Whether preparing paste of fresh ginger and garlic by crushing them and adding salt, etc. amounted to manufacture ?
The Commissioner of Sales Tax in his determination order u/s. 52 had held on 13-2-96 that preparing paste of fresh ginger and garlic by grinding them in a big grinder and adding tiny amount of salt and other preservatives and putting it in the small plastic bags amounted to manufacturing and the item was taxable at 8% under Schedule Entry No. C-II-27 as a food article.
Before the tribunal it was contended by the appellant that the paste was prepared by simple process and no new commodity had come into existence. The paste was used just like fresh ginger and garlic since nature and original substance did not change. It was, therefore, prayed that the item should be held as covered by entry A-23 as fresh vegetable. It was also contended that in any case the item could not be said to be a food stuff or food provision (C-II-27) as held by the Commissioner.
On the other hand, the department objected on the grounds that, the process amounted to manufacture; the entry A-23 referred to fresh vegetables, while the word fresh was not added to garlic; the paste was a different commercial commodity; in Rule 3(14) ginger and garlic are not included; in this case two commodities are mixed whereas in some cases, referred to by the appellant, only one commodity like Copra, Pineapple was involved; ratio of K.A.K. Anwar & Co.’s case should be applied; both the items lost their identity; if it did not fall under C-II-27 it should be covered by C-II-102.
The Tribunal considered the case laws cited by the appellant and summarised the ratios laid down by different courts as follows:
1. Definition of manufacture, should not be given wide interpretation so as to include any and every process;
2. There may emerge a new article but if substantial identity was retained, then there was no manufacture;
3. It could not be the intention of the legislature to go on taxing the same product in different forms;
4. Adding flavour, preservative and water did not change essential characters;
5. Powdered milk or condensed milk were held as milk;
6. All products of vegetable need not be held as food.
After considering all the judgements the Tribunal concluded that substantial identity of the paste was retained, use of paste was the same as that of ginger and garlic, no new commercial commodity came into existence, by applying functional test. The use/function of fresh ginger and garlic and that of paste remained the same.
The Tribunal also considered whether the paste could be held as “food” and held that it could not be said to be food, while food is taken to satisfy hunger. It was used for adding flavour just like spices.
No common man will accept it as food. The Tribunal held that the activity of preparing paste did not amount to manufacture and the paste was covered by Schedule Entry No. A-19. Order of the Commissioner was set aside.
[Ahura Enterprises, App. No. 46 of 96 decided on 21-8-1998, per Shri V. A. Garge, member, IVth Bench. Shri N. T. Nirale, Advocate, appeared for the appellant].
Written by ntnirale on September 20th, 2009 with comments disabled.
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