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K. Govindrajan, J.—The Petitioner runs a Hatchery unit, doing hatching and rearing of day-old layer chicks by artificial methods using different medicines, chemicals and various other ingredients purchased locally and from outside the State and selling the reared chicks, in Tamil Nadu. The Petitioner applied for registration and the same was granted under the Tamil Nadu General Sales Tax Act, 1959 and under the provisions of the Central Sales Tax Act, 1956. In the said Registration Certificate, among other items, poultry equipments, medicines, chemicals etc. also were included. Though the said Certificate was obtained on 16.6.1980. the fourth Respondent issued a show cause notice dated 13.5.1994 to show cause why the items mentioned therein should not be deleted from ''B'' Registration Certificate, alleging that the purchase of the same against issue of ''C'' Forms was not proper as the nature of activity carried on by the Petitioner was not a manufacture warranting issue of ''C'' Forms. The Petitioner filed objection dated 13.5.1994. The Petitioner challenged the said show cause notice by filing writ petition in W.P.21144 of 1994, and this Court directed the fourth Respondent to pass orders in accordance with law after considering the objection raised by the Petitioner and also after appreciating the letter of the Ministry of Industry Government of India, dated 19.8.1994. By the order dated 52.12.1994, the 4th Respondent passed final orders. Aggrieved, the Petitioner filed another writ petition in W.P. No. 5164 of 1995. This Court in the order dated 18.8.1995 set aside the order of the 4th Respondent and directed the 4th Respondent to dispose of the case in the light of the order of this Court dated 22.12.1994.
Thereafter the 4th Respondent issued another show cause notice on 19.4.1996 proposing to delete medicines, vaccines, feed equipments etc. from the ''B'' Certificate. The Petitioner filed objections on 3.5.1996. The 4th Respondent passed the impugned order rejecting the Petitioner''s application. Thereafter the Petitioner filed appeal to the 3rd Respondent. The 3rd Respondent in his letter dated 26.11.1996 rejected the claim of the Petitioner. Then the Petitioner filed appeal to the 2nd Respondent. The 2nd Respondent also in his letter dated 20.11.1996 rejected the Petitioner''s claim. Even before the 1st Respondent, the Petitioner could not succeed in his attempt. In the impugned order dated 15.5.1997 the 1st Respondent rejected the Petitioner''s claim, and so the Petitioner has filed the above writ petition.
The learned Counsel appearing for the Petitioner has submitted that Section 7 of the Central Sales Tax Act (hereinafter called ''the Act'') deals with registration by a dealer. Section 7(3) of the Act deals with the registration and granting certificate of registration. Section 7(3-A) of the Act deals with the necessity for grant of such certificate. Those provisions read as follows:
7(1)....
(2)....
(2-A)....
7(3) If the authority to whom an application under Sub-section (1) or Sub-section (2) is made, is satisfied that the application is in conformity with the provisions of this Act and the rules made thereunder, and the condition, if any, imposed under Sub-section (2-A) has been complied with, he shall register the applicant and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of Sub-section (1) of Section 8.
(3-A) Where it appears necessary to the authority granting a certificate of registration under this action so to do for the proper realisation of tax payable under this Act or for the proper custody and use of the forms referred to in Sub-section (2-A), he may. at any time while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer, to whom the certificate has been granted, to furnish within such time as may be specified in the order and in the prescribed manner such security, or, if the dealer has already furnished any security in pursuance of an order under this Sub-section or Sub-section (2-A), such additional security, as may be specified in the order, for all or any of the aforesaid purposes.
From the abovesaid provisions it is clear that in the certificate the class or classes of goods should be specified for the purposes of Sub-section (1) of Section 8. Sub-section (1) of Section 8 of the Act reads as follows:
Rates of tax on sales in the course of inter-State trade or commerce: (1) Every dealer, who in the course of inter-State trade or commerce:
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the Government goods of the description referred to in Sub-section (43). shall be liable to pay tax under this Act, which shall be four per cent of his turnover.
It is useful to extract Sub-section (3)(b) to Section 8 of the Act which reads as follows:
8 (3) The goods referred to in Clause (b) of Sub-section (1):
(a)....
(b) (***) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.
It is also relevant to refer to Rule 13 of the Central Sales Tax (Registration and Turnover) Rules 1957, which reads as follows:
The goods referred to in Clause (b) of Sub-section (3) of Section 8 which a registered dealer may purchase, shall be goods intended for use by him as raw-materials, processing materials, machinery, plant, equipment, tools, stores, spare-parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale, or in mining or in the generation or distribution of electricity or any other form of power.
From the abovesaid provisions if the goods of the class or classes specified in the certificate of registration of the registered dealer are sold as contemplated under Sub-section (1) to Section 8 of the Act, the dealer is liable to pay tax under the Act at 4% of his turnover. The dealer is entitled to get the goods of the class or classes specified in the certificate of registration. Such goods should be intended for re-sale by him, or for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power. Even under Rule 13 of the Rules, while describing the nature of goods for the purpose of Section 8(3) of the Act, it is also stated that such goods should be as raw-materials, processing materials, machinery, plant, equipment, tools, stores, spare-parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale, or in mining or in the generation or distribution of electricity or any other form of power. Now, the certificate has been varied by deleting certain items, by the authorities on the ground that those items will not come under the said classifications.
It is not in dispute that the Petitioner is having a hatchery unit, doing hatching and rearing of day-old layer chicks by artificial methods. No doubt the Petitioner has to establish that the goods which had been deleted from the certificate are also the goods that would come under the purview of Section 8 of the Act and Rule 13 of the Rules so as to enable the Petitioner to retain those goods in the certificate.
The Andhra Pradesh High Court in Venkataramana Hatcheries Pvt. Ltd. Vs. Commercial Tax Officer, Company Circle, Hyderabad, , while dealing with the scope of Sub-rule of Rule 5 of the Andhra Pradesh General Sales Tax Rules 1957 has come to the conclusion that chicks are goods, and held as follows-
Having regard to the expressions used in the definition of ''goods'' and the scope and ambit of entry 54 in List II of the Seventh Schedule to the Constitution of India, we do not find force in the contention of the learned Counsel for the Petitioners that chicks are not ''goods'' within the meaning of that word in entry 54. Chicks being the tangible movable things produced by the Petitioners for the purpose of sale, the law authorising levy of tax on the sale or purchase of such goods is quite legal and valid.
It was however urged that chicks were not liable to be treated as general goods having regard to the provisions of Sub-rule (2) of Rule 5 of the Rules and they were to be treated as live-stock. If that were so, tax was leviable on the turnover of a dealer computed on the basis of the amount paid by such dealer as a consideration for their purchase and the Petitioners were not liable to pay tax as the sale point.
The learned Government Advocate basing on the abovesaid provisions has submitted that the goods deleted from the certificate have not been used in the manufacturing and so the authorities are correct in deleting those goods from the certificate. In support of his submission, the learned Government Advocate has relied on the decision in Commissioner of Sales Tax Vs. Nhava Poultry Farm, . In the said case, it was construed whether the production of egg amounts to manufacture. While considering the said issue, the learned Judges of the Bombay High Court has held as follows:
Coming now to the second question, the facts found show that what the Respondents did was merely to preserve and maintain laving hens in a proper condition so that they would lay eggs which the Respondents collected, preserved and sold. It is beyond dispute that eggs must be regarded as goods and also that the eggs are produced in the sense that when a hen lays an egg, it can be said to have produced that egg. The question which really falls for consideration is whether for the purposes of Section 2(17) of the said Act, the man who keeps hens can be said to have produced the eggs laid by the hens In this connection, we cannot lose sight of the fact that it is in the nature of a laying hen that it will lay eggs. The eggs are laid by a biological and natural process. It cannot thus be said that the keeper of a laying hen is the manufacturer of the eggs laid by the hen. It was urged by Mr. Thakor that if a person employs workmen in order to produce certain commodities or goods, he can certainly be regarded as a producer or a manufacturer of those goods although physically the goods might have been produced by the workmen and similarly a person who keeps laying hens with a view to obtaining eggs and selling them for profit must be regarded as the producer of these eggs. It is difficult to accept the analog given by Mr. Thakor. In the case of an employer employing workmen to produce goods, the goods are not merely produced by keeping workmen. Merely keeping the workmen and maintaining them or paying them wages would only lead to waste of money. If workmen have to produce goods, they have to be directed to do particular work. They have to be given basic materials from which the goods are to be produced and so on whereas in the case of a person merely keeping laying hens all that he does to do is to keep the hens in good health and to feed them, and the hens will lay eggs in the course of nature. Thus we fail to see how a person merely keeping laying hens and feeding them could be regarded as a producer or manufacturer of those eggs even within the wide definition given in Sub-section (17) of Section 2 of the said Act. In the present case, there is nothing to show that the Respondents did anything more in respect of layers than keeping them in proper health and feeding them. It is true that the Respondents must have taken proper care to collect the eggs, to preserve them and to sell them. But all those activities were conducted after the eggs were laid or produced, and on account of those activities, it could not be said that it was the Respondents who produced the eggs.
The learned Government Advocate has also relied on the decision in Travancore Tea Estates Co. Ltd. Vs. State of Kerala, . In the said case, the Apex Court has decided whether the goods required for agriculture operation can be included in the certificate of registration and held as follows:
The cultivation and growth of tea-plants and leaves cannot, in our opinion, be comprehended in the expression in the manufacture or processing of goods for sale Cultivation and growth of tea plants no doubt results in the production of raw material in the form of green tea-leaves which are ultimately processed into tea meant for sale Such cultivation and growth are in the very nature of things prior to the manufacturing process and do not answer to the description of manufacture and processing of tea meant for sale. There is a vital difference between an agricultural operation and a manufacturing process, and the same should not be lost sight of. What is needed for being used purely in an agricultural operation cannot be held to be goods required for use in a manufacturing process. We are therefore, of the opinion that he Appellant was not entitled to get fertilisers and other goods mentioned in item No. (1) included in the registration certificate. The same reasoning would also hold good in respect of weighing machines used not in the factories but in the tea fields.
Though the learned Government Advocate has relied on the above decisions and the decisions in Food Corporation of India v. State of Maharashtra 88 S.T.C. 500, and in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, , in support of his submission that every production cannot be construed as manufacture, the said argument need not be dealt with in view of the submission made by the learned Counsel appearing for the Petitioner to the effect that preserving eggs and chicks and keeping them for marketability is a processing, though it cannot be construed as manufacture.
While dealing with the scope of ''marketability'', the Apex Court has held as follows:
''Marketability'' is a decisive test for dutiability. It only means ''Saleable'', or ''suitable for sale''. It need not be in fact ''marketed''. The article should be capable of being sold or being sold, to consumers in the market, as it is without anything more.
The Petitioner firm has been dealing with eggs and chicks in large scale only for the purpose of marketing the same. For that purpose it has to do some processing and according to the Petitioner in the course of such processing, the materials sought to be deleted from the certificate are being used. Without such processing, it is impossible for the Petitioner to keep the said goods for marketing. The fact is not denied in the counter. In the counter it is specifically stated that deletion of the goods from the certificate was only on the ground that hatching and rearing of chicks was not a manufacturing activity and so the said deletion of goods can be sustained. It is not the case of the Respondents that the goods deleted from the certificate are not being used in the course of processing as contended by the Petitioner. In the counter it is not specifically disputed that the case of the Petitioner that the above materials are processing materials. As per Section 8 of the Act and the Rules, if the said materials are used in the course of processing of goods for sale, can be included in the certificate.
So, when chicks and eggs are construed as goods as held by the Andhra Pradesh High Court, and chemicals, medicines and poultry equipements have been used as processing materials to process the said goods for sale, it cannot be said that the deletion was only on the ground that the said processing materials have not been used in the manufacture of goods. So, the said conclusion arrived at by the Respondents is contrary to the scope of Section 8 of the said Act and Rule 13 of the Rules. If such materials are being used in the course of processing of goods for sale, the dealer is entitled to have those goods in the certificate. The Respondents have lost sight of this fact while passing the impugned order.
In view of the above, the impugned order of the 1st Respondent dated 15.5.1997, confirming the order of the 4th Respondent dated 31.5.1996 is quashed, and this writ petition is allowed accordingly. No costs Consequently, W.M.P. No. 19919 of 1997, is closed.