1971 (4) TMI 91 - HC - VAT and Sales Tax

Summary

Issues:
Sales tax liability on the sale of parched rice, gram, and dal. Interpretation of exemption under section 6 of the Act for cereals and pulses, including all forms of rice.

The judgment of the court addressed four sales tax references relating to different assessment years. The assessee, a Hindu undivided family firm, engaged in the business of purchasing and selling various food items after processing them through parching. The assessing authority determined the turnover and taxable quantum based on estimates due to the absence of proper records. The assessee contended that the sale of parched rice, gram, and dal should be exempt from tax under section 6 of the Act as they fall under the category of tax-free goods listed in the Second Schedule. The assessing authority, however, considered these sales as of manufactured goods, not raw cereals and pulses, and imposed tax liability.

Multiple appeals were filed by the assessee, leading to partial acceptance by the Appellate Assistant Commissioner of Sales Tax for some assessment years. However, subsequent revision petitions were dismissed by the Commissioner of Sales Tax and the Additional District Judge. The assessee then sought a reference to the High Court under section 21(1) of the Act, which was initially denied but later granted by a Division Bench. The questions referred to the High Court pertained to the assessment years and the interpretation of the exemption for cereals and pulses, including all forms of rice under section 6 of the Act.

The High Court analyzed the meaning of "cereals" and "all forms of rice" under the exemption provision. It concluded that the exemption covered rice in various shapes and conditions, including parched rice. The court highlighted that the exemption did not apply when goods were sold in sealed containers, indicating its applicability to small transactions by petty shopkeepers. The court cited precedents from other jurisdictions to support its interpretation that processed forms of cereals retained their exemption status.

Based on the interpretation of the exemption provision and the nature of the goods sold by the assessee, the High Court held that parched rice, gram, and dal qualified as cereals within the exemption category. Therefore, these items were deemed exempt from sales tax under the Act unless sold in sealed containers. Consequently, the court answered the questions raised in favor of the assessee, concluding that there was no material to sustain the tax assessment on the mentioned goods for the relevant assessment years. The assessee was awarded costs, and the reference was answered accordingly.