2005 (3) TMI 448 - SC - VAT and Sales Tax

Whether germinated barley or malt is a cereal for the purposes of three notifications? Held that - Appeal dismissed. The notifications by which the rate of tax has been fixed in respect of foodgrains makes it clear that the definition of foodgrains in the notifications is wider than that in section 14 of the Central Sales Tax Act, 1956. It must be remembered that the notifications are not exception notifications but contain charging provisions. As such the onus to prove that the malted barley does not fall within foodgrains or cereals was on the Revenue. They have failed to discharge the onus. Both the Tribunal and the High Court have concurrently found that malted barley is a foodgrain or cereal for the purposes of the three notifications for reasons that cannot be discarded as perverse. We therefore see no reason to interfere with their conclusion.

Summary

Issues:
1. Whether germinated barley or malt is considered a cereal for the purposes of three notifications.

Analysis:
The dispute in the case revolved around the classification of germinated barley or malt as a cereal for the purposes of three notifications issued under the U.P. Sales Tax Act, 1948. The first notification, dated 30th May, 1975, included foodgrains, cereals, and pulses for taxation. The second notification, dated 11th September, 1976, applied a reduced tax rate to foodgrains other than those defined in the Central Sales Tax Act, 1956. The third notification, dated 30th April, 1977, taxed first purchases of foodgrains, cereals, and pulses. The respondent-assessee contended that even if malted barley was not a cereal under the Central Sales Tax Act, it should still be considered a foodgrain or cereal for the purposes of the notifications.

The High Court initially rejected the claim that malted barley was a cereal under the Central Sales Tax Act. The respondent-assessee then filed rectification applications, arguing that malted barley should be considered a foodgrain or cereal for taxation purposes. The High Court, in its order dated 21st September, 1994, remanded the case to the Sales Tax Tribunal to determine whether malt prepared from barley qualifies as a foodgrain or cereal under the notifications. The Tribunal, after re-examining various definitions, concluded that malt fell under the category of cereal in the notifications.

Upon review, the High Court upheld the Tribunal's decision, considering malt as a form of barley and a foodgrain within the scope of the notifications. The department challenged this decision, arguing that malt was not a cereal as per the remand order. However, the Supreme Court clarified that the remand order did not preclude malt from being classified as a foodgrain or cereal under the notifications. The Court analyzed various dictionary meanings and emphasized that malt was commonly understood as a foodgrain.

The Court highlighted that the notifications' definition of foodgrains was broader than that in the Central Sales Tax Act. It noted that the burden of proof lay with the Revenue to show that malted barley did not fall under the category of foodgrains or cereals, which they failed to do. Both the Tribunal and the High Court had found malted barley to be a foodgrain or cereal for taxation, a conclusion the Supreme Court saw no reason to overturn. Additionally, the Court pointed out that the question of law framed in the special leave petition was incorrect, as it did not align with the Tribunal's decision or the High Court's affirmation.

In conclusion, the Supreme Court dismissed the appeals, upholding the classification of malted barley as a foodgrain or cereal for taxation purposes under the notifications.