PRASAD, J. - (1.) ALL these revision petitions involve similar question of law and facts and therefore they are being decided by a common order.
(2.) FOR factual matrix, S. B. Civil Sales Tax Revision Petition No. 931/2002 (M/s. Mamta Surgical Cotton Industries vs. Assistant Commissioner (Anti-Evasion) Bhilwara and others) is taken up. The petitioner is a partnership firm duly registered under the Rajasthan Sales Tax Act, 1994, Central Sales Tax Act 1956 and rules framed thereunder. The petitioner is carrying on the business of processing the cotton and making it amenable for surgical cotton. The petitioner during the relevant period had purchased cotton after paying tax at the rate of 4% and carried out the process for transforming the ordinary cotton into surgical cotton. The case of the petitioner is that in such a process, cotton does not get changed into such a new commodity which can be said to be one making it to be taxed over again. This contention raised by the petitioner prevailed with the assessing authority and assessment orders were made. In this assessment, no tax was levied on surgical cotton. The respondent Department conducted a survey in the premises of the petitioner firm on 25. 5. 1999. According to the officers of the Department that not levying tax on surgical cotton was not correct. It was concluded that end product produced i. e. surgical cotton which is sold by the petitioner, was taxable. A show cause notice was issued to the petitioner proposing to re-open assessment. It was also proposed that penalty and interest under Sec. 65 and 58 of Rajasthan Sales Tax Act are also attracted. A detailed reply was filed by the petitioner to the show cause notice as issued by the respondent Department. The petitioner therein contended that there was no evasion and merely on the basis of change of opinion, re-assessment proceedings cannot be initiated. It was submitted that surgical cotton is nothing but a form of cotton only. As such surgical cotton is not liable to be taxed, as the tax has already been paid on the original commodity. The levy of interest and penalty was also objected by the assessee. The submissions in the reply as filed by the petitioner were not properly considered by the Assessing Authority and tax was levied with penalty to the tune of double the amount of tax and interest thereon. Being aggrieved by the aforesaid order passed by the Assessing Authority, the petitioner preferred an appeal before the Dy. Commissioner (Appeals) Commercial Taxes, Ajmer who accepted the appeal. The Dy. Commissioner (Appeals) has clearly found that process adopted by the petitioner does not bring into existence any new commodity. According to the appellate authority, surgical cotton is nothing but a yet another form of cotton. The Department preferred an appeal before the Rajasthan Tax Board against the order of Dy. Commissioner (Appeals ). The Rajasthan Tax Board came to the conclusion that Appellate Authority has erred in reversing the order of the assessing authority. The Tax Board has found that surgical cotton is amenable to be taxed as an independent identity. Feeling aggrieved by the order of Rajasthan Tax Board, the present revision petition has been filed. Learned counsel for the petitioner urged inter alia that may it be that the cotton in question is surgical cotton but it is same as cotton. No manufacturing process is involved in converting cotton into surgical cotton. Surgical cotton do not attain a stage which is different than cotton. That being the position, production of the commodity known as surgical cotton is not taxable under the Rajasthan Sales Tax Act, 1994 (for short `the Act') because tax has already been paid on the agricultural produced cotton after ginning.
(3.) LEARNED counsel for the petitioner submits that cotton after ginning is put into boiler and its roughage is separated from cotton. Such clean cotton is thereafter treated with caustic soda and acid. After aforesaid treatment with caustic soda and acid, the cotton is cut in small pieces. These pieces are transferred to a tank where bleaching process takes place. Such bleached cotton is then transferred into tanks for washing. That takes four steps. Each step involves treatment of cotton for half an hour. The treated cotton as aforesaid is then transferred to a process known as hydro process where it is dried and then cotton is put in the blower for cleaning the same. Such blowed out cotton is transferred to kier where rolls are prepared and then cotton is got into pieces with the desired level, width and size. The rolled out calibrated pieces of cotton are then put in carding machine where thin layers are framed and such layers are packed in bundle for marketing. The rolled and compressed cotton is sent for trading. Learned counsel submits that none of the processes which are undertaken to make surgical cotton as aforesaid involve manufacturing process. The end product remains cotton as such and therefore tax sought to be levied by taxation authorities is not attracted to this product. Learned counsel submits that, time tested formula for understanding the manufacturing process, had been that, end product after undergoing a process should come out to be in a shape, which is entirely different from the original with which the process was initiated. According to the learned counsel, end product and the initial product, apart from being treated as aforesaid, is cotton and as such no manufacturing process is involved into it. The end product is not liable to be taxed in terms of the Act. Learned counsel places reliance on a decision of Hon'ble Supreme Court in the case of Sterling Foods vs. The State of Karnataka and another (1), wherein following observations have been made :- " The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those deal is a distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. It is necessary to point out that it is not every processing that brings about change in the character and identity of a commodity. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage. With each process suffered, the original commodity experiences change. But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct commodity that it can be said that a new commodity, distinct from the original, has come into being. The test is whether in the eyes of those dealing in the commodity or in commercial parlance the processed commodity is regarded as distinct in character and identity from the original commodity : vide Deputy Commissioner of Sales Tax vs. Pio Food Packers (1980) 46 STC 63 (SC); (1980) 3 SCR 1271 ). ;