Hillpro Enterprises vs State of Karnataka

B.B. Naik, M.-The appellant has filed these two appeals against the orders of the Deputy Commissioner of Commercial Taxes (Appeals). Mangalore passed in A.P. No. 130/78-79 dated 6-2-1980 for Deepavali Year ending with 3-11-1975 partly allowing the appeal. For the year ending with 11-11-1977 he has filed the appeal against the Order passed by the same appellate authority in A.P. No. 19/78-79 dated 6-2-1980 remanding the case to the assessing authority.

The facts of the cases are that the Commercial Tax Officer, I Circle, Mangalore had passed the assessment order for the year ending 3-11-1975 levying the purchase tax under section 6 of the Karnataka Sales Tax Act, 1957 on the purchase of Tapioca Chips worth Rs. 13,972.50 at 31/2%. The appellant had contended that he was not liable to pay purchase tax as he was not a manufacturer but he had simply converted tapioca chips into powder. But the first appellate authority did not accept his contention and therefore confirmed the order of the assessing authority. For the year ending 11-11-1977, the same assessing authority had levied the purchase tax under section 6 at 4% on the purchase of Tapioca Chips on Rs. 1,59,568.24. But the appellant had disputed the turnover of Rs. 17,718.75 only as it was purchased from unregistered dealers. The case was remanded by the first appellate authority to the assessing officer as the proposition notice was not issued in form No. 31-A.

Sri K. Venkatesh Rao, the learned Sales Tax Practitioner, represented the cases and argued that the appellant has converted the Tapioca Chips into Tapioca Powder and there is no manufacture and there is no material change in the nature of the commodity and its use, hence no purchase tax should be levied. He cites the decion of the Supreme Court in 46 STC 63, and contended that the Supreme Court had held that when the slices are made out of pineapple, it will not amount to manufacture and there is no material change in the nature of the commodity. If the same principle is applied the commodity, i.e., Tapioca Powder is not different from Tapioca Chips. He had also produced the copy of the Order in CRP. 1157/61 dated 23-7-1962 in the case of Ms. Oil and Flour Mills and contended that when seegakai powder is produced out of seegakai there was no manufacture. Finally he produced the copy of the Judgment of the High Court of Karnataka passed in S.T.R.P. 61/74 dated 14-12-1977 in the case of H.P. Nanjundayya Setty & Sons v. State of Karnataka wherein the case had been remanded to the lower authorities for fresh disposal.

Heard Sri Bore Gowda, S.R. in the matter.

We have examined the copy of the judgement produced by the appellant in the case of M/s. H.P. Nanjundayya Setty and Sons, in which the High Court had directed the assessing authority to examine the exact nature of process involved in the conversion of Jigatine Barks and Chips into powder setting out the circumstances which, if accepted, would suggest that the resultant Jigatine Powder could not be said to be a new or distinctive article, with a distinctive name, character or use. In the cases on hand also the lower authorities have not given any findings regarding the nature of process involved in conversion of Tapioca Chips into Tapioca Flour. It is not known whether any other articles were used in the manufacture of Tapioca Flour. Under such circumstances the orders of the appellate authority are set aside and remanded for fresh disposal according to law in the light of the decision of the High Court the copy of which is filed before us in the case of H.P. Nanjundayya Setty & Sons v. State of Karnataka in sales tax revision petition No. 61/74 dated 14th day of December 1977.

In the result both the cases are remanded and the institution fees shall be refunded in both the cases.