Pintu Spices vs State of Kerala and Others

P.R. Ramachandra Menon, J.—Whether the rejection of the application submitted by the Petitioner for exemption from payment of sales tax in respect of "chilly powder" and "coriander powder" as per exhibit P5 and modified as per exhibit P6 placing reliance on "exhibit P7 SRO" is correct or proper, is the moot point involved in this writ petition.

The Petitioner is a partnership firm, constituted by three women (one, a minor represented by guardian) as the partners and registered as an "SSI unit" before the fourth Respondent as borne by exhibit P1 certificate of registration. The said industrial unit was set up in the year 1991 and commercial production was set up in the very same year. The product manufactured as shown in exhibit P1, is "curry powder", which was later amended including/incorporating, chilly powder, coriander powder, turmeric powder, sambar powder, meat masala and pickle powder. It is stated that, by virtue of the policy of the Government, the Petitioner''s industrial unit being owned and operated exclusively by women, has been classified as a project under the "Women Industrial Programme" (WIP) as reflected from exhibit P3 certificate issued in this regard. By virtue of the classification as above, such units forming part of "WIP" are entitled to tax discount and various other benefits provided by the Government from time to time. Accordingly, taking note of the contentions of the Petitioner, the Petitioner being a WIP unit, exhibit P3 exemption was given from collecting payment of any sales tax for a period of seven years from November 20, 1991 to November 19, 1998. It is stated that the Petitioner enjoys the benefit of exhibit P3 exemption and the Petitioner had been producing and marketing the products without collecting any sales tax.

While so, a notice was issued in the year 1996 stating that some of the items marketed by the Petitioner were exigible to tax and required to satisfy the liability. Immediately the Petitioner approached the Government by filing petitions dated August 27, 1998 and August 12, 1998 and after considering the same, the Petitioner was instructed by the Government as per exhibit P4 communication dated September 15, 1998, to apply for amendment of the SSI registration certificate for including the items, for which sales tax exemption was requested and then to apply for ST exemption for those items.

In tune with the intimation given by the Government as above, ''the Petitioner took necessary steps to have the products arrayed and shown separately in exhibit P1 certificate of registration and after considering the request, the same was corrected and later incorporated in the certificate of registration as revealed from the second page of exhibit P1, giving the different items/products as items 1 to 6 vide the amendment dated on September 18, 1998. As per the said endorsement, the products manufactured and marketed by the Petitioner are: 1. chilly powder, 2. coriander powder, 3. turmeric powder, 4. sambar powder, 5. meat masala and 6. pickle powder. On the basis of the amendment carried out as above, the Petitioner submitted a fresh application for exemption as instructed by the Government, vide exhibit P4 ; which was considered by the fourth Respondent and exemption was granted only in respect of "sambar powder, meat masala and pickle powder", while the claim in respect of the other items was rejected.

In the meanwhile, as per the decision rendered by the Full Bench of this Court in Tatson Food Industries v. State of Kerala [2000] 119 STC 265 : [1999] 3 KLT 174, it was held that "turmeric" and "turmeric powder" were two different entities and that manufacturing process was very much involved in converting turmeric into turmeric powder. Based on the said decision, the matter was got considered by the fourth Respondent afresh and accordingly, exhibit P6 modified order was passed granting exemption also including "turmeric powder" but leaving out "chilly powder" and "coriander powder".

Incidentally, it is to be noted that exemption was being given by the 4th Respondent, as borne by exhibits P5 and P6, on the basis of exhibit P11 S. R. O. No. 499/90, where Clause 6 refers to "manufacture" as the specific requirement to claim exemption. The case of the fourth Respondent was that the production of "chilly powder" and "coriander powder" does not involve any manufacturing process but for mere pulverization and hence that, they are not liable to be exempted from the purview of tax. The Petitioner is challenging the logic and reasoning behind the classification made by the fourth Respondent on many a ground, contending that exhibit P11 notification which is stated as relied on for denying the benefit to the Petitioner is not applicable to the case in hand. It is their case that the actual, notification, which ought to have been considered, is exhibit P10. The other contention raised by the Petitioner is that the same logic and reasoning as given by the Full Bench in holding that "turmeric" and "turmeric powder" are two different entities involving a manufacturing process (as held in the decision cited in (supra)) is very much applicable in the case of "chilly powder" and "coriander powder" as well.

The learned Government Pleader appearing for the Respondents submits that the idea and understanding of the Petitioner is quite wrong and misconceived, particularly in view of the fact that there is already a decision rendered by the Full Bench of this Court in Namputhiris Pickle Industries v. State of Kerala [1994] 92 STC 1 : [1993] 1 KTR 327: [1993] 1 KLT 486 wherein a specific finding has been rendered, holding that there is absolutely no difference between "chilly" and "chilly powder" and also between "coriander" and "coriander powder" and that no manufacturing process is involved in converting the former to the latter. It is also submitted by the learned Government Pleader that the said finding has attained finality, as the SLP filed against the said verdict has been dismissed by the apex court.

The learned Counsel for the Petitioner submits that the above decision rendered by the Full Bench has been very much referred to, by the subsequent Full Bench in Tatson Food Industries v. State of Kerala [2000] 119 STC 265 : [1999] 3 KLT 174 and the factual position as to whether "chilly" and "chilly powder" as well as "coriander" and "coriander powder" are the same, without involvement of any "manufacturing process" was directed to be considered afresh by the Tribunal and the matter was remanded accordingly.

On the basis of the decision, rendered by the Full Bench in Tatson Food Industries v. State of Kerala [2000] 119 STC 265 : [1999] 3 KLT 174 holding that "turmeric" and "turmeric powder" are two different entities involving a "manufacturing process", the claim put forth by the Petitioner in this regard was considered and it was also included in the certificate of registration, leaving out the other two items as borne by exhibit P6. The learned Counsel for the Petitioner also submits that, on challenging exhibit P5 in appeal before the Director of Industries and Commerce, the same was modified by the said authority as per exhibit P7, also including "turmeric powder" as an item eligible for exemption. This was followed by exhibit P8, whereby the product "turmeric powder" happened to be included in exhibit P6 with effect from February 24, 1992.

On going through the rival contentions, the crucial point to be considered is, whether the reliance placed on exhibit P11 S. R.O. by the 4th Respondent for rejecting the claim for exemption in respect of the unit of the Petitioner with regard to the products "chilly powder" and "coriander powder" is correct or not. Obviously, in exhibit P11 S. R. O, (opening paragraph), it is stated as issued in supersession of the notification issued vide GO/MS No. 74/80/TD dated 29th September, 1980 published as S. R. O. No. 968/80 in the Kerala Gazette Extraordinary No. 42 dated October 21, 1980. A copy of the earlier notification (S. R. O. No. 968/80) was made available for consideration of this Court by the learned Counsel for the Petitioner. On going through the said notification, it is revealed that it pertains to exemption granted for a period of five years in respect of the sale of goods produced and sold by the new industrial units (SS Is) as provided therein. Prima facie, it may appear that everything is taken away by virtue of exhibit P11, since it is in supersession of S. R. O. No. 968/80. But on a closer scrutiny, the Petitioner-establishment, being a small-scale industry certified as WIP unit, vide exhibit P2, stands entirely on a different footing and is covered by exhibit P10-S. R. O. No. 969/80.

As per exhibit P10 G. O, Mini Industries, Women Industrial Units and also other SSI units set up by Harijans which started production before April 1, 1979, were eligible for exemption for a period of "six" years. This by itself shows that exhibit P10 S. R. O. No. 969/80, which was notified immediately after issuance of the other notification, i.e., S. R. O. No. 968/80 (referred to as superseded in exhibit P11) was intended to serve the purpose in respect of the units belonging to the particular class asmentioned therein (except those mentioned in the earlier notification 968/80). In other wards, S. R. O. No. 968/80 is a "general notification" in respect of all new industrial units; whereas S. R. O. No. 969/80 is a "special notification" in respect of the mini industrial units, women''s industrial units and the SSI units set up by Harijans.

There is also another distinction, in so far as, in the prior general Notification S. R. O. No. 968/80, the exemption is only for a period of "five" years ; whereas in the "special notification" S. R. O. No. 969/80, it is for a period of "six" years ; which by itself shows that a conscious decision was taken by the Government in treating the concerned units separately and more/wider privileges, benefits and advantages were extended to the units coming within the purview of the special Notification S, R. O. No. 969/80. The Petitioner''s unit, being one exclusively owned and operated by women, it very much satisfies the requirements under exhibit P10 S. R. O. This being the position, denying the benefit of exemption to the unit of the Petitioner, placing reliance on exhibit P11 S. R. O (which has superseded only the S. R. O. No. 968/80, i.e., the "general notification" and not exhibit P10 "special notification" S. R. O. No. 969/80) is not correct or sustainable. The case of the Petitioner requires to be reconsidered and as a natural consequence, the coercive steps being pursued are not liable to be enforced any further.

In the above facts and circumstances, the impugned proceedings, exhibit P9 series, are set aside and the fourth Respondent is directed to reconsider the matter in the light of the observations made above, as to the eligibility of the Petitioner to have exemption based on exhibit P10 S. R. O. This exercise shall be pursued and finalised after giving an opportunity of hearing to the Petitioner, as expeditiously as possible; at any rate within three months from the date of the receipt of copy of this judgment.

In the light of the nature of relief granted as above, the question whether the making of "chilly powder" and "coriander powder" does involve any "manufacturing process" is left open.

The writ petition is disposed of.