# SHAW WALLACE & CO. LTD v. STATE OF TAMIL NADU

- **Citation:** [1976] 3 S.C.R. 795
- **Court:** Supreme Court of India
- **Decided:** 1976-03-23
- **Bench:** A. N. Ray, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shaw-wallace-co-ltd-v-state-of-tamil-nadu-6835
- **Pages:** 6

## Headnote

Tamil Nadu General Sales J;ax Act, 1959-Sec. 3-First Schedule Entry 21Fertilizer mixture prepared by mixing manually some of cheniical fertilizers
1nentioned in Schedule whether exempted from tax-Whether same n1arketable
commodity-Whether 1nanufacturing process of relevant consideration.
TID.e appellant is a registered dealer under the Tamil Nadu General Sales
A
B
Tax Act. 1959. The appellant manufactures and deals in chemical fertilizers.
C
The appellant paid tax under the Act on certain cheniical fertilizers which
are shown as sub items 1 to 1§ of Serial No. 21 of the First Schedule to the
Act. The appellant prepared {ertilizer mixtures by dry-mixing various chemical
fertilizers which had already suffered tax. The appellants claimed exemption
for the turnover in respect of fertilizers mixtures on the ground that it cannot
be said to be a commodity different from the ingredients composing it which
had been purchased within the State and bad suffered t~x under item No. 21
of the First Schedule. The Assessing Officer disallowed the exemption.
On
D
appeal the
Appeilate Assistant Commissioner allowed the exemption on the
·ground that no manufacturing process was involved at the time of preparing
the fertilizer mixture and that the resultant product is not a product different
from the ingredients constituting it which had already suffered tax.
In an appeal, the Tribunal reversed the decision of the Appellate Assistant
Commissioner and refused to grant the exemption. The Revision Application
filed by the appellants to the Tamil Nadu High Court was dismissed at the
stage of admission on the ground that each of the competent article and the
fertilizer mixture have different chemical properties of their own and their use
.also is different and that. therefore, it is not possibJe to treat the fertilizer
mixture as the same article as the components themselves.
The appellants contended in appeal by special leave
E
(I) As s. 3(2) of the Act provides for levy of sales tax in respect of
~oods mentioned in the First Schedule at the rate and only at the
point specified thereunder and as the fertilizer mixture"! are prepared
F
by mixing manually by means of shovels some of the chemical
fertilizers mentioned in sub items 1 to 15 in Entry 21 in the
Schedule without admixture of any organic manure, they are not
(2)
liable to tax inside the State.
Even if such fertilizer bears a specific commercial name, for the
purpose of the Act, it has no identity except as a chemical fertilizer
and secondly the mixing of one or more chemical fertilizers cannot
but be the same article entitled to application of single point scheme
in respect of its ingredients. This is the natural implication of the
expression 'chemical fertilizers' followed by the expression 'that is
to say'.
Dismissing the appeal,
G
HELD : (I) The pr.incipal question for determination in these appeals is
whether the fertilizer mixtures in question can be treated as the same article
H
as chemical fertilizers composing them. A plain reading of s. 3 read with
item 21 of the First Schedule shows that it is only when a chemical fertilizer
specified in sub items 1 to 15 of item No. 21 of the First Schedule is sold
in the same condition in which it is purchased that it is not subject to a
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796
SUPREME COURT REPORTS
[1976] 3 s.c.R.
fresh levy.
Fertilizer mixture it would be noted is not the same article as
the i~gredients composi1;1g it.
It is sold as a different commercial produLi. The
question w~~ther t~ere is _any manufacturing process involved in the preparation
of any fert1hzer mixture is wholly irrelevant for the present purpose.
[798A
G-H, 799AJ
'
(2) The fertilizer mixture is a marketable commodity different from its
components, it is put to different use and has different properties. [800-G-1
State of Ta1nil Nadu v. Rallis lndia, 34 S.T.C. 532 and State of Ta1nil Nadu
v. Pyarelal Malhotra [1976] 3 S.C.R. 168, relied on.
Appeal by Special Leave from the Judgment and Order dat

## Text

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795
SHAW WALLACE & CO. LTD.
v.
STATE OF TAMIL NADU
March 23, 1976
[A. N. RAY, C.J. AND JASWANT SINGH, JJ.]
Tamil Nadu General Sales J;ax Act, 1959-Sec. 3-First Schedule Entry 21Fertilizer mixture prepared by mixing manually some of cheniical fertilizers
1nentioned in Schedule whether exempted from tax-Whether same n1arketable
commodity-Whether 1nanufacturing process of relevant consideration.
TID.e appellant is a registered dealer under the Tamil Nadu General Sales
A
B
Tax Act. 1959. The appellant manufactures and deals in chemical fertilizers.
C
The appellant paid tax under the Act on certain cheniical fertilizers which
are shown as sub items 1 to 1§ of Serial No. 21 of the First Schedule to the
Act. The appellant prepared {ertilizer mixtures by dry-mixing various chemical
fertilizers which had already suffered tax. The appellants claimed exemption
for the turnover in respect of fertilizers mixtures on the ground that it cannot
be said to be a commodity different from the ingredients composing it which
had been purchased within the State and bad suffered t~x under item No. 21
of the First Schedule. The Assessing Officer disallowed the exemption.
On
D
appeal the
Appeilate Assistant Commissioner allowed the exemption on the
·ground that no manufacturing process was involved at the time of preparing
the fertilizer mixture and that the resultant product is not a product different
from the ingredients constituting it which had already suffered tax.
In an appeal, the Tribunal reversed the decision of the Appellate Assistant
Commissioner and refused to grant the exemption. The Revision Application
filed by the appellants to the Tamil Nadu High Court was dismissed at the
stage of admission on the ground that each of the competent article and the
fertilizer mixture have different chemical properties of their own and their use
.also is different and that. therefore, it is not possibJe to treat the fertilizer
mixture as the same article as the components themselves.
The appellants contended in appeal by special leave
E
(I) As s. 3(2) of the Act provides for levy of sales tax in respect of
~oods mentioned in the First Schedule at the rate and only at the
point specified thereunder and as the fertilizer mixture"! are prepared
F
by mixing manually by means of shovels some of the chemical
fertilizers mentioned in sub items 1 to 15 in Entry 21 in the
Schedule without admixture of any organic manure, they are not
(2)
liable to tax inside the State.
Even if such fertilizer bears a specific commercial name, for the
purpose of the Act, it has no identity except as a chemical fertilizer
and secondly the mixing of one or more chemical fertilizers cannot
but be the same article entitled to application of single point scheme
in respect of its ingredients. This is the natural implication of the
expression 'chemical fertilizers' followed by the expression 'that is
to say'.
Dismissing the appeal,
G
HELD : (I) The pr.incipal question for determination in these appeals is
whether the fertilizer mixtures in question can be treated as the same article
H
as chemical fertilizers composing them. A plain reading of s. 3 read with
item 21 of the First Schedule shows that it is only when a chemical fertilizer
specified in sub items 1 to 15 of item No. 21 of the First Schedule is sold
in the same condition in which it is purchased that it is not subject to a
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796
SUPREME COURT REPORTS
[1976] 3 s.c.R.
fresh levy.
Fertilizer mixture it would be noted is not the same article as
the i~gredients composi1;1g it.
It is sold as a different commercial produLi. The
question w~~ther t~ere is _any manufacturing process involved in the preparation
of any fert1hzer mixture is wholly irrelevant for the present purpose.
[798A
G-H, 799AJ
'
(2) The fertilizer mixture is a marketable commodity different from its
components, it is put to different use and has different properties. [800-G-1
State of Ta1nil Nadu v. Rallis lndia, 34 S.T.C. 532 and State of Ta1nil Nadu
v. Pyarelal Malhotra [1976] 3 S.C.R. 168, relied on.
Appeal by Special Leave from the Judgment and Order dated the
5-3-74 of the Madras High Court in Tax Cases Nos. 77 and 78/74.
K. S. Ramamurthi and A. T. M. Sampath for the Appellant.
S. T. Desai, A. V. Rangam and A. Subhashini; for Respondent.
The Judgment of the Court was delivered by
JASWANT SINGH, J.-These appeals by special leave from the common judgment of the Madras High Court dated March 5, 1974, in Tax
Cases Nos. 77 and 78 of 1974 which involve the interpretation of
section 3 and item No. 21 of the First Schedule to the Tamil Nadu
General Sales Tax Act, 19 59 hereinafter referred to as 'the Act', shall
be disposed of by this judgment.
The appellant, Tvl. Shaw Wallace & Co. Ltd., a public limited
company, is a registered dealer under the Act and is an assessee on
the rolls of the Commercial Tax Officer IV, Central Assessment Circle23, Madras.
Amongst other things, the appellant manufactures and
deals in chemical fertilisers.
It also prepares fertiliser mixtures. For
the assessment years 1969-70 and 1970-71, the appellant claimed exemption on a turnover of Rs. 2,35,01,129.47 and Rs. 2,07,94,490.73
respectively relating to sales of fertiliser mixtures.
The case of the
appellant was that as· the fertiliser mixtures were prepared by dry mix
ing of various chemical fertilisers (shown as sub-items (1) to (15) of
S. No. 21 of First Schedule to the Act) according tothe standard formula approved by the Director of Agriculture at its mixing works
manually by means of shovels and as the resultant product could not
be said to be a commodity different from the ingredients composing it
which had been purchased within the State and had suffered tax under
item No. 21 of the First Schedule to the Act, they could not be taxed
again.
The Assessing Officer disallowed the exemption on the entire
turnover for the year 1969-70.
He, however, allowed exemption on
a turnover of Rs. 1,65,44,223.73 which represented the mixture sold
after August 6, 1970-the date when the Tamil Nadu General Sales
Tax (Third Amendment) Act (26 of 1970) amending item 21
of
Schedule came into force.
On appeal, the Appellate Assistant Commissioner (CA) 1, Madras City, found that part of the ingredients
which went into the production of fertiliser mixtures had suffered tax
under the Act.
He, therefore, allowed exemption on the
turnover
which had suffered tax by following the earlier decision of the Sales
Tax Appellate Tribunal dated July 27, 1972 in the case of Rallis India
Ltd. T. A. 114 of 1971, Where it was held that there is no manufacture
and the resultant product viz. manure mixture is not a different product
than the ingredients constituting it which have already suffered tax. The
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SHAW WALLACE & co. v. TAMIL NADU (Jaswant Singh, I.) 79 7
exemption allowed by the Appellate Assistant Commissioner for the
years 1969-70 and 1970-71 amounted to Rs.
1,20,18,842.80 and
Rs. 42,38,182.90 respectively.
The appellant filed further appeals for
both the years under secton 36(1) of the Act before the Tamil Nadu
Sales Tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner.
The State of Tamil Nadt• also filed enhancement petitions.
Since the earlier order of the 5des Tax Appellate
Tribunal dated July 27, 1972 in T. A. No. 114 of 1971 (supra) which
was the basis of the relief granted by the Appellate Assistant Commissioner was reversed by the Madras High Court vide its judgment
dated September 18, 1973, in T.C. No. 18 of 1973, the Sales Tax Appellate Tribunal by its orders Nos. 1138/1139 of 1972 dated February 21, 1974 cancelled the relief granted to the appellant by the Appellate Assistant Commissioner.
The appellant thereupon took the
matter in revision to the Madras High Court under section 38 of the
Act but its applications were dismissed at the stage of admission by
that Court on March 5, 1974 in the light of its earlier judgment dated
September 18, 1973 in T. C. No. 18 of 1973 (Revision No. 6 of 1973)
where it was observed :-
"Each of the component article and the manure mixture
have different chemical properties of their own and their use
also is different. It is not, therefore, possible to treat the
manure-mixture as the same article as the components themselves ..... Whether the process adopted (in the preparation
of manure mixture) is manufacture or otherwise, if the resultant product obtained by mixing the various articles of chemical fertilisers referred to in item 21 is sold as a different
commercial product and for a different user, it has to be treated as a different article from the components".
In rendering this decision, the Madras High Court relied on the .
ratio of the decision of its own Court in Imperial Fertilisers and Company v. State of Madras,(') to the effect that if the mixture sold has
different chemical properties and is tested as a different commodity in
commerce, its sale cannot be taken to be a second sale of chemical fertiliser merely because the components have suffered ta« at an earlier
stage as chemical fertilisers.
After failing to obtain a certificate of fitness for appeal to this Court,
the appellant applied for special leave to this Court which was granted
vide order dated March 15, ·1974.
Appearing in support of the appeals, Mr. Desai has urged that as
section 3 (2) of t.he Act provides for levy of sales tax in respect of
good.s ment10ned JU the FlfSt Schedule at the rate and only at the point
~pec1fied therein and chemical fertilisers which are specified in sub1tems (1) to (15) of item No. 21 of the First Schedule to lhe Act are
liable to tax at the point of first sale inside the State' the sales of fertiliser mixtures which are prepared by mixing man~ally by means of
shovels, some of t:'ne aforesaid chemical fertilisers mentioned at subitems 1 t~ 15 in the Sc~e~ule without ad-mixture of any organic manure
are not h~ble to tax. ~ns1de the State .. Mr. Desai has further urged
that even if_ each fert1hsers bears a specified commercial name, for the
(1) [1973] 31 S.T.C. 390
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SUPREME COURT REPORTS
(1976] 3 S.C.R.
purpose of the Act, it has no identity except as a 'chemical fertiliser'
and consequently the mixture of one or more chemical fertilisers cannot but be the same article entitled to application of single
point
scheme in respect of its ingredients.
This, accordi!lg to Mr. Desai, is
the natural implication of the expression 'chemical fertilisers' followed by the expression "that is to say".
The principal question for determination in these appeals is whe·
ther the fertiliser mixtures in question can be treated as the same article as chemical fertilisers composing them.
For a proper determination of the contention raised on behalf of
the appellant, it is necessary to refer to section 3 of the Act and to
item No. 21 of the First Schedule to the Act which run as under:-
"3. Levy of taxes on sales or purchases of goods :-
( 1) Every dealer (other than a casual trader or agent
of a non-resident dealer) whose total turnover for a
year is not less than fifteen thousand rupees
and
every casual trader or agent of a non-resident dealer.
whatever be his turnover for the year, shall pay a
tax for each year at fue rate of (three per cent) of
his taxable turnover .
(2) Notwith~tanding anything contained in sub-section
( 1), in the case of goods mentioned in the first schedule, the tax under this Act shall be payable by a
dealer, at the rate and only at the point specified
therein on the turnover in a year relating to
such
goods whatever be the quantum of turnover in that
year.
"
"Item 21 of the First Schedule: Chemical
fertilisers,
that is to say :-
( 1) Ammonium sulphate; (2) Ammonium nitrate; .(3)
Urea ( 4) Ammonium Choloride; (5) Sodium Nit·
rate; (6) Calcium Ammonium nitrate; (7)
super
phosphate single; (8) super phosphate triple; (9)
Kotka phosphate (10) di-calcium phosphate; (11)
Potassium chloride (nuriate of potash); (12) sulphate of potash; (13) mone ammonium phosphate;
(14) di-ammonium phosphate; (15)
bone
meal;
( 16) any mixture of one or more of the articles mentioned in items ( 1 to 15) and one or more of the
organic manures.
Point of levy is at the point of
first safo in the State, rate of tax is 31 /27."
_,
A plain reading of the above mentioned provisions would show
that it is only when a chemical fertiliser specifi~d in sub-items 1 .. to
15 of item No. 21 of the First Schedule is sold m the same cond1t1on
in which it is purchased that it is not subject to .a fresh levy; Fert~iser
mixture it would be noted is not the same article as the mgred1ents
composing it.
It is sold a; a different commercial product. It is put
to a different use and has different chemical properties.
As such, it
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SHAW WALLACE & co. v. TAMIL NADU (Jaswant Singh, I.)
799
has to be treated as a different article from its component parts. The
question whether there is any manufacturing process involved in the
preparation of any fertiliser, mixture or whether shovel mixing of the
chemical fertilisers amounts to manufactute or not is wholly irrelevant
for the purpose of the determination of the question before us.
The decision of the Bombay High Court in Nilgiri Ceylon
Tea
Supplying Co. v. The State of Bombay,(') on which reliance
is
placed by counsel for the appellant in support of his contention has
no bearing on the question before us as the language of the prov1So
to section (8a) of the Bombay Sales Tax Act, 1953 which fell for
consideration in that case is not the same as section 3 and item 21
of the First Schedule to the Act befor~ us. It has also to be borne
in mind that we are not called upon in the instant appeals to consider
as to whether the chemical fertilisers which had been purchased by
the assessee had been processed as in the case of Nilgiri Ceylon Tea
Supplying Co. (supra). The only question before us, as already
indicated, is as to whether there was any mixture of one or more
of the articles shown as sub-items (1) to (15) of item No. 21. It is
admitted by the appellant in the statement of the case that the fertiliser mixture is prepared by mixing various chemical fertilisers and
fillers like china clay, gypsom etc. by a shovel.
It cannot also be
disputed that the fertiliser mixture is a marketable commodity different from its components, is put to different use and has different properties.
In the case of Imperial Fertiliser and Co. (supra) where the assessee purchased various items of chemical manure referred to
in
item 21 of the First Schedule to the Act and brought about a new
product by mixing one or more of the said articles with one or more
of the organic manure, the resultant product, it was held, could not
be said to be the same chemical manure or fertiliser which the assessee had purdhased, as the mixture would have different properties of
its own and it could not be said that it retained the same characteristics or properties of any of the chemical manures or organic manures
which went to make up the resultant mixture.
It was further held in
that case that for getting an exemption on the ground that the sale
'of an article is a second or subsequent sale, it must be established
that there has been a sale of the same goods at an anterior point of
time and if there is no identity between the product purchased and
the product sold, it is not possible to treat the sales of the product by
an assessee as second sales.
In State of Tamil Nadu v. Rallis India Ltd.(') it was held that as
manure mixture prepared from one or more of the articles mentioned
in sub-items (1) to (1S) of item No. 21 of the First Schedule has
chemical properties different from its comoonents and its use is also
different, it is not possible to treat the manure mixture as the same
article as the components themselves.
'I'he following
observations
made in this decision .are pertinent :-
"If the product obtained by mixing the various chemical fertilisers referred to in item 21 is sold as a different
commercial product and for a different user, it has to be
(1) 10 S.T.C. 500.
(2) 34 S.T.C. 532
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SUPREME COURT REPORTS
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treated as a different aritcle from the components, whether
the process of such mixture is one of manufacture or not".
In State of Tamil Nadu v. Mis Pyari Lal Malhotra etc.(') a bench
of four judges of this Court, to which one of us, namely, My Lord
the Hon'ble Chief Justice was a party, had occasion to consider the
meaning of the expression "that is to say" and the tests to be applied
in determining whether the sale of a certain class of goods is subject
to the levy of single point sales tax.
With regard to the expression
"that is to say", our learned brother, Beg, J. who spoke for the
Court observed :-
"We think that the precise meaning of the words "t!l\at
is to say''. must vary with the context.
But in the context of single point sales tax, subject to special conditions
when imposed on separate categories of specified goods, the
expression was apparently employed to specifically enumerate separate categories of goods on a given list.
The purpose of such specification and enumeration in a statute dealing with sales tax at a single point in a series of sales would,
very naturally, be to indicate the types of goods each bf
..yhich would constitute a separate class for a series
of
sales.
Otherwise, the listing itself loses all meaing and would
very naturally, be to indicate thet ypes of goods each
of
be without any purpose behind it".
In regard to the test for determining the taxable events in relation
to the sales tax, same learned brother observed as follows :-
"The mere fact that the substance or raw material out of
which it is made has also been taxed in some other form,
when it was sold as
a separate "commercial commodity,
would make no difference for purposes of the law of sales
tax.
The object appears to us to be to tax sales of goods of
each variety and not the sale of the substance out of which
they are made. . . . . As soon as separate commercial commodities change or come into existence, they become separately taxable goods or entitles for purposes of sales tax .....
The law of sales tax is also concerned with "goods" of various
descriptions.
It, therefore, becomes necessary to determine
when they cease to be goods of one taxable description and
become those of a commercially
different category
and
description".
A;s in the instant. cases, the mixtures produced by the appellant
are d1~erent from therr component parts, their properties and uses are
also different and th~y are sold as diff~rent commercial products, the
appell~nt was ~ot entitled ~o !J?.e exemp!ion claimed by it.
The appeals
accordmgly fail and are dJS1mssed with costs.
H
P.H.P.
Appeals dismissed.
(I) [1976] 3 S.C.R. 168
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