1970 (8) TMI 65 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether cotton seeds are considered oil-seeds under Section 14(vi) of the Central Sales Tax Act, 1956, and Entry (3) in Schedule 'C' to the Punjab General Sales Tax Act, 1948.

Detailed Analysis:

Issue 1: Classification of Cotton Seeds as Oil-Seeds
The core issue in both writ petitions was whether cotton seeds qualify as oil-seeds under Section 14(vi) of the Central Sales Tax Act, 1956 (Central Act), and Entry (3) in Schedule 'C' to the Punjab General Sales Tax Act, 1948 (Punjab Act). The relevant statutory provisions were examined:

Section 14(vi) of the Central Sales Tax Act:
"Oil-seeds, that is to say, seeds yielding non-volatile oils used for human consumption, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like."

Entry (3) in Schedule 'C' to the Punjab General Sales Tax Act:
"Oil-seeds, (including groundnut) that is to say, seeds yielding non-volatile oils used for human consumption, or in industry, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like."

The petitioners argued that cotton seeds should be classified as oil-seeds because oil is extracted from them on a commercial scale, primarily for human consumption in the form of vanaspati. They supported their argument with references from Encyclopedia Britannica and judgments from the Supreme Court, stating that cotton seed oil is a common oil used for producing vanaspati.

Supreme Court References:
1. Union of India and Another v. Delhi Cloth and General Mills Co. Ltd. - Cotton seed oil was mentioned as a common oil used for producing vanaspati.
2. State of Madras v. R.M. Krishnaswami Naidu and Others - Cotton seed oil was listed as an ingredient in vanaspati.
3. State of Orissa v. Dinabandhu Sahu & Sons - A communication from the Government of India listed cotton seed as an oil-seed.

The respondents relied on the judgment in State of Punjab and Others v. Chandu Lal Kishori Lal, where it was observed that cotton seeds are not declared goods. However, the court noted that this judgment did not specifically address whether cotton seeds are oil-seeds under Section 14(vi) of the Central Act.

Judicial Precedents:
1. Hans Raj Choudhri v. J.S. Rajyana - Groundnuts were not considered oil-seeds under the Punjab Act.
2. S. Kannappa Mudaliar v. The State of Madras - Coconuts were not considered oil-seeds under the Madras General Sales Tax Act.

The court emphasized that the test is whether the seeds are commonly known as oil-seeds and used principally for oil extraction. Cotton seeds meet this criterion as they are used to produce vanaspati, meant for human consumption.

Conclusion:
The court held that cotton seeds are oil-seeds as defined in Entry (3) of Schedule 'C' to the Punjab Act and Section 14(vi) of the Central Act. The oil produced from cotton seeds is used in industry for manufacturing vanaspati ghee, which is meant for human consumption.

Judgment:
The writ petitions were accepted, and the assessing authority was directed to amend the impugned orders to consider cotton seeds as oil-seeds. The court left the parties to bear their own costs due to the complexity of the issue.

Petitions allowed.