Decided on September 04,2003

Swapna Bone Meal Co Pvt Ltd Appellant
District Level Committee For Sales Tax Exemption Respondents


- (1.) PETITIONER a private limited company engaged in production of crushed bones, bone meal and tallow, has filed these two writ petitions, one challenging the denial of sales tax exemption on its products and the other challenging proceedings for cancellation of registration on account of non -payment of tax even after disallowance of sales tax exemption. I heard counsel appearing for the petitioner, Dr. K.B. Mohamed Kutty and Sri. Sojan James, Government Pleader appearing for the respondents.
(2.) IN O.P. No. 5295 of 2003 the petitioner is challenging Ext. P3 proceedings of the District Level Committee for Sales Tax Exemption disallowing the petitioners claim for sales tax exemption on its products and Ext.P7 order of the State Level Committee confirming the said proceedings. Even after disallowance of sales tax exemption the petitioner did not file proper returns or remit tax dues and consequently the assessing officer issued noticed proposing cancellation of registration under Sec. 14(7) of the KGST Act, which is under challenge in W.P.C. No. 26626 of 2003. The petitioner started commercial production in their industrial unit on 22.9.1997 and applied for sales tax exemption vide application dated 26.3.1998. The petitioner is purchasing animal bones from slaughter houses and the same is crushed to produce crushed bones and bone meal. In the process of crushing bones the petitioner obtains meat tallow quantity of which is not very sizable but is also separated packed and sold by the petitioner. The claim of exemption is seen discussed in the impugned orders with particular reference to bone meal but without referring to other products, namely crushed bones and meat tallow (referred to as mutton tallow in the records). On a specific query to counsel for the petitioner. Whether the petitioner wants to press for sales tax exemption on the tallow produced by it, counsel for the petitioner conceded that the quantity of tallow produced and the value of the same are not significant enough to press for sales tax exemption on the turnover of tallow alone. Moreover the petitioner may not be selling tallow within the State for availing sales tax exemption. In any case, since petitioner does not press for sales tax exemption on tallow produced, there is no need for this Court to go into the question as to whether the petitioner is entitled to sales tax exemption on tallow independently. Even though sales tax exemption is claimed by the petitioner on its product, namely, crushed bones the same is not seen independently discussed neither by the District Level Committee nor by the State level Committee in the appeal. Their decision are based on the two judgments of this Court referred to in the impugned orders wherein this Court has held that there is no manufacturing activity in the production of bone meal. However, counsel for the petitioner pressed for sales tax exemption on crushed bones also separately. Therefore the question to be considered is whether the two products namely, crushed bones and bone meal are entitled to sales tax exemption in terms of notification. SRO 1729 of 1993 under which exemption was claimed and disallowed. In order to appreciate whether the crushed bones and bone meal are manufactured products of the petitioner, it is necessary to look into the raw materials used, the process involved and the items produced by the petitioner. The petitioner itself has annexed a production chart, Ext. P1 which shows that the animal bones brought by the petitioner are crushed and heated in a Digestor with water and thereafter water is removed and floating tallow is separated and packed. The crushed bones of suitable sizes are separated and sold to the petitioners Buyer, Kerala Chemicals and Proteins Ltd. While the balance unsuitable bone pieces, animal bones and hooves are powdered and said as bone meal which is a manure. It is conceded that the petitioner is essentially producing crushed bones for sale to another industry namely KCPL for use as raw material in the production of various products by that company particularly gelatine, which is a product manufactured from animal bones. The bone meal produced by the petitioner is by product which is sold as a manure Apart from the manufacturing process shown in Ext.P1 is precisely explained by the General Manager District Industries Centre after conducting inspection in the petitioners unit in the following words in Ext.P6. The broken raw bones are loaded into the digester using hoist and boiled using steam coils in the digester. The boiled water and tallow are collected in the collection tanker. Floating tallow will be separated and the remaining water will be reused in the Digester. The bones are emptied into the Centrifuge which expels the remaining water in the bones. From the centrifuge it is loaded into the drier and kept there for three hours. The driver discharges into the disintegrator and the bones are crushed to get crushed bones as per KCPL specification. Crushed bones as per KCPL specification are separated. The rejections are further crushed to produce bone meal.
(3.) NOW the question is as to whether the conversion of raw animal bones into crushed bone pieces and the waste and unsuitable sizes into bone -meal amount to manufacture or not. In order to decide the question it is necessary to refer to the term manufacture as defined under the notification, SRO 1729/1993 with the negative list of industries, which is as follows: ''Manufacture '' shall mean the use of raw materials and production of goods commercially different from the raw materials used but shall not include mere packaging of goods, polishing, cleaning grading, drying blending or mixing different varieties of the same goods sawing garbling processing one form of goods into another form of the same goods by mixing with chemicals or gas fumigation or any other process applied for preserving the goods in good condition or for easy transportation. The process of producing desiccated coconut out of coconut Chemical treatment of rubber wood and production of dress or tanned hides out of raw hides shall be deemed to be ''manufacture '' for the purpose of this notification. The following process shall not be deemed to be ''a manufacture for the purpose of this notification. (a) Crushing copra and producing coconut oil and coconut oil cake. (b) converting timber logs into timber sizes (c) Crushing rubble into small metal pieces. (d) Converting sodium silicate into liquid silicate. (e) Tyre -retreading. (f) Cutting granite or marble slabs into smaller pieces and polishing them. (g) Such other process as may be notified by Government in this behalf. (h) Conversion of rubber latex into centrifugal latex, raw rubber sheet, ammoniated lates, crepe rubber, crumb rubber or any other item falling under entry 110 of the First Schedule to the Kerala General Sales Tax Act, 1963 or treating the raw rubber in any form with chemicals to form a compound of rubber by whatever name called. Counsel appearing for the petitioner contended that the raw material, namely raw bones are commercially different from the products manufactured by the petitioner, namely broken bones of specific dimensions and bone meal which have to be treated as manufactured products from the raw materials namely animal bones. Since the authorities below decided the case just based on the two decisions of this Court, counsel for the petitioner relied on the decisions of the Supreme Court in PADMASUNDRA RAO V. STATE OF T.N. A.I.R. 2002 S.C. 1334 and contended that both the authorities below went wrong in deciding the matter based on the judgments of the High Court without discussing the factual position. The Supreme Court in the said decision held that judicial utterances are made in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases '' Therefore according to him the decisions relied by the District Level Committee as well as he State Level Committee in the context of Sec. 5A of the KGST Act is not correct. On the other hand, Government Pleader submitted that so far as bone meal is concerned, the issue is squarely covered by the decision of the Supreme court in A.A. SULAIMAN V. DEPUTY COMMISSIONER OF SALES TAX, 105 STC 320 wherein the Supreme Court reversing the decision of this Court held that there is no consumption of raw materials in the manufacture of bone meal for the purpose of levy of tax under Sec. 5A. ;

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