SATISH CHANDRA, J. - (1.) M /s. Prag Ice and Oil Mills, Aligarh, the assessee, manufacture vegetable ghee from groundnut oil. The groundnut oil is mixed with acids and chemicals in order to purify and refine the oil. The residue left after the refined portion is removed is sold by the assessee to the manufacturers of soaps, etc. According to the assessee the turnover of the sale of this residue oil was taxable at one per cent. on the view that the residue was still groundnut oil. The Sales Tax Officer rejected this contention. He held that this was oil of a different character and was taxable at 6 per cent. This view was upheld in appeal. The assessee went up in revision. The Judge (Revisions), Sales Tax, held that the residue was in its nature and character groundnut oil with greater impurities than were contained in the original oil prior to its being treated with acids and chemicals. It was taxable as groundnut oil at one per cent. At the instance of the Commissioner, Sales Tax, the Judge (Revisions), Sales Tax, has referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Additional Judge (Revisions) was legally justified in holding the residual oil as groundnut oil simpliciter, even when it had undergone change in its properties by the admixture of chemicals and acids ?"
(2.) IT is common ground that groundnut oil is edible. It is also used in the manufacture of soaps. After it is refined in the process of manufacturing vegetable ghee from it, the residue is no longer edible. It is usually utilised in manufacturing soaps. The question is whether this residual oil is commercially a different commodity other than the original groundnut oil. In Tungabhadra Industries Ltd. v. Commercial Tax Officer ([1960] 11 S.T.C. 827 (S.C.)), the question was whether the hydrogenated groundnut oil, commonly called Vanaspati, was groundnut oil. In that case the Supreme Court repelled the submission that the processing of the oil in order to render it more acceptable to the customer by improving its quality would render the oil a commodity other than groundnut oil. It was observed : "....if the oil as extracted were kept still in a vessel for a period of time, the sediment normally present in the oil would settle at the bottom leaving a clear liquid to be drawn out. The learned Advocate-General cannot go so far as to say, that if this physical process was gone through, the oil that was decanted from the sediment, which it contained when it issues out of the expresser, ceased to be 'groundnut oil' for the purposes of the rule. If the removal of impurities by a process of sedimentation does not render groundnut oil any the less so, it follows that even the process of refining, by the application of chemical methods for removing impurities in the oil, would not detract from the resulting oil being 'groundnut oil' for the purpose of the rule."
(3.) APPLYING this test it appears us that the residue is still groundnut oil though it contains more than the normal quantity of impurities. It may be remembered that the acids and chemicals that are added to the groundnut oil in order to prepare vegetable oil are added to it with a view to refine the oil. It becomes clearer and more acceptable as an edible oil; but the process of refining does not change the nature and character of the commodity. It remains groundnut oil. On the same hypothesis the residue would continue to be the same commodity though of an inferior grade. It will be from a commercial standpoint groundnut oil though of a cheaper variety in comparison to the refined product which becomes vegetable oil.;