JUDGMENT Satish Chandra, J.
1. M/s. Prag Ice and Oil Mills, Aligarh, the assessee, manufacture vegetable ghee from groundnut oil. The groundnut oil is mixed with acids and chemicals in order to purify and refine the oil. The residue left after the refined portion is removed is sold by the assessee to the manufacturers of soaps, etc. According to the assessee the turnover of the sale of this residue oil was taxable at one per cent on the view that the residue was still groundnut oil. The Sales Tax Officer rejected this contention. He held that this was oil of a different character and was taxable at 6 per cent. This view was upheld in appeal. The assessee went up in revision. The Judge (Revisions), Sales Tax, held that the residue was in its nature and character groundnut oil with greater impurities than were contained in the original oil prior to its being treated with acids and chemicals. It was taxable as groundnut oil at one per cent. At the instance of the Commissioner, Sales Tax, the Judge (Revisions), Sales Tax, has referred the following question of law for the opinion of this court:
Whether, on the facts and in the circumstances of the case, the Additional Judge (Revisions) was legally justified in holding the residual oil as groundnut oil simpliciter, even when it had undergone change in its properties by the admixture of chemicals and acids ?
2. It is common ground that groundnut oil is edible. It is also used in the manufacture of soaps. After it is refined in the process of manufacturing vegetable ghee from it, the residue is no longer edible. It is usually utilised in manufacturing soaps. The question is whether this residual oil is commercially a different commodity other than the original groundnut oil.
3. In Tungabhadra Industries Ltd. v. Commercial Tax Officer [I960] 11 S.T.C. 827 (S.C.), the question was whether the hydrogenated groundnut oil, commonly called Vanaspati, was groundnut oil. In that case the Supreme Court repelled the submission that the processing of the oil in order to render it more acceptable to the customer by improving its quality would render the oil a commodity other than groundnut oil. It was observed:
...if the oil as extracted were kept still in a vessel for a period of time, the sediment normally present in the oil would settle at the bottom leaving a clear liquid to be drawn out. The learned Advocate-General cannot go so far as to say, that if this physical process was gone through, the oil that was decanted from the sediment, which it contained when it issues out of the expresser, ceased to be 'groundnut oil' for the purposes of the rule. If the removal of impurities by a process of sedimentation does not render groundnut oil any the less so, it follows that even the process of refining, by the application of chemical methods for removing impurities in the oil, would not detract from the resulting oil being 'groundnut oil' for the purpose of the rule.
4. Applying this test it appears to us that the residue is still groundnut oil though it contains more than the normal quantity of impurities. It may be remembered that the acids and chemicals that are added to the groundnut oil in order to prepare vegetable oil are added to it with a view to refine the oil. It becomes clearer and more acceptable as an edible oil; but the process of refining does not change the nature and character of the commodity. It remains groundnut oil. On the same hypothesis the residue would continue to be the same commodity though of an inferior grade. It will be from a commercial standpoint groundnut oil though of a cheaper variety in comparison to the refined product which becomes vegetable oil.
5. In the aforesaid case the Supreme Court put the test thus:
To be groundnut oil, two conditions have to be satisfied. The oil in question must be from groundnut and secondly the commodity must be 'oil'. That the hydrogenated oil sold by the appellants was out of groundnut not being in dispute, the only point is whether it continues to be oil even after hydrogenation. Oil is a chemical compound of glycerine with fatty acids, or rather a glyceride of a mixture of fatty acids-principally oleic, linoleic, stearic and palmitic-the proportion of the particular fat varying in the case of the oil from different oil-seeds and it remains a glyceride of fatty acids even after the hardening process, though the relative proportion of the different types of fatty acids undergoes a slight change. In its essential nature therefore no change has occurred and it remains an oil -a glyceride of fatty acids-that it was when it issued out of the press.
6. In our opinion, these observations will equally apply to the residue which is left after the refining part of the process is completed. The residue is a product of groundnut and is oil as explained in these observations.
7. The Supreme Court further observed that "groundnut oil when it issues out of the expresser normally contains a large proportion of unsaturated fatty acids-oleic and linoleic-which with other fatty acids which are saturated are in combination with glycerine to form the glyceride which is oil. The unsaturated fatty acids are unstable, i. e., they are subject to oxidative changes. When raw oil is exposed to air particularly if humid and warm, i. e., in a climate such as obtains in Madras, oxygen from the atmosphere is gradually absorbed by the unsaturated acid to form an unstable peroxide (in other words, the change involves the addition of two atoms of oxygen) which in its turn decomposes breaking up into aldehydes. It is this oxidative change and particularly the conversion into aldehydes that is believed to be responsible for the sharp unpleasant odour, and the characteristic taste of rancid oil. If nothing were done to retard the process the rancidity may increase to such an extent as to render it unfit for human consumption. The change here is both additive and inter-molecular, but yet it could hardly be said that rancid groundnut oil is not groundnut oil. It would undoubtedly be very bad groundnut oil but still it would be groundnut oil and if so it does not seem to accord with logic that when the quality of the oil is improved in that its resistance to the natural processes of deterioration through oxidation is increased, it should be held not to be oil.
8. It appears that the residual oil becomes unfit for human consumption due to oxidative change because of which the rancidity increases to a considerable extent. The fact that nothing is done to arrest this process will not change the character of the commodity. If it was groundnut oil to start with it none the less remained groundnut oil even though because of the increased rancidity it may become unfit for human consumption.
10. Groundnut oil is generally used both for human consumption as well as for manufacture of soaps. If because of the oxidation process it ceases to be available to one of its general use but is none the less still usable for manufacture of soaps, the mere circumstance that it has become non-edible will not change its nature or character as a commercial commodity. It does not, in our opinion, become an oil other than groundnut oil. In our opinion, the Judge (Revisions), Sales Tax, was right in holding that the turnover of the sales of residual oil was liable to be taxed as groundnut oil at one per cent. The question referred to us is, therefore, answered in the affirmative in favour of the assessee and against the department. The assessee is entitled to its costs which we assess at Rs. 100.