2003 (1) TMI 296 - SC - VAT and Sales Tax

Whether desiccated coconut is covered under Serial No. 14 of Notification No. 12525 CTA-62/82-F. dated 22-3-1982? Held that - The appeal is accordingly allowed and the decision of the High Court is set aside and the question which had been formulated before the High Court is answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Interpretation of a notification regarding sales tax on desiccated coconut powder.
2. Application of relevant provisions of the Orissa Sales Tax Act, 1947.
3. Comparison with previous court decisions on similar matters.
4. Assessment of whether sales tax is applicable based on the purchase tax.

Issue 1: Interpretation of Notification:
The case involved a dispute regarding the imposition of sales tax on desiccated coconut powder sold by the appellant. The High Court concluded that desiccated coconut was not covered by a specific notification. However, the Supreme Court analyzed the notification and previous court decisions to determine if desiccated coconut fell within the definition of "coconut" as specified in the notification.

Issue 2: Application of Relevant Provisions:
The Supreme Court examined the relevant provisions of the Orissa Sales Tax Act, particularly sections 3-B and 5(1). It discussed a notification issued under section 3-B, which declared certain goods liable to tax on purchase turnover. The Court interpreted whether desiccated coconut manufactured by the appellant could be considered as falling within the definition of "coconut" in the notification.

Issue 3: Comparison with Previous Court Decisions:
The Court referred to a previous decision involving an identical provision in the Central Sales Tax Act, where desiccated coconut was considered to be within the definition of copra. The Court analyzed the reasoning behind that decision and applied it to the current case to establish that desiccated coconut should be treated as copra for taxation purposes.

Issue 4: Assessment of Tax Liability:
The Court addressed the argument that the appellant had not paid purchase tax on the raw coconuts used to manufacture desiccated coconut. It clarified that once a declaration was made subjecting goods to tax on purchase turnover, no sales tax would be payable on the sales of those goods. Therefore, the authorities should have recovered the purchase tax instead of imposing sales tax, as they were not authorized to do so under the relevant provision.

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's decision and ruling in favor of the appellant, emphasizing that no sales tax was payable on the goods covered by the notification.