1970 (10) TMI 62 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether paddy and rice are considered the same "goods" or different "goods" under the Punjab and Haryana General Sales Tax Acts.
2. Whether the delivery of rice to the Government under compulsory levy constitutes a "sale."
3. Whether "chokar" is included in the term "husk" and thus exempt from sales tax under the Punjab General Sales Tax Act.

Detailed Analysis:

Issue 1: Whether paddy and rice are considered the same "goods" or different "goods" under the Punjab and Haryana General Sales Tax Acts

The court examined whether paddy and rice should be treated as the same commodity for the purpose of tax deductions under section 5(2)(a)(vi) of the Punjab and Haryana General Sales Tax Acts. The court analyzed the definitions and provisions of both Acts, noting that purchase tax is payable on paddy, while rice husked from paddy on which purchase tax has been paid is exempt from sales tax in Haryana. However, rice not husked from paddy on which purchase tax has been paid is subject to sales tax.

The court referred to various dictionary definitions and legal precedents to determine the commercial understanding of paddy and rice. The court ruled that paddy and rice are two distinct commodities in commerce and popular parlance. Paddy is used as seed for growing crops, while rice is a staple food. The court emphasized that the legislative intent, as evident from the Acts and notifications, treats paddy and rice as separate commodities. Therefore, no deduction can be allowed under section 5(2)(a)(vi) if paddy is not sold as paddy but rice extracted from it is sold.

Issue 2: Whether the delivery of rice to the Government under compulsory levy constitutes a "sale"

The court addressed whether the compulsory delivery of rice to the Government constitutes a sale. The assessing authorities had argued that such transactions were not sales due to the compulsory nature of the levy. However, the court referred to Supreme Court judgments which established that transactions under legal compulsion still constitute sales if mutual assent is not completely excluded. The court held that the compulsory levy does not vitiate the contract or the element of consent, and thus, such transactions are valid sales. However, to claim deductions under section 5(2)(a)(vi), it must be shown that the buyer (the Government) is a registered dealer.

Issue 3: Whether "chokar" is included in the term "husk" and thus exempt from sales tax under the Punjab General Sales Tax Act

In Civil Writ No. 1362 of 1970, the court considered whether "chokar" (bran) is included in the term "husk" under item No. 15 of Schedule 'B' of the Punjab Act, which exempts "husk of all foodgrains and pulses" from sales tax. The court referred to various dictionary definitions and concluded that "chokar" is indeed included in the term "husk." Therefore, the assessing authority erred in imposing sales tax on "chokar," and the claim of the petitioners should have been allowed.

Conclusion:
1. Paddy and rice are considered different commodities under the Punjab and Haryana General Sales Tax Acts, and no deductions can be allowed if paddy is not sold as paddy but rice extracted from it is sold.
2. The compulsory delivery of rice to the Government constitutes a sale, provided the Government is a registered dealer.
3. "Chokar" is included in the term "husk" and is thus exempt from sales tax under the Punjab General Sales Tax Act.

Judgment Summary:
The court dismissed the writ petitions except for Civil Writ No. 1362 of 1970, which was allowed to the extent that the order disallowing the claim in respect of the sales of "chokar" was quashed. The appeals and other writ petitions were dismissed without any order as to costs.