1993 (9) TMI 315 - SC - VAT and Sales Tax

Whether the expression wheat in section 14(i)(iii) of the Central Sales Tax Act, 1956 (Act) includes flour, maida and suji ? Held that - It is obvious that if Parliament proposes to treat flour, maida and suji also as declared goods, it can always say so, by effecting necessary amendments.

Issues Involved:
1. Interpretation of the term "wheat" under Section 14(i)(iii) of the Central Sales Tax Act, 1956.
2. Whether wheat includes its derivative forms such as flour, maida, and suji.
3. The legislative intent and restrictions under Sections 14 and 15 of the Central Sales Tax Act.
4. The impact of judicial precedents and interpretations by various High Courts.
5. The constitutional framework and limitations on the State Legislature's power to tax declared goods.

Detailed Analysis:

1. Interpretation of the Term "Wheat" Under Section 14(i)(iii) of the Central Sales Tax Act, 1956:
The primary issue revolves around whether the term "wheat" in Section 14(i)(iii) of the Central Sales Tax Act, 1956, includes its derivative forms such as flour, maida, and suji. The Karnataka and Patna High Courts held that it does, while the Andhra Pradesh, Rajasthan, and Madras High Courts took a contrary view. The Supreme Court examined the legislative intent and the language used in Section 14, which declares certain goods to be of special importance in inter-State trade or commerce.

2. Whether Wheat Includes Its Derivative Forms Such as Flour, Maida, and Suji:
The learned counsel for the dealers argued that wheat, when milled into flour, maida, or suji, remains essentially the same commodity. They contended that these derivatives should be considered as different forms of wheat to avoid excessive or multiple taxation, which was the intent behind the 1976 Amendment Act. Conversely, the counsel for the States argued that wheat and its derivatives are commercially different goods and should be treated as such. The Court agreed with the States, stating that wheat in its primary form is distinct from flour, maida, and suji, which are different commodities.

3. Legislative Intent and Restrictions Under Sections 14 and 15 of the Central Sales Tax Act:
Sections 14 and 15 impose restrictions on the State Legislature's power to levy tax on declared goods. Section 14 lists specific goods, including cereals like wheat, while Section 15 imposes conditions such as a tax rate not exceeding 4% and a single-stage tax levy. The Court emphasized that these restrictions should be construed strictly, and only the goods expressly mentioned in Section 14 should be considered as declared goods. The Court noted that the absence of flour, maida, and suji in the list of declared goods under Section 14 indicates that they are not included within the term "wheat."

4. Impact of Judicial Precedents and Interpretations by Various High Courts:
The Court reviewed several judicial precedents, including decisions in Ganesh Trading Co. v. State of Haryana, Babu Ram Jagdish Kumar and Co. v. State of Punjab, and State of Karnataka v. Raghurama Shetty, which held that rice is distinct from paddy, similar to how flour is distinct from wheat. The Court also considered the decision in Alladi Venkateswarlu v. Government of Andhra Pradesh, which dealt with the classification of parched rice and puffed rice under the Andhra Pradesh General Sales Tax Act. The Court distinguished these cases based on the specific language and context of the Central Sales Tax Act.

5. Constitutional Framework and Limitations on the State Legislature's Power to Tax Declared Goods:
The Court examined the constitutional framework, particularly Article 286 and Entries 54 and 92-A of the Seventh Schedule, which govern the State Legislature's power to tax goods. Article 286 imposes restrictions on taxing inter-State sales and declared goods. The Court reiterated that the restrictions under Sections 14 and 15 of the Central Sales Tax Act must be construed strictly, limiting the State Legislature's power to tax only the goods expressly mentioned as declared goods.

Conclusion:
The Supreme Court held that flour, maida, and suji derived from wheat are not "wheat" within the meaning of Section 14(i)(iii) of the Central Sales Tax Act. These derivatives are distinct and different commodities from wheat and are not declared goods. The judgments of the Karnataka and Patna High Courts were set aside, and the appeals preferred by the dealers were dismissed. The Court emphasized that any change in the classification of these derivatives as declared goods should be made by Parliament through necessary amendments.

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