DEPUTY COMMISSIONER OF SALES-TAX (LAW), BOARD OF REVENUE (TAXES), ERNAKULAMversusSHIPHY INTERNATIONAL, ALLEPPEY

                                                                                '{.
         DEPUTY COMMISSIONER OF SALES-TAX (LAW),
A
          BOARD OF REVENUE (TAXES), ERNAKULAM
                           v.
             SHIPHY INTERNATIONAL, ALLEPPEY

                               MARCH 7, 1988.
B
     [SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.)                              ~I

           Central Sales Tax Act, 1956-Section 5(3)-Export of fresh frog
    legs after freezing to avoid decomposition and decay-.c.Whether assessee
    entitled to benefit of the Section-Test to be applied in determination of
                                                                                ~
                                                                                  -
    character of commodity.
c                                                                                '\.
          The respondent-assessee bad purchased fresh frog legs and after       1     '
    removing the skin, ~ashing and removing dirt etc. and freezing it for
    the purpose of avoiding decomposition and decay exported the said frog
    legs and claimed entitlement to benefit of s. 5(3) of the Central Sales
D   Tax Act, 1956.

          It was contended on behalf of the State that what was purchased
    as fresh legs was not exported as such, without freezing them and,
    therefore, the assessee was not entitled to the benefit of the section.

E         The Sales Tax Tribunal held that the fresh frog legs purchased by
    the assessee and exported after freezing for the purpose of avoiding
    decomposition and decay, were one and the same commodity and the
    frozen legs did not undergo any material change in character and the
    identity of the frog legs remained unchanged as such, and, therefore,
    the assessee was entitled to the benefit of s. 5(3) of the Act. The High
F   Court upheld the view of the Tribunal.

          Dismissing the State's appeal,

          HELD: Every processing does not bring about a change in the
    character and identity of the commodity. The nature and extent of
G   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 experi-
    ences 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
H   and distinct commodity that it can be said that a new commodity,
                                       98
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    I



        BOARD OF REVENUE v. SHIPHY INTERNATIONAL [MUKHARJI, J.[               99

        distinct from the original, has come into being, The test is whether in
                                                                                    A
        the eyes of those dealing in the commodity or in commercial parlance
        the pro~essed commodity is regarded as distinct in character and
        identity from the original commodity,

               In the instant case, the High Court was right in holding, on the
        facts found by the Tribunal, that frozen frog legs are same as fresh frog
  1-    legs, and the process was only to prevent decomposition.
                                                                                    B


               M/s. Sterling foods. v. State of Karnataka and another, [i986] 3
        SCC 469 and Deputy Commissioner of Sales Tax v. Pio Food Packers,
        [ i980] 3 SCR 127i, relied on,

             East Texas Motor Freight Lines v. Frozen Food Express, (100 L          C
        Ed. 917 at 923) referred to.

              Deputy Commissioner of Sales Tax and others v. A.B. Ismail and
        others, [1986] Snppl. SCC 2i8, distingnished.
                                                                                    D
             CIVIL APPELLATE JURISDICTION: Civil Appeal No. 904
        (NT) of 1988

             From the Judgment and Order dated 10.11.1986 of the Kerala
· •.4   High Court in T.R.C. No. 162 of 1986
                                                                                    E
              V.J. Francis for the Appellant.

              The Judgment of the Court was delivered by

-·-1          SABYASACHI MUKHARJI, J. Special leave granted.
                                                                                    F
              This is an appeal against the judgment and order of the High
        Court of Kerala dated 10th of November, ·1986. By the impugned
        judgment the High Court has dismissed the Tax Revision Case filed at
        the instance of the Sales-tax authority. The asssessee-respondent he·
        rein had purchased fresh frog legs and after removing the skin, wash-
        ing and removing dirt etc. and freezing it for the purpose of avoiding      G
        decomposition and decay, the said frog legs were exported. The asses·
        see·claimed that they were entitled to the benefit of section 5(3) of the
        Central Sales-tax Act, 1956.

              In order to appreciate the question it is necessary to refer to the
        findings of the Tribunal. The Tribunal found that what was purchased        H
    100                   SUPREME COURT REPORTS             11988] 3 S.C.R.

A   by the assessee was fresh frog legs and, after freezing it for the purpose
    of avoiding decomposition and decay, it was exported. It was, there-
    fore, held by the Tribunal that what was purchased as fresh frog legs
    was exported by the assessee. It was contended on behalf of the State
    that what was purchased was fresh frog legs and the same was not
    exported as such without freezing it. The tribunal held that only frozen
B   frog legs were exported. Therefore, if followed that what was pur-
    chased and exported was one and the same commodity. The frozen
    frog legss did not undergo, any material change in character. The
    identity of the frog legs remained unchanged as such. In that view of
    the matter the Tribunal held that the assessee was entitiled to the
    benefit of section 5(3) of the aforesaid Act. The High Court accepted
    this.view.
c
         In our opinion the question is concluded by a decision of this
  Court in M/s. Sterling Foods v. State of Karnataka and another, 11986]
  3 S.C.C. 469. That was a decision of a Bench of three learned Judges
  rendered on 21st July, 1986. There the Court was concerned with
D Shrimps, prawns and lobsters locally purchased for complying with
  export orders and after the p;ocess of cutting their heads and tails,
  peeling, deveining, cleaning, freezing and packing, exported these
  .outside India·under prior contract of sale. It was held that after such
  processing, shrimps, prawns and lobsters retained their original
  identity and did not become different commodities. It was, therefore,
E held that the assessee was entitled to exemption from tax under section
  5(3) of the Central Sales Tax Act, 1956 in respect of purchase turnover
  of shrimps, prawns and lobsters, the purchases being of the same
  commodities which were exported. There, the question was whether
  shrimps, prawns and lobsters subjected to processing like cutting of
   heads and tails, peeling, deveining, cleaning and freezing ceased to be
F the same commodity or become different commodity for the purpose
  of the Central Sales Tax Act. This Court expressed the view that the
   test applied for the purpose of determining whether a commodity sub-
   jected to processing retained its original character and identity is as to
   whether the processed commodity is regarded in the trade by those
  who deal in it as distinct in identity from the original commodity or it is
G regarded, commercially and in the trade as same as the original
   commodity.

          Every processing does not bring about a change in the character
    and identity of the commodity. The nature and extent of processing
    may vary from one case to another and indeed there may be several
H   stages of processing and perhaps different kinds of processing at each
       BOARD OF REVENUE v. SHIPHY INTERNATIONAL [MUKHARJI. J:i             101

       stage. With each process suffered, the original commodity experiences
                                                                                  A
       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 re-
       garded 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       B
       the processed commodity is regarded as distinct in character and
       identity from the original commodity. See in this connection the
       observations of this Court in Deputy Commissioner of Sales Tax v. Pio
       Food Packers, [1980] 3 S.C.R. 1271.

             Applying that test in M/s. Sterling Foods v. State of Karnataka &
       Anr. (supra) the Court had found that processed or frozen shrimps,
                                                                                  c
       prawns and lobsters were commercially regarded as the same commo-
       dity as raw shrimps; prawns and lobsters. These are in common
       parlance known as shrimps, prawns and lobsters. There was no
       essential difference between raw shrimps, prawns and lobsters and
       processed or frozen shrimps, prawns and lobsters. The only difference      D
       was that processed shrimps, prawns and lobsters were ready for the
       table while raw shrimps, prawns and lobsters were not, but still both
       are. in commercial parlance, shrimps, prawns and lobsters.

             The aforesaid view also finds ample support from the decision of
       the Supreme Court of the United States in East Texas Motor Freight         E
       Lines v. Frozen Food Express 100 L Ed. 917 at 923, where the question
       was whether dressed and frozen chicken was a commercially distinct
       article from the orginial chicken. The United States Supr"._me Court
       held that it was not a commercially distinct article but was commer-
       cially and in common parlance the same article as chicken. The United
       States Supreme Court held that killing, dressing and freezing a chicken    F
       is certainly a change in the commodity. But it is no more drastic a
       change than the change which takes place in milk from pasteurising,
       homogenizing, adding vitamin concentrates, standardising and
       bottling.

              Applying the aforesaid tests to the facts of this case, we are      G
       clearly of the opinion that the High Court was right on the facts found
,-1.   by the Tribunal in this case that frozen frog legs is same as fresh frog
       legs, the process was only to prevent decomposition.

            Reliance was placed on behalf of the revenue on a decision of the
       same Bench of three learned Judges of this Court in the case of Deputy     \J-1
    102                   SUPREME COURT REPORTS            [1988] 3 S.C.R.

A   Commissioner of Sales Tax and another v. A.B. Ismail and others,
    [1986] Suppl. S.C.C. 218. This was a decision prior to the decision in
    Sterling Foods, (supra) which as we have mentioned before was
    rendered on 21st July, 1986 and this decision was rendered on 15th
    April, 1986. In the subsequent decision no reference was made to the
    previous one because the facts were entirely different. There it was the
B
    sale of meat, hides and skin, got after slaughtering goat and sheep. It
    was held that it was taxable under section 5A(1)(a) of the Kerala
    General Sales Tax Act. It was further held that goats and sheeps are
    distinct from meat, hides and skins. The process of conversion from
    goat and sheep into mutton, hides and skin involves consumption and

c
    manufacture resulting in production of goods different from the origi-
    nal goods. It was held that consumption was a word of wide import. It
    denoted the taking in of something, to convert that something into
    another. In that case, goats and sheeps underwent a process viz.,
    slaughtering, and then came into existence meat, hides and skin. The
    slaughter of the animals and their conversion into meat was the conse-
                                                                               "
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    quence of consumption of goats in a legal sense. In such conversion, a
D
    process of manufacture could also be inferred. There the Court con-
    sidered the goat and sheep different from mutton from commerciai
    circle and common parlance. But that is not as in the case of frozen
    frog legs and fresh frog legs and these are essentially the same
    commodity.
E
         In the aforesaid view of the matter, we are of the opinion that the
    High Court was right in the view it took. The appeal is accordingly
    dismissed. There will be no order as to costs.

    N.P.V.                                               Appeal dismissed.