable on such turnover subject, of course, to a notice, and a reasonable opportunity being given to show cause against such assessment. The words 'for any reason' are words of wide import. Similar terminology appears in the Bihar Agricultural Income-tax Act which fell for consideration before the Supreme Court in Maharajadhiraj Sir Kameshwar Singh v. The State of Bihar : [1959]37ITR388(SC) . Section 26 of the Bihar Agricultural Income-tax Act, 1938, reads as follows :
'If for any reason any agricultural income chargeable ............. escaped assessment for any financial year or has been assessed it too low a rate, the Agricultural Income-tax Officer may, at any time within one year of the end of that financial year, serve on the person liable to pay agricultural income-tax on such agricultural income or, ....... a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 17, and may proceed to assess or reassess such income, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.'
The argument before the Supreme Court was that section 26 was not applicable to a case where income was returned but was initially held to be not liable to tax. This contention was negatived and the Supreme Court held that the Agricultural Income-tax Officer was competent under section 26 of the Bihar Act to assess an item of income which he had omitted to tax earlier, even though in the return that income was included and the Agricultural Income-tax Officer then thought it was exempt. In paragraph 16 of its judgment the Supreme Court pointed out that the use of the words 'any reason' which are of wide import dispenses with those conditions by which section 34 of the Indian Income-tax Act is circumscribed. Having regard to the manner in which section 16 is worded, the restrictions which are based upon the Income-tax Officer for reopening an assessment under section 147 cannot be imported when the validity of the action taken under section 16 is to be judged and having regard to the use of the words 'for any reason' it is clear that, even where a turnover was disclosed but it was not subjected to tax, because at the relevant time, the assessing authority thought that particular turnover was exempt under the provisions of section 5(3) of the Central Act, it will be permissible for the assessing authority to reopen the assessment under section 16(1)(a) of the local Act. No infirmity can, therefore, be found in the reassessment proceedings which were either initiated or completed.
24. An argument was advanced before us that in an assessment proceeding under the Income-tax Act, 1961, it is quite possible for an Income-tax Officer, dealing with a case of the dealer, to take the view that any additional tax consequent upon the reassessment under section 16 of the Tamil Nadu General Sales Tax Act would not be treated as deductible expenditure under section 37 of the income-tax Act with the result that as a consequence of the wrong view of the law taken by the assessing authority, the petitioner would be prevented from getting the necessary relief under the Income-tax Act. According to the learned counsel the assessments made under section 16 must be held to be invalid because section 16 cannot be so construed as to take away the benefit of deduction of tax paid for purposes of the Income-tax Act. This contention must be rejected. The provision under section 16 of the Tamil Nadu General Sales Tax Act will have to be construed in accordance with the well-known rules of interpretation of statutes. What impact this reopening of assessments will have on the petitioners' rights under some other Act like the Income-tax Act will be foreign to the question of construction of validity of the assessment made under section 16 of the Act.
25. Having regard to the view which we have taken, it must be held that the assessing authorities were justified in reopening the assessments on the ground that in the original assessments, the turnover in respect of cashew kernel has been exempted wrongly, and that, that turnover was liable to be taxed. Accordingly, W.P. No. 3968 of 1982 must stand dismissed. All the other petitions, namely, W.P. Nos. 4334 to 4337 of 1982, 4329 of 1983, 5579 of 1983, 5580 of 1983, 2236 of 1983, 4325 of 1983, 4330 of 1983, 4471 of 1983, 4472 of 1983, and 6310 of 1983 must also stand dismissed.
26. In cases where the petitioners have challenged only the notice issued under section 16 of the local Act, the assessing authorities will be entitled to determine the assessment on merits. The following petitions have been challenging notices under section 16 of the local Act. W.P. Nos. 4663, 4332, 4333, 9857, 10026, 10027, of 1982, 2226 of 1983, 2227, 2228, 2229, 2230, 2231, 5576, 10968 and 10969 of 1983 and 175 of 1984, 176, 1099 of 1984, 9856 of 1982 and 12230 of 1983.
27. In W.P. Nos. 327 of 1983, 2232, 2233, 2234, 2235, 2237, 2400, 2401, 2402, 2403, 4326, 4327, 4328, 4977, 5576, 5577, 5578 of 1983 and 1100 of 1984, 4976 of 1983, the petitioners have challenged the notice issued by the Joint Commissioner of Commercial Taxes to show cause why he should not exercise revisional jurisdiction. These proceedings will now go on and be decided according to law.
28. The following writ petitions in which under section 18(2) notices were issued before the orders were passed, must also stand dismissed. W.P. Nos. 6432, 6333, 9855, 9860, 9861, 9862, 9864, 9866, 9867, 9868, 10028, 10030, 10158, 10029, 9863, 9865, and 9916 of 1982.
29. W.P. Nos. 169 and 170 of 1984 were filed against the original assessments though appeals are pending and they also will stand dismissed.
30. The learned counsel on behalf of the petitioners has now argued that because of the pendency of the writ petitions, some of the petitioners have not filed any appeals, and that if any appeals are filed, the appellate authority should be directed to condone the delay and deal with the appeals on merits. Such a request cannot be granted by this Court. The power of condonation of delay is vested with the appellate authority. It is that authority which has to exercise that power. We cannot direct the appellate authority to condone the delay. If and when appeals are filed, it is for the appellate authority to consider on its own merits whether the delay should be condoned or not. Since there is a common argument advanced, we think that it will be proper to award costs in the main writ petition W.P. No. 3968 of 1982. Having regard tot he questions involved and the argument advanced at the Bar, we are inclined to fix the counsel fee at Rs. 1,500. There will be no order as to costs in the other writ petitions.