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1994 (4) TMI 316 - SC - VAT and Sales TaxWhether groundnut protein flour is a deoiled cake within entry 29 of Schedule I of the Act? Held that - Appeal allowed. It is true that the analyst report in this appeal does indicate that both deoiled cake and groundnut protein flour contain common properties but the use and purpose being different and distinct, they cannot be considered to be the same commodity. The groundnut protein flour is an edible protein food for human consumption and is a different commercially marketable entity and thereby is distinct from deoiled cake for animal feed though obtained in the course of same process at different stages. Both emerge into different and distinct commodities commercially known in common parlance for distinct and different use. Thereby groundnut protein flour did not remain part of the genus, i.e., deoiled cake, but became a new and different entity known in the commercial parlance. Accordingly it is exigible to CST at the relevant time at 4 per cent. The appeals, therefore, are allowed. The order of the High Court is set aside and that of the Deputy Commissioner and Commercial Tax Officer and Sales Tax Appellate Tribunal are confirmed.
Issues Involved:
1. Classification of groundnut protein flour under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act. 2. Determination of tax liability on groundnut protein flour. 3. Distinction between deoiled cake and groundnut protein flour for tax purposes. Issue-wise Detailed Analysis: 1. Classification of Groundnut Protein Flour: The core issue was whether groundnut protein flour falls under the category of "deoiled cake" within entry 29 of Schedule I of the Andhra Pradesh General Sales Tax Act. The respondent, a dealer in groundnut and its by-products, argued that groundnut protein flour should be classified as deoiled cake, which is subject to a lower tax rate. 2. Determination of Tax Liability: For the assessment year 1977-78, the Commercial Tax Officer, Kurnool, assessed the tax liability at 4% under the CST Act for groundnut protein flour. The Assistant Commissioner on appeal concluded it was deoiled cake, taxable at 1%. The Deputy Commissioner revised this, affirming the 4% tax rate, a decision upheld by the Sales Tax Appellate Tribunal. The High Court, however, ruled that groundnut protein flour is not a distinct product from deoiled cake, thus taxable at 1%. 3. Distinction Between Deoiled Cake and Groundnut Protein Flour: The Supreme Court examined whether groundnut protein flour is a distinct commercial product from deoiled cake. The manufacturing process involves decortication, solvent extraction, and further processing to produce groundnut protein flour, which is fit for human consumption. Deoiled cake, on the other hand, is used as animal feed. The Court emphasized that sales tax law aims to tax distinct commercial commodities. The Court referenced several precedents, including: - Ganesh Trading Co. v. State of Haryana: Rice produced from paddy is a distinct commodity. - State of Karnataka v. Raghurama Shetty: Wheat flour is distinct from wheat. - Rajasthan Roller Flour Mills Association v. State of Rajasthan: Flour, maida, and suji are distinct from wheat. - Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh: Fabricated forms of metal are distinct commercial commodities. - Atul Glass Industries P. Ltd. v. Collector of Central Excise: Glass mirrors are distinct from glass sheets. - Deputy Commissioner of Sales Tax v. Coco Fibres: Coconut fibre is distinct from coconut husk. The Court concluded that groundnut protein flour, being an edible product for human consumption, is a distinct commercial entity from deoiled cake used as animal feed. Despite common properties, their different uses and market recognition make them separate commodities. Thus, groundnut protein flour is subject to a 4% tax under the CST Act. Conclusion: The Supreme Court allowed the appeals, setting aside the High Court's order and confirming the decisions of the Deputy Commissioner, Commercial Tax Officer, and Sales Tax Appellate Tribunal. Groundnut protein flour is distinct from deoiled cake and taxable at 4%. Each party was directed to bear its own costs. Appeals allowed.
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