2008 (12) TMI 394 - SC - VAT and Sales Tax

Whether paddy husk and rice husk connote the same commodity or not? Held that - If something is included in the Schedule which is non-existent, no tax can be levied thereupon. Furthermore, if there is a doubt or dispute as to whether paddy husk or the rice husk denotes the same commodity or not, the benefit thereof shall be given to the assessee. Furthermore, it is not the case of the appellant that the respondent extracts any oil out of paddy husk . Therefore, evident that rice husk is still considered by the Government of Uttar Pradesh to be a different commodity. Thus if, according to the Government of Uttar Pradesh, rice husk is this cover which further requires husking, no exception thereto can be taken. When paddy is dehusked, it becomes paddy husk and when the rice is dehusked, it becomes rice husk.

Issues Involved:
1. Whether paddy husk and rice husk connote the same commodity.
2. The interpretation of statutory provisions and notifications under the Uttar Pradesh Trade Tax Act.
3. Application of precedents and common parlance test in defining commodities.
4. The legal distinction between paddy and rice, and its implications on tax liability.
5. The impact of amendments and notifications on the imposition of sales tax.

Detailed Analysis:

1. Whether paddy husk and rice husk connote the same commodity:
The primary issue was whether paddy husk and rice husk are the same commodity. The respondents used paddy husk as fuel and were assessed for sales tax under various notifications issued by the State of Uttar Pradesh. The court examined the definitions and common parlance of "husk" and concluded that paddy husk and rice husk are different commodities. The court noted that paddy husk is obtained after dehusking paddy, whereas rice husk is obtained after further processing rice. The court held that paddy husk and rice husk denote different commodities, rejecting the argument that they are synonymous.

2. Interpretation of statutory provisions and notifications under the Uttar Pradesh Trade Tax Act:
The court reviewed Section 3D of the Uttar Pradesh Trade Tax Act, which pertains to the levy of trade tax on certain goods. The State had issued notifications specifying the rate and point of tax for commodities, including rice husk and paddy husk. The court noted that paddy husk was explicitly included in the notifications for the first time on June 6, 1996. The court emphasized that tax imposition must be clear and unambiguous, as per Article 265 of the Constitution of India, and any ambiguity should benefit the assessee.

3. Application of precedents and common parlance test in defining commodities:
The court referred to precedents from the Allahabad High Court and Madhya Pradesh High Court, which had previously determined the meaning of "Bhusa" and "Bhusi" and their distinction from rice bran. The court applied the common parlance test, which considers how commodities are understood in everyday language. The court found that rice husk and paddy husk are distinct in common parlance, supporting the respondents' argument that they should be treated as separate commodities for tax purposes.

4. Legal distinction between paddy and rice, and its implications on tax liability:
The court reiterated the legal distinction between paddy and rice, as established in previous judgments such as Ganesh Trading Co., Karnal v. State of Haryana. The court held that paddy and rice are different commodities, and this distinction extends to their husks. Consequently, paddy husk and rice husk are different for tax purposes. The court noted that the State had not clarified this distinction in its notifications, leading to ambiguity.

5. Impact of amendments and notifications on the imposition of sales tax:
The court examined the amendments to the notifications over the years. It noted that paddy husk was included in the notifications for the first time in 1996, and the rate of tax was increased in subsequent notifications. The court held that these amendments were substantive and not merely clarificatory, meaning that paddy husk was subject to tax only from the date of its inclusion in the notifications. The court emphasized that any new tax imposition must be clear and explicit.

Conclusion:
The court concluded that paddy husk and rice husk are different commodities and should be treated separately for tax purposes. The court dismissed the appeals, affirming the High Court's decision in favor of the respondents. The court awarded costs to the respondents, assessing counsel's fee at Rs. 25,000 in each matter.

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