TEEJAN BEVERAGES LTD Vs. STATE OF KERALA
LAWS(KER)-2003-3-86
HIGH COURT OF KERALA
Decided on March 17,2003

TEEJAN BEVERAGES LTD Appellant
VERSUS
STATE OF KERALA Respondents

JUDGEMENT

G. SIVARAJAN, J. - (1.) THE first four appeals arise from the common judgment in O. P. Nos. 35719 of 2001, 4430 of 1999-B, 34182 and 34092 of 2001 of the learned single Judge ([2002] 128 STC 216 ). W. A. No. 1089 of 2002 arises from the separate judgment in O. P. No. 31415 of 1999 following the common judgment in the writ petitions which are the subject-matter of the first four appeals. Though the appellants in all these appeals are different persons, the question involved in all these appeals is one with regard to the eligibility for exemption from payment of sales tax under the Notification S. R. O. No. 1729 of 1993 in respect of their product styled as "mineral water" and later called as "packaged drinking water". THErefore, all these writ appeals are being disposed of by this common judgment. THE petitioners in the writ petitions are the appellants. THEy are either proprietary concerns, or partnership firms or private limited companies. However, all the appellants are small-scale industrial units registered as such with the Industries Department concerned. THEy have also taken out registration both under the Kerala General Sales Tax Act, 1963 (for short, "the Act") and under the Central Sales Tax Act, 1956. THEy are also assessees on the files of the respective Sales Tax Officers having jurisdiction over their business places. According to the appellants, they are small-scale industrial units registered with the Industries Department and are engaged in the business of manufacture and sale of mineral water/packaged drinking water. According to them, the sales turnover of their product is entitled to exemption from payment of sales tax for a period of seven years under S. R. O. No. 1729 of 1993 issued under section 10 of the Act. THE appellant in W. A. No. 1075 of 2002 started commercial production on January 10, 1998 and as such it claimed exemption from payment of sales tax under the Notification S. R. O. No. 1729 of 1993 for the period from January 10, 1998 till January 9, 2005. Its capital investment on fixed assets is Rs. 12,06,195. THE District Level Committee constituted under the notification considered the appellant's application for sales tax exemption dated September 14, 1998 and issued an eligibility certificate dated October 20, 1998 (exhibit P3) as per which exemption from payment of sales tax was available from January 10, 1998 to January 9, 2005 for an amount of Rs. 12,06,195. Based on the said eligibility certificate, the assessment of the appellant for the year 1997-98 and 1998-99 were completed granting the sales tax exemption. While so, the Sales Tax Officer, II Circle, Perumbavoor (first respondent both in the writ petition and in the writ appeal) issued a notice dated October 31, 2001 (exhibit P7) under rule 21 (10) of the Kerala General Sales Tax Rules, 1963 (for short, "the Rules") stating that the Government has clarified that manufacture of mineral water will not amount to "manufacture" as defined in clause 11 (ix) of S. R. O. No. 1729 of 1993 and proposed to complete the assessment denying the exemption. THE appellant then filed writ petition, O. P. No. 34262 of 2001 challenging the said notice. However, the said writ petition was disposed of on the submission of the Special Government Pleader that the first respondent is withdrawing the said notice. Later the assessing authority issued exhibit P11 series of notices under rule 21 (9) of the Rules proposing to complete the monthly assessments for the period from April, 2001 denying the exemption. Exhibit P. 8 is a circular dated January 23, 1999 issued by the Government clarifying that as per the definition of "manufacture" given in S. R. O. No. 1729 of 1993 dated November 3, 1993 purifying water and filling it in bottles will not amount to manufacture. In view of the said clarification, the appellant has filed writ petition, O. P. No. 35719 of 2001 challenging exhibit P8 circular and exhibit P11 series of notices. THE appellant in Writ Appeal No. 1078 of 2002 started commercial production on December 16, 1996 and claimed exemption from payment of sales tax for a period of seven years up to December 15, 2003. THE appellant's capital investment on fixed assets came to Rs. 66,20,000. Though they had submitted the application for exemption from payment of sales tax under the Notification S. R. O. No. 1729 of 1993 no final decision is taken in the application. It is stated that the application was initially considered by the District Level Committee and later placed before the State Level Committee for consideration and the matter is pending. According to the appellant in view of the circular dated January 23, 1999 (exhibit P4) no relief can be expected from the said authorities. It is stated that no final assessments under the Act have been made on the appellant. In view of the said clarification, the appellant has filed writ petition, O. P. No. 4430 of 1999. THE appellant in W. A. No. 1082 of 2002 started commercial production on June 11, 1998 and as such they claimed exemption from payment of sales tax for the period up to June 10, 2005. THEir capital investment on fixed assets came to Rs. 12,39,721. THE District Level Committee considered their application dated May 22, 2001 and issued proceedings dated June 6, 2001 (exhibit P4 ). THE exemption claimed on the sales turnover of mineral water was denied but exemption to the tune of Rs. 42,250 on hot and cold water dispensers was granted for the period from June 11, 1998 to June 10, 2005. This order was communicated to the appellant on October 10, 2001. THE appellant filed an appeal against the said proceedings before the State Level Committee and the same is pending. In the meantime, the appellant received demand notice (exhibit P7) dated October 27, 2001 from the assessing authority. It is in these circumstances, the appellant filed the writ petition, O. P. No. 34182 of 2001 seeking to quash exhibit P4 and for a direction to the respondents to grant sales tax exemption to the appellant in terms of S. R. O. No. 1729 of 1993. THE appellant in W. A. No. 1084 of 2002 started commercial production on December 4, 1998 and claimed exemption from payment of sales tax for the period up to December 3, 2005. THEir capital investment on fixed assets is shown as Rs. 21,07,831. THE District Level Committee considered the exemption application and issued proceedings dated September 4, 2001 (exhibit P4) rejecting the claim. THE said order was communicated to the appellant on October 15, 2001. THE appellant filed appeal against the said order before the State Level Committee. THE assessing authority in the meantime has issued demand notice dated October 20, 2001 (exhibit P7 ). It is the case of the appellant that in view of the clarification dated January 23, 1999 (exhibit P8) the appellant does not expect any favourable result in the appeal. It is in these circumstances, the appellant has filed the writ petition, O. P. No. 34092 of 2001 seeking to quash exhibits P4, P7 and P8 and for a direction to the respondents to grant sales tax exemption to the appellant in terms of S. R. O. No. 1729 of 1993 and/or to direct the third respondent to decide exhibit P5 appeal uninfluenced by exhibit P8. THE appellant in W. A. No. 1089 started commercial production on February 20, 1997 and claimed exemption for the period up to February 19, 2004. THE District Level Committee granted exemption from payment of sales tax to the tune of Rs. 59,56,697 for the period from February 20, 1997 to February 19, 2004. However, the first respondent by order dated November 26, 1999 (exhibit P2) cancelled the said eligibility certificate stating that the circular dated January 23, 1999 (exhibit P3 in the writ petition) was omitted to be considered while issuing exhibit PI eligibility certificate. THE appellant has sought to quash exhibit P2 order and exhibit P3 circular and also sought for a declaration that it is entitled to the exemption under the notification. As already noted, the appellants' case is that they are engaged in the manufacture and sale of mineral water. THEy had also set out the process employed by them on ground water in the manufacture of mineral water. According to them by the process so employed, a totally different commodity, viz. , mineral water emerged. THE appellants, thus, contended that the process so employed constitutes "manufacture" as defined in the Notification S. R. O. No. 1729 of 1993. THE appellants in W. A. Nos. 1075 and 1089 of 2002 have advanced a further contention that the eligibility certificate issued by the competent authority, viz. , District Level Committee has not been cancelled in accordance with law and, therefore, the exemption available as per the eligibility certificate is still in force. Yet another contention was also raised that the appellants have also manufactured bottles for filling it with mineral water and, therefore, the turnover of bottles is also entitled to exemption from payment of sales tax under the notification. THE learned single Judge, after detailed examination of the matter, rejected all the contentions of the appellants and the writ petitions were dismissed. Hence these appeals by the petitioners. We have heard the learned counsel appearing for the appellants in all these cases and also the learned Special Government Pleader appearing for the respondents. THE case of the appellants, as already noted, is that they are small-scale industrial units set up for the manufacture and sale of "mineral water", now called as "packaged drinking water", that their units have obtained permanent registration with the Industries Department and that the assessing authorities have treated the appellants as manufacturing units. It is also their case that, being small-scale industrial units engaged in the manufacture of mineral water, they are entitled to sales tax exemption for a period of seven years from the date of commencement of commercial production under S. R. O. No. 1729 of 1993. THEy have also furnished the date of commencement of commercial production. As already noted, in the case of the appellants in W. A. Nos. 1075 and 1089 of 2002 eligibility certificates granting sales tax exemption were issued. THE eligibility certificate issued to the appellant in W. A. No. 1075 of 2002 was not cancelled but the eligibility certificate in the case of the appellant in W. A. No. 1089 of 2002 was cancelled without notice to the appellant. In the case of the appellant in W. A. No. 1078 of 2002 the application for exemption is pending before the District Level Committee. In the case of other appellants, the sales tax exemption claimed on the sales turnover of mineral water/packaged drinking water was rejected holding that the process employed by them in bringing out the product did not satisfy the definition of "manufacture" contained in the Notification S. R. O. No. 1729 of 1993. THE main question to be considered in these cases is as to whether the item "mineral water/packaged drinking water" which is the product of the appellants qualifies for sales tax exemption as a manufactured product within the definition of the word "manufacture" in the Notification S. R. O. No. 1729 of 1993 issued by the State Government under section 10 of the Act. Clause 11 (ii) of the Notification S. R. O. No. 1729 of 1993 defines "manufacture" 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 packing 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 dressed or tanned hides out of raw hides) shall be deemed to be 'manufacture' for the purpose of this notification. " THE following processes shall not be deemed to be "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 or polishing them. (g) Such other processes as may be notified by Government in this behalf. (h) Conversion of rubber latex into centrifugal latex, raw rubber sheet, ammonited latex, 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. THE processing and bottling of drinking water is explained by the appellants. It is stated that the processing involves three steps (1) collection of water, primary filtration treatment and pre-treatment to modify parameters like TDS, iron, arsenic, manganese, etc. (2) disinfection, the most important step and the final filtration and (3) filling and packing. THE learned single Judge has extracted the said process as follows : 1. Alum dosing.
(2.) SEDIMENTATION. Chlorination. Aeration.
(3.) SAND filtration. G. A. C. filtration.;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.