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2006 DIGILAW 51 (SC)

STATE OF KARNATAKA v. GOA GRANITES, BANGALORE.

2006-01-16

H.L.DATTU, H.N.NAGAMOHAN DAS

body2006
JUDGMENT H. L. Dattu J. The Revenue is before this Court, being aggrieved by the majority opinion expressed by the learned Judges of the Karnataka Appellate Tribunal in S.T.A. Nos. 1176 and 1177 of 2000, dated 30th day of November, 2002. A two-Judges Bench of the Karnataka Appellate Tribunal by invoking their powers under Regulation 54(a)(ii) of the Karnataka Appellate Tribunal Regulations, 1979, had referred STA Nos. 1176 and 1177 of 2000 for decision of the Full Bench, on the ground, that the legal issues involved in the Appeals are of considerable importance and has ramification on all other similar matters pending before the Tribunal. The Bench also had framed the following issues for consideration of the Full Bench. They are : "1. Whether the Polished Tiles obtained out of Rough Granite Blocks should be reckoned as the same goods or commercially new commodity for allowing exemption from Central Sales Tax Law as contemplated under Section 5(3) of the Central Sales Tax Act, 1956 ? 2. Whether under the facts and circumstances of the case of the Appellant, the ratio of the decision of the Hon'ble High Court of Karnataka in the case of M/s. Foredge Granite Private Limited v. State of Karnataka, STA No. 1264 of 1989, dated 27.9.1990 is applicable ?" The Hon'ble Chairman of the Tribunal in exercise of his powers under Section 3 of the Karnataka Appellate Tribunal Act, 1976 read with rule 6 of the Karnataka Appellate Tribunal Rules, 1979 had constituted a Full Bench by his order dated 8.7.2002 to furnish their opinion on the points framed by the Bench. The two learned Judges of the Bench have opined that the Polished Tiles obtained out of the Rough Granite Blocks should be reckoned as the same goods and eligible for exemption under Section 5(3) of the Central Sales Tax Act, 1956 and they are also of the view, that the decision of this Court in the case of M/s. Foredge Granite Private Limited, would apply to the Appellant's case before them. Alone member has dissented from the conclusion reached by the other members. That is how the Revenue is before this Court in this Sales Tax Revision Petition filed under Section 23(1) of the Karnataka Sales Tax Act, 1957. Alone member has dissented from the conclusion reached by the other members. That is how the Revenue is before this Court in this Sales Tax Revision Petition filed under Section 23(1) of the Karnataka Sales Tax Act, 1957. The questions of law raised in the Revision Petition for our consideration are as under : "I. Whether the Tribunal was right in holding that the Polished Tiles obtained out of Rough Granite Blocks are to be reckoned as the same goods or commercially new commodities for allowing exemption under Section 5(3) of the CST Act, 1956 ? II. Whether the ratio of the decision of this Hon'ble Court in the case of Foredge Granite Private Limited v. State of Karnataka, STRP No. 58 of 1991, rendered with reference to Entry 17 of Part's of the Second Schedule to Karnataka Sales Tax Act, as it stood prior to 1.4.1991 was applicable to the facts of the case of the Assessee ?" The relevant facts are, that the Assessee is a proprietary concern and a dealer registered both under the provisions of the Karnataka Sales Tax Act, 1957 ('KST Act' for short) and Central Sales Tax Act, 1956 ('CST Act' for short). The Assessee for the Assessment Year 1993-94 had sold 40 Perediso Quality Granite Blocks with a total quantity of 59.073 Cubic Meters to M/s. Inlac Granites Stones Limited, Bangalore, for a value of Rs. 3,78,511.00 for the purpose of export of Cut and Polished Granite Tiles in their 100% Export Oriented Unit located at Kundumaranahalli Village, Dharmapuri District, Tamil Nadu. For the Assessment Year 1994-1995, the Assessee had sold 40 Perediso Quality Granite Blocks with a total quantity of 59.073 Cubic Meters to M/s. Inlac Granite Stones Limited, Bangalore, for a value of Rs. 5,81,805.00 for the purpose of export of Cut and Polished Granite Tiles in their 100% Export Oriented Unit located at Kundumaranahalli Village, Dharmapuri District, Tamil Nadu. In respect of export sales, the Assessee had filed 'H' Forms, the Purchase Order placed by M/s. Inlac Granite Stones Limited, Bangalore, and bill of the exporter against the supplies effected by the Assessee and had claimed exemption on the entire turnover in the returns of turnover filed for both the Assessment Years. In respect of export sales, the Assessee had filed 'H' Forms, the Purchase Order placed by M/s. Inlac Granite Stones Limited, Bangalore, and bill of the exporter against the supplies effected by the Assessee and had claimed exemption on the entire turnover in the returns of turnover filed for both the Assessment Years. The Assessing Authority after examining the returns so filed, had rejected the claim of the Assessee for exemption from tax and had held, that the sale of Granite Blocks constituted Sales in the course of inter-State trade or commerce, liable to tax under the CST Act, 1956. According to the Assessing Officer, the Granite Blocks sold by the Assessee were different from Granite Tiles exported to foreign countries by M/s. Inlac Granite Stones Limited, Bangalore, and since the sales were not supported by 'C' Forms, the Assessing Officer had passed Assessment Order under Section 9(3) of the CST Act, 1956, for the Assessment Year 1993-1994, assessing taxable turnover at Rs. 3,78,511.00 at 15% and for the Assessment Year 1994-1995 assessed the taxable turnover at Rs. 5,81,805.00 at 10%. The Assessee being aggrieved by the aforesaid order passed by the Assessing Authority, had filed two separate Appeals before the Joint Commissioner of Commercial Taxes (Appeals), Bangalore, who by his common order dated 31.8.2000, after examining the issues involved in the Appeals in detail, has rejected both the Appeals. The findings and the conclusion reached by him are, that the Rough Granite Blocks undergo cutting, sizing, polishing, slicing and so on. All these processes are done mechanically or in machines. The Legislature has also understood Rough Granite and Polished Granite differently as per Entry 17 of Part's of the Second Schedule to the KST Act. Therefore, the goods sold by the Appellant are not same as the goods exported. What is exported is commercially new commodity, which comes into being as a result of processing. There is value addition to the goods after they are manufactured and polished. Therefore, the Rough Granite sold by the Appellant is not actually exported. Hence, the sale of Rough Granite cannot be said to have been made as one for export to the foreign buyers. Hence, these sales cannot be regarded as deemed export sales. The Appeals filed by the Assessee against the common order passed by the First Appellate Authority before the Karnataka Appellate Tribunal in S.T.A. Nos. Hence, the sale of Rough Granite cannot be said to have been made as one for export to the foreign buyers. Hence, these sales cannot be regarded as deemed export sales. The Appeals filed by the Assessee against the common order passed by the First Appellate Authority before the Karnataka Appellate Tribunal in S.T.A. Nos. 1176 and 1177 of 2000 have been allowed by the Tribunal by its order dated 30th day of November, 2002 by setting aside the common order passed by the First Appellate Authority dated 31.8.2000 and the orders passed by the Assessing Authority under Section 9(3) of the CST Act, 1956 dated 20.1.2000 and has declared, that the Assessee is entitled for exemption on its sales turnover of Granite Blocks to an 100% Export Oriented Unit for both the Assessment Years under Section 5(3) of the CST Act, 1956 and accordingly, has remanded the matter to the Assessing Authority to grant exemption to the Assessee by passing an appropriate order in the light of the observations made by them in the course of the order. Feeling aggrieved by the common order passed by the Karnataka Appellate Tribunal in Sales Tax Appeal Nos. 1176 and 1177 of 2000, the Revenue is before this Court in this Revision Petition. In this Revision Petition, facts are not in dispute. What is sold or supplied by the Dealer-assessee registered both under KST Act and CST Act, is Rough Granite Blocks to an 100% Export Oriented Unit and it is also not in dispute that, what is exported by the Export Oriented Unit is Polished and Thin Slice of Tiles made out of big Rough Granite Blocks supplied by the Assessee. The documents produced by the Assessee before the Assessing Authority are also not in dispute and therefore, the only question that requires consideration of this Court is, whether the Assessee is eligible for exemption from payment of tax under Section 5(3) of the CST Act, 1956 ? Section 6 of the CST Act is the charging provision. Under Section 6(1) of the CST Act, every dealer, subject to the other provisions of the Act, is liable to pay tax under this Act on all sales of goods other than the Electrical Energy effected by him in the course of inter-State trade or commerce during any year. Proviso to sub-section (1) carves out an exception to the main provision. Proviso to sub-section (1) carves out an exception to the main provision. The exception is, that a dealer shall not be liable to pay tax under the Act on any sale of goods, which is in accordance with the provisions of sub-section (3) of Section 5 of the CST Act, is a sale in the course of export of those goods out of the territory of India. Section 5(3) of the CST Act reads as under. "Section 5. When is a sale or purchase of goods said to take place in the course of import or export. - (1) * * * (2) * * * (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after and was for the purpose of complying with, the agreement or order for or in relation to such export". Section 5(1) of the Act deals with exports. Section 5(2) of the Act deals with imports. Section 5(3) of the Act deals with the transaction of sale or purchase preceding the export. Section 5(3) of the Act had come up for consideration before the Apex Court on several occasions. More recently in the case of M/s. Sterling Foods v. State of Karnataka and Another, 1986(2) Kar. L. J. 242 (SC) : (1986) 63 STC 239 (SC) : AIR 1986 SC 1809 : (1986) 3 SCC 469 , a three-Judges Bench of Supreme Court has stated and the same cannot be placed better than quoting verbatim, what is observed in the said decision. "It is clear on a plain reading of sub-section (3) of Section 5 of the Central Sales Tax Act, 1956, that in order to attract the applicability of that provision, it is necessary that the goods which are purchased by an Assessee for the purpose of complying with the agreement or order for or in relation to export must be the same goods which are exported out of the territory of India. The words "those goods" in this sub-section are clearly referable to "any goods" mentioned in the preceding part of the sub-section and it is, therefore obvious that the goods purchased by the Assessee and the goods exported by him must be the same. If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the Assessee cannot be said to be purchases in the course of export". The Court has further stated : "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 who deal in it as 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 takes the commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognised as a new 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". The aforesaid view is reiterated by the Supreme Court in the case of Vijayalakshmi Cashew Company and Others v. Deputy Commercial Tax Officer and Another, (1996) 100 STC 571 (SC) : (1996) 13 MTJ 350 . The aforesaid view is reiterated by the Supreme Court in the case of Vijayalakshmi Cashew Company and Others v. Deputy Commercial Tax Officer and Another, (1996) 100 STC 571 (SC) : (1996) 13 MTJ 350 . In the said decision, the Court has observed as under : "In order to resist imposition of Sales Tax by the State on the penultimate transaction contemplated by Section 5(3) of the Central Sales Tax Act, 1956, the dealer will have to establish the identity of the goods purchased with the goods to be exported out of the territory of India. If, in order to fulfill an export obligation, an exporter purchases goods and as result of some processing the identity and character of the goods change, then it will not be a case of export of the same goods. The penultimate sale or purchase of goods must be those goods which were actually exported". The same view is reiterated by the Apex Court in the case of Shafeeq Shamed and Company v. Assistant Commissioner of Commercial Taxes and Others, (2003) 9 SCC 276 , wherein the Court has observed as under : "............. that Section 5(3) of the Central Sales Tax Act, 1956, was not applicable where the goods which were sold or purchased had undergone any transformation. Since the dressed hides and skins exported by the the Appellant were goods different from raw hides and skins purchased by it, the Appellant was not entitled to the benefit of exemption of the penultimate sale or purchase under Section 5(3) of the CST Act, 1956". Since the dressed hides and skins exported by the the Appellant were goods different from raw hides and skins purchased by it, the Appellant was not entitled to the benefit of exemption of the penultimate sale or purchase under Section 5(3) of the CST Act, 1956". The settled legal position is, that for the purpose of Section 5(3) of the Act, for a sale or purchase preceding export being deemed to be one in the course of export is, that it must be last sale or purchase preceding export; the sale or purchase must take place and be completed after the exporter had entered into agreement with a foreign buyer or order for supply has been received by him; the sale or purchase should be for the purpose of complying with the agreement or order of the foreign buyer; the Courts by interpretation have read into this sub-section while interpreting the words "those goods" therein, is that the goods, exported out of India should be the same as the goods purchased by the exporter, that there is no dispute that every change does not bring into existence new goods nor can it be said that however small the change, may be due to the processing, the identity of the goods will be completely lost and it is a question of fact and degree. Now coming to the submissions made by Smt. Sujatha, the learned Additional Government Advocate for the Revenue, who are the Petitioners in this Revision Petition, it is contended that the Assessee, who is a dealer under the CST Act, 1956, has supplied Rough Granite Blocks to an 100% Export Oriented Unit, which in turn has sliced the blocks into thin pieces and after polishing them as specified by the foreign importer, have exported the same not as Granite Blocks, but as Polished Granite Tiles. Therefore, the learned Additional Government Advocate contends, that what is sold to the exporter is Rough Granite Block and what is exported is Polished Tiles and therefore, what is sold or supplied and what is exported are not one and the same commodity and therefore, the Assessee is not eligible to claim exemption under Section 5(3) of the Act. Per contra, Sri. Per contra, Sri. Rabinathan, learned Counsel for the Assessee contended that the Rough Granite Blocks are supplied to an 100% Export Oriented Unit by the Assessee and thereafter, they are cut into sizes and polished and exported out of the country by the exporter. According to the learned Counsel, what is sold or supplied is being exported and therefore, the sale by the Assessee is in the course of export and therefore, eligible for exemption from payment of tax under the Act in view of Section 5(3) of the CST Act, 1956 read with proviso to Section 6(1) of the CST Act, 1956. The issue in this case is, whether the Polished Tiles, which were exported are those goods, which were sold by the Assessee in the penultimate transaction ? In other words, whether the Rough Granite Blocks, which were sold were the very goods, which were exported ? To be further precise, the controversy in this Revision Petition is about the identity of the goods purchased and identity of the goods sold. We say this is the issue, that falls for our consideration, for the reason that, in order to claim exemption under sub-section (3) of Section 5 of the CST Act, the Assessee will have to establish that the last sale or purchase before the sale or - purchase occasioning export, were of "those goods" which were exported. At this stage, it may be useful to refer to the observations made by the Apex Court in the case of Delhi Cloth and General Mills Company Limited v. State of Rajasthan and - Others, (1980) 4 SCC 71 : (1980) 46 STC 356 (SC) wherein the Court has stated, that "it was fairly well-settled that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and consumer. It is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted". The question for consideration is, whether this Polished Tiles obtained out of Rough Granite Blocks would amount to export of "those goods", which had been sold by the Assessee ? The question for consideration is, whether this Polished Tiles obtained out of Rough Granite Blocks would amount to export of "those goods", which had been sold by the Assessee ? It is the specific case of the Assessee before all the Authorities under the Act that what is sold is only Rought Granite Blocks to an industrial unit, which is an 100% Export Oriented Unit. It is also its case that the Export Unit by using heavy machinery, cut these Rough Granite Blocks into thin pieces and thereafter, they have been polished and exported not as Granite Blocks but as Polished Tiles. Under these circumstances, they are of the view that they are entitled to get exemption from payment of tax under the Act, since the commodity supplied and the commodity exported are one and the same, except for the diminishing size. In aid of their assertion, they had placed reliance on the observations made by this Court in the case of M/s. Foredge Granite Private Limited. At the outset, we should notice in this case, firstly, that sub-section (3) of Section 5 of the CST Act did not fall for consideration of this Court. The issue that was raised in the said decision was, mere cutting a Rough Block of Granite into different sizes to the requirement of the customer would involve any manufacturing activity ? The facts which were noticed by the Court in that case were, that the Petitioner had purchased Rough Granite Blocks and with the help of the machines run by electrical energy in its unit, cuts the granites into required sizes and thickness and polishes the same to the requirement of the customers and sells the same. The case of the Assessee before the Assessing Authority was that the business activity of the Petitioner is a manufacturing activity and therefore, would be entitled to the benefit of the notification dated 15.10.1981, which provided for exemption from payment of tax under the KST Act, 1957, in respect of goods manufactured and sold by new Industrial Unit. The Assessing Authority had allowed the claim of the dealer and had granted exemption from payment of Sales Tax, treating the business activity of the Petitioner as a manufacturing activity and therefore, entitled to certain incentives and concession flowing from the notification. The Assessing Authority had allowed the claim of the dealer and had granted exemption from payment of Sales Tax, treating the business activity of the Petitioner as a manufacturing activity and therefore, entitled to certain incentives and concession flowing from the notification. This order of the Assessing Authority was revised by the Revisional Authority by invoking the provisions of Section 21(2) of the KST Act and the order so passed was confirmed by the Karnataka Appellate Tribunal, by rejecting the Appeal filed by the Assessee. It is the correctness or otherwise of this order was called in question by the Assessee before this Court in Sales tax Revision Petition No. 58 of 1991. The learned Counsel for the Assessee had raised two contentions before this Court. Firstly, the jurisdiction of the Revising Authority to initiate suo motu revisional proceedings to upset an order made by the Assessing Authority, since according to the learned Counsel, the order passed by the Assessing Authority granting certain benefits to the Assessee by virtue of the notification, is not Assessment Order. Secondly, the Revisional Authority was not justified in his conclusion, that, the activity of the Petitioner in sale of Polished Granite was not a manufacturing activity and therefore, not entitled to the benefit of the notification dated 15.10.1981. On this set of facts, this Court has stated that the stones are large Granite Blocks purchased by the Petitioner and even when cut into the sizes to the requirement of the customers including as regards its thickness or polishing, it continues to be a Granite Block. May be a smaller or thinner size, but it would continue to be Granite Block however polished it may be. Even though it may be used as a building material/the Granite Block does not cease to be a Granite Block and therefore, no manufacturing activity is involved. The conclusion the Court has reached is, mere cutting a Rough Block of Granite into different sizes to the requirement of the customers would not involve any manufacturing activity. In the present case, we are not concerned with the concept of manufacture that was involved in the case of M/s. Foredge Granite Private Limited (supra). The question before us is, whether the export of Polished Granite Tiles obtained out of Rought Granite Blocks would amount to export of "those goods", which had been sold and supplied ? In the present case, we are not concerned with the concept of manufacture that was involved in the case of M/s. Foredge Granite Private Limited (supra). The question before us is, whether the export of Polished Granite Tiles obtained out of Rought Granite Blocks would amount to export of "those goods", which had been sold and supplied ? To determine this aspect of the matter, the test that requires to be applied is, as stated by the Apex Court in the case of Sterling Foods, 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 who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. If this test is applied, neither in common parlance nor in commercial parlance, sliced, thin, polished tiles cannot be regarded as the Rough Granite Blocks. When Rough Granite Blocks are subjected to process of cutting, slicing into required size and polished and exported as Tiles, the Rough Granite Blocks ceased to be Granite Blocks and become a distinct and different commercial commodity from the original commodity. In the trade circle, they are not considered as one and the same commodity. If the purchaser goes to the market to buy the Polished Tiles, he will not be given the Rough Granite Blocks. Converse of this is also an indication that they are cut/sliced, polished as tiles and therefore, for the purpose of Section 5(3) of the CST Act, it cannot be said that the goods sold or supplied were those goods, which were exported. The Granite Stones are extracted from the quarry and they are cut into small and large blocks. If they are cut or sawn to very specific dimension and sold either as smaller blocks or cut-sizes of Granite Blocks to the exporter and if that exporter exports those small cut-sizes of Granite Blocks, it can definitely be said, that what is sold and what is exported are one and the same commodity. If they are cut or sawn to very specific dimension and sold either as smaller blocks or cut-sizes of Granite Blocks to the exporter and if that exporter exports those small cut-sizes of Granite Blocks, it can definitely be said, that what is sold and what is exported are one and the same commodity. But in the present case, the facts noticed by the fact-finding authorities are that, the exporter before exporting the cut-sizes of Granite Blocks, cuts them into slices to the actual size of tiles, polishes or effects honing process, which is similar to polishing and the end result is a tile that has a satin or patina finish or polish finish. If it was a case of mere cutting or sawing to a specific dimension and beveled edges are polished, it could be a case of export of the same goods and therefore, eligible for tax exemption under Section 5(3) of the Act. In our view, the 'tiles' are not simply cut or sawn of a Granite Blocks. They undergo further processing of cutting into thin slices, and process of polishing and emerge as 'tiles' and ready to be sold as 'tiles' and in commercial parlance, they are treated as 'afferent commodity altogether. Even if we have to adopt a value added test, then also, in our view, there is substantial transformation of the original commodity into different commercial commodity. Therefore, what is sold and what is exported is not "those goods" or the "same goods", which is eligible for exemption under Section 5(3) of the Act. While considering the issues" involved in this Revision Petition, we are not considering whether any manufacturing activity is involved while Rough Granite Blocks are cut/sliced into Thin Pieces as Tiles and polished or honed. Reference is also made to the decision of this Court in the case of (W.A. Nos. 289 to 293 of 1994, dated 8.1.1996) M/s. Poonam Stone Processing Industries, Batagere (K), Sedam Taluk, Gulbarga District v. Deputy Commissioner of Commercial Taxes (Administration), (Gulbarga Division), Gulbarga and Others., 1999(46) Kar. L. J. 329 (HC) (DB). We do not understand how the facts and the issues involved in the said decision has any relevance to the facts and the issues involved in the present case. In this case, the Assessee was a new industrial unit engaged in cutting and polishing Granite Stones. L. J. 329 (HC) (DB). We do not understand how the facts and the issues involved in the said decision has any relevance to the facts and the issues involved in the present case. In this case, the Assessee was a new industrial unit engaged in cutting and polishing Granite Stones. Before the Assessing Authority, they had claimed exemption on their Sales Turnover by relying upon the notification issued by the State Government dated 30.10.1983. The Assessing Authority had disallowed the claim of the Assessee. That is how the Assessee was before this Court in Writ Petition No. 20773 of 1991, dated 3.12.1993 and connected matters (M/s. Poonam Stone Processing Industries, Gulbarga v. Deputy Commissioner of Commercial Taxes (Administration), Gulbarga., 1994 (38) Kar. L. J. (Tri. Supp.) 209 : (1994) 94 STC 183 (Kar.). A learned Single Judge relying on the notification dated 31.3.1983 had rejected the Writ Petitions by his order dated 3.12.1993. In the Appeals filed against the said order, the Division Bench has only stated that, in the first notification dated 30.10.1982, there was no reference in any part of the notification to the manufacturing activity to be involved, for claiming exemption and therefore, the department could not have refused to give benefit of incentive and concessions available under the notification dated 30.10.1982, since the notification dated 31.3.1983, firstly, has superseded the earlier notification and secondly, it is in this notification a reference is made to manufacturing activity to claim incentives and concessions. Therefore, in our view, this decision would in no way assist the dealer in the present case. Reliance is also placed on the decision of this Court in the case of M/s. Padmavathi Marbles v. State of Karnataka., S.T.R.P. Nos. 65 and 66 of 1992, decided on 30.1.1996. We fail to see how the decision would assist the Assessee. That was a case where the Assessee was involved in the activity of stone polishing. It had claimed the benefit of 50% of Sales Tax payable in view of the Notification No. FD 164 CSL 79(I), dated 15.10.1981. The claim had been allowed by the Assessing Authority. The order so made was reversed by the Revisional Authority, which order had been confirmed by the Karnataka Appellate Tribunal. That is how the Assessee was before this Court by fling a Revision Petition. The claim had been allowed by the Assessing Authority. The order so made was reversed by the Revisional Authority, which order had been confirmed by the Karnataka Appellate Tribunal. That is how the Assessee was before this Court by fling a Revision Petition. The question raised in the Revision Petition was, whether the activity of stone polishing would amount to manufacture for the purpose of claiming benefit of incentives and concessions under the notification ? This Court keeping in view the purpose and object of the notification, did hold that mere polishing of the stones does not result in the manufacture of new articles. In our view, the decision on which reliance is placed by the learned Counsel for the Assessee would not assist the Assessee in any manner whatsoever. The learned Counsel Sri. Rabinathan has also relied on the observations made by the Apex Court in the case of Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s. Pio Food Packers., AIR 1980 SC 1227 : (1980) 46 STC 63 (SC). In the said decision, the Court was pleased to observe that when Pineapple was sliced and canned for sale, the slices did not cease to be Pineapple and secondly, what was considered in the said decision was Section 5A(1)(a) of the Kerala General Sales Tax Act, 1963, which read as "consumes such goods in the manufacture of other goods for sale or otherwise". Keeping in view the language of the sub-section, the Court was pleased to hold that "the Pineapple Fruit is not consumed in the manufacture of Pineapple Slices for the purpose of being sold in sealed cans". In Sterling Foods case, the Appellants purchased Shrimps, Prawns and Lobsters locally for complying with the orders for export and they cut the heads and tails of the shrimps, prawns, lobsters and then they were subjected to peeling, deveining and cleaning and freezing before being exported in cartons. The Appellants claimed that no local Sales Tax was payable by them in view of Section 5(3) of the Central Sales Tax Act, 1956, which precluded levy of Sales Tax on local purchases, if they were made pursuant to Export Orders and the sale was of those goods purchased. The Appellants claimed that no local Sales Tax was payable by them in view of Section 5(3) of the Central Sales Tax Act, 1956, which precluded levy of Sales Tax on local purchases, if they were made pursuant to Export Orders and the sale was of those goods purchased. Keeping the facts in view, the Supreme Court held, that by reason of processing of the goods after their purchase, there was no change in their identity and that, in fact, commercially, they were to be regarded as the original goods. Since the goods that were purchased were those goods which were exported, the Supreme Court allowed the claim of the Assessee in view of Section 5(3) of the CST Act, 1956. Our attention is also drawn to the observations made by the Madras High Court in the case of T. Azeezur Rahman and Company v. State of Tamil Nadu, (1991) 82 STC 355 (Mad.)(DB). In the said decision, the Court has observed as under : "For purposes of entitling an Assessee to the benefits of Section 5(3) of the Central Sales Tax Act, 1956, in respect of a commodity subject to the limitations contained in Section 14(iii) read with Section 15 of the Act, the lack of commercial identity of the goods has no relevance, and what is really relevant is whether the sale or purchase in question is the "penultimate sale or purchase" that satisfies the two conditions specified in Section 5(3), namely, (a) that such penultimate sale must take place (i.e. become complete) after the agreement or order under which the goods are to be exported; and (b) it must be for the purpose of complying with such agreement or order and it is only then that such penultimate sale or purchase is deemed to be in the course of export. The words "those goods" found in Section 5(3) of the Act do not mean and refer to the goods sold or purchased preceding the sale or purchase occasioning the export, in the same condition as they were when so purchased or sold immediately before export so long as the identity of the goods is not altered bringing into existence a new commercial product of different character and property. If the sale is of the same goods even after some processing, then the sale would be exempt notwithstanding the processing unless the goods exported are totally changed in character and property from the goods purchased for export". In our view, this case also does not assist the learned Counsel for the Assessee. In fact, in the said decision, the Court has stated, that "if the sale is of the same goods even after some processing, then the sale would be exempt notwithstanding the processing unless the goods exported are totally changed in character and property from the goods purchased for export". In the present case, what is sold is Rough Granite Blocks and what is exported is Polished Tiles and they are two different commodities both in common and commercial parlance. In this decision, the emphasis also is not on 'manufacture' but on 'processing'. The expression "processing" is explained by the Apex Court in number of cases. A reference can be made to the decision of the Apex Court in the case of Chowgule and Company Private Limited and Another v. Union of India and Others, AIR 1981 SC 1014 : (1981) 47 STC 124 (SC) : 1981 Tax LR 2929 (SC) : (1981) 1 SCC 653 , wherein it is held that : "The term "processing" means subjecting a commodity to a process or treatment so as to develop it or make it fit for the market; it is thus an operation on an article which makes it undergo a change. The nature and extent of processing and of the change brought about as a result thereof may vary from case to case and there may, may not be, application of energy or force to effect a processing. It is the effect of processing operations that is material for determining whether there has been processing of goods". The Court has further observed : ".... that mere mixing or blending different goods so as to make goods of a different quality or specification did amount to processing, though not a manufacture". It is the effect of processing operations that is material for determining whether there has been processing of goods". The Court has further observed : ".... that mere mixing or blending different goods so as to make goods of a different quality or specification did amount to processing, though not a manufacture". In Union of India v. Ahmedabad Electricity Company Limited and Others, (2004) 134 STC 24 (SC) : (2003) 11 SCC 129 it is held that : "The natural meaning of the word "process" is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject-matter in order to transform or reduce it to certain stage. The thin line of difference between "manufacture" and "processing" is that, in the former, a new commodity is produced at the end of the process, while in the latter, the commodity retains its identity throughout till the end, after the operations performed on it". Reference is also made to the decision of the Rajasthan High Court in the case of Guljag Industries Limited v. State of Rajasthan and Another., (2003) 129 STC 3 (Raj). We do not see any issue in this decision which has any bearing on the issue that we are considering in the present case. The learned Counsel Sri. Rabinathan nextly relies on the decision of the Supreme Court in the case of Commissioner of Sales Tax, Uttar Pradesh, Lucknow v. Lal Kunwa Stone Crushers (Private) Limited., 2001 (50) Kar. L. J. 380 (SC) : (2000) 118 STC 287 (SC) : (2000) 3 SCC 525 . In the said decision, the Court has observed as under : "In the list appended to Notification dated September 7, 1981, issued by the Uttar Pradesh State Government under Section 3-A(1)(e) of the Uttar Pradesh Sales Tax Act, 1948, specifying items, point of tax and rate of tax. Entry 40 specified "Ramraj Geru, Surkhi, Sand, Lime, Bajri, Marble Chips, Moram, Gitti, Kankar, Stone-ballast, Stone and Articles of Stone except of Glazed Stone" as liable to tax at the point of sale to the consumer at the rate specified. Entry 40 specified "Ramraj Geru, Surkhi, Sand, Lime, Bajri, Marble Chips, Moram, Gitti, Kankar, Stone-ballast, Stone and Articles of Stone except of Glazed Stone" as liable to tax at the point of sale to the consumer at the rate specified. The Respondent, a dealer engaged in purchasing Stone Boulders and crushing them into Stone Chips, Gitti and Dust for the purpose of further sale, claimed that at the time of purchase of Boulders, Sales Tax had been paid and hence and sales of Small Stones Dust etc., were not liable to tax again. The Tribunal and the High Court held that the goods continued to be Stone and they were not commercially different goods to be identified differently for the purpose of Sales Tax. On Appeal to the Supreme Court : "Held, affirming the decision of the High Court, that Stone, as such and Gitti and Articles of Stone were all of similar nature though by size they might be different Even if Gitti, Kankar, Stone-Ballast, etc., might all be looked upon as separate in commercial character from Stone Boulders offered for sale in the market, it could not be presumed that Entry 40 of the notification was intended to describe the same as not stone at all. The term "stone" was wide enough to include various forms such as Gitti, Kankar, Stone Ballest. The Respondent was not, therefore, liable to Sales Tax on the Stone Chips, Gitti, etc." By the Court : "Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing, they may remain commercially the same goods which cannot be taxed again in a series of sales, so long as they retain their identity as goods of a particular type". Lastly, the learned Counsel with the permission of the Court, has relied upon the decision of the Tamil Nadu Taxation Special Tribunal in the case of Iqra Traders v. State of Tamil Nadu, (2003) 32 STC 471 (T.N.T.S.T.). Facts and issues involved in this decision are identical with the facts and issues involved in this Revision Petition and in the said decision, the Tribunal has observed as under : "....... that out of the Rough Granite Stone the exporter has only cut the Bigger Blocks into smaller sizes for which Lime Powder and Steel Granite were used. Facts and issues involved in this decision are identical with the facts and issues involved in this Revision Petition and in the said decision, the Tribunal has observed as under : "....... that out of the Rough Granite Stone the exporter has only cut the Bigger Blocks into smaller sizes for which Lime Powder and Steel Granite were used. But these Lime Powder, Water and Steel Granite got washed away and thereafter the Granite was polished. This cutting and polishing is necessary in order to make the Granite fit to be introduced in the export market. The nature of the activities undertaken by various Assessee in the different cases relied on by the Appellant wherein the Apex Court and the High Courts have very clearly held that despite such activities, the commodity still remained the same. Therefore, the Appellant is eligible for exemption of Sales Tax on sales of Granite Blocks effected by them to the exporters under Section 5(3) of the Central Sales Tax Act, 1956". With greatest respect at our command, we do not subscribe to the view expressed by the Special Tribunal. We stop at that. In the instant case, the Assessee has supplied Rough Granite Blocks to an 100% Export Oriented Industrial Unit. They have been cut into slices, polished and exported out of the country. The input is Rough Granite Blocks and the output is Sliced Thin Polished Tiles. Chemical composition of them may continue to remain as Stones when they were supplied and cut into thin sizes, polished and sold as tiles, but in common parlance or in commercial parlance or in trade circles or in value added percentage test, in our view, they are not understood as one and the same commodity. The Rough Granites are processed to an extent that they no more remain as Granites but as Tiles ready to be used in building construction and other activities. By this process, there is value addition to the goods. There would be price variation between the Rough Granite Block and Cut and Polished Tiles. Even in the trade circles, when a customer asks for Polished Tiles of required size, the dealer shall not supply him with Rough Granites. The converse of this transaction is also an indicative factor how the trade circles understands the difference between Rough Granite Blocks and Polished Granite Tiles. Even in the trade circles, when a customer asks for Polished Tiles of required size, the dealer shall not supply him with Rough Granites. The converse of this transaction is also an indicative factor how the trade circles understands the difference between Rough Granite Blocks and Polished Granite Tiles. Therefore, in our view, for the purpose of Section 5(3) of the CST Act, 1956, it cannot be said that what is supplied or sold are those goods which are exported. Accordingly, the Assessee is not eligible to claim exemption from payment of tax under the Act, on the ground that the sale of Granite Blocks to an 100% Export Oriented Unit is a sale in the course of export or deemed sale to be in the course of export. Insofar as second question of law raised by the Revenue, the same need not detain us for a long. In our earlier part of the judgment, we have already noticed how the decision of this Court in the case of M/s. Foredge Granite Private Limited (supra), would not apply to the present facts and circumstances of the case. We further add that the Apex Court in the case of Sterling Foods, has observed that" the character or identity of the commodity has to be determined not on the basis of a distinction made by the State Legislature for the purpose of exigibility to State Sales Tax, because even where the commodity is the same in the eyes of the persons dealing in it, the State Legislature may make a classification determining liability to Sales Tax. This question for the purpose of the Central Sales Tax Act, has to be determined on the basis of what is commonly known or recognised in commercial parlance". Therefore, in our view, for deciding the issue raised in this Revision Petition, reference to Entry 17 of Part 'S' of Second Schedule to the KST Act is wholly irrelevant. In view of our above discussions, the Revision Petition requires to be allowed. Accordingly, the following : ORDER I. Sales Tax Revision Petition is allowed; II. The impugned order passed by the Karnataka Appellate Tribunal in STA Nos. 1176 and 1177 of 2000, dated 30.11.2002 is set aside; III. The impugned order passed by the First Appellate Authority in Appeal Nos. CST.AP.4 and 19/2000-01, dated 31.8.2000 is restored; IV. No order as to costs. Ordered accordingly.