1978 (2) TMI 184 - SC - VAT and Sales Tax

Whether 'atukulu (parched rice) and 'muramaralu' (puffed rice) are 'rice' within the meaning of entry 66(b) of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957? Held that - Appeal allowed. On a parity of reasoning, the term rice as ordinarily understood in English language would include both parched and puffed rice. Thus set aside the judgment of the High Court and answer the question framed above as follows Atukulu (parched rice) and muramaralu (puffed rice) are rice within the meaning of entry 66(b) of Schedule I of the Andhra Pradesh General Sales Tax Act, 1957.

Issues Involved:
1. Whether 'atukulu' (parched rice) and 'muramaralu' (puffed rice) are 'rice' within the meaning of entry 66(b) of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957.

Issue-wise Detailed Analysis:

1. Definition and Taxation under Andhra Pradesh General Sales Tax Act, 1957:
The primary issue revolves around the interpretation of whether 'atukulu' (parched rice) and 'muramaralu' (puffed rice) fall under the term 'rice' as specified in entry 66(b) of Schedule I of the Andhra Pradesh General Sales Tax Act, 1957. Section 5(1) of the Act mandates that every dealer, whose total turnover for a year is not less than Rs. 25,000, shall pay a tax at the rate of four paise on every rupee of his turnover. Section 5(2) specifies different points of levy for goods mentioned in the First and Second Schedules.

2. Taxation on Paddy and Rice:
The First Schedule under section 5(2)(a) includes entry 66, which differentiates between rice not covered by sub-item (b) and rice obtained from paddy that has met tax under the Act. The Division Bench of the High Court acknowledged that the paddy used to produce these commodities had already been subjected to tax. The question was whether parched rice and puffed rice are covered by item 66(b), which pertains to rice obtained from paddy that has already been taxed.

3. Process of Conversion and Identity of Rice:
The Court examined whether the conversion of paddy into parched rice and puffed rice changes its identity to the extent that it ceases to be 'rice'. The processes of heating or parching were considered as mere transformations of rice grain into different forms without altering its fundamental identity as rice. The Court noted that the term 'rice' should include its various forms, whether edible or inedible.

4. Interpretation of Taxing Statutes:
The High Court had concluded that parched rice and puffed rice were separate kinds of goods and not covered by entry 66. However, the Supreme Court disagreed, stating that the intention of the legislature was not to impose double taxation on virtually the same product in different forms. The Court emphasized that unless the language of the taxing statute is absolutely clear, it should not be interpreted against the assessee.

5. Commercial Character and Common Sense Interpretation:
The Court referred to the principle that the commonly accepted sense of a term should prevail in construing the description of an article of food. It was observed that although parched rice and puffed rice might have different commercial characters, they still fall under the broad category of 'rice'. The Court applied the "commonsense" rule of interpretation, as laid down in Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool, to conclude that 'rice' includes both parched and puffed rice.

6. Legislative Intent and Historical Context:
The Court considered the historical context of tax exemptions for 'pelalu' and 'muramaralu' and their subsequent cancellation. It was noted that the sudden imposition of heavy tax burdens on these items was not the legislature's intention. The Court highlighted that the State Government had the power to modify or exempt items under sections 40 and 9 of the Act, respectively.

Conclusion:
The Supreme Court set aside the High Court's judgment and concluded that 'atukulu' (parched rice) and 'muramaralu' (puffed rice) are indeed 'rice' within the meaning of entry 66(b) of Schedule I of the Andhra Pradesh General Sales Tax Act, 1957. The interpretation favoring the assessee was preferred, and the appeals were allowed with each party bearing their own costs.

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