1973 (1) TMI 86 - HC - VAT and Sales Tax

Issues Involved:
1. Whether paddy is subject to purchase tax under the U.P. Sales Tax Act.
2. Interpretation of the term "foodgrain" under Section 3-D of the U.P. Sales Tax Act.
3. Validity and scope of the notification dated 15th November 1971.
4. Whether the notification of 16th February 1965 exempting paddy from sales tax is still in effect.
5. Whether the State Government has adequately specified the foodgrains subject to tax.

Issue-wise Detailed Analysis:

1. Whether paddy is subject to purchase tax under the U.P. Sales Tax Act:
The petitioners, who are dealers in paddy, contended that paddy was not liable to purchase tax under the U.P. Sales Tax Act. They argued that the notification dated 15th November 1971 did not explicitly mention paddy as being subject to tax. The court analyzed the notification and concluded that paddy, being a type of foodgrain, falls under the purview of the tax imposed by the notification. The court stated, "Foodgrain, in our opinion, would include rice whether in commercially prepared form or in its original state, which is called paddy."

2. Interpretation of the term "foodgrain" under Section 3-D of the U.P. Sales Tax Act:
The court examined whether paddy could be considered a foodgrain. It was noted that foodgrain is a comprehensive term that includes all grains used as food by human beings. The court referenced various definitions and concluded that paddy, being unhusked rice, is indeed a foodgrain. The judgment stated, "Paddy is nothing but unhusked rice" and "Foodgrain includes cereals and pulses but excludes sawan, kodon, mandua, kisar, kisari dal, etc. Paddy has not been specifically excluded."

3. Validity and scope of the notification dated 15th November 1971:
The notification aimed to rescind previous notifications and impose tax on the turnover of purchases of foodgrains at all points of purchase. The court found that the notification sufficiently complied with the legal requirements by specifying the foodgrains subject to tax through a process of elimination. The judgment noted, "The notification sets out the foodgrains which are excluded. It means that the Government specified the foodgrains liable to tax by excluding therefrom such foodgrains as were not intended to be included."

4. Whether the notification of 16th February 1965 exempting paddy from sales tax is still in effect:
The petitioners argued that the exemption notification of 16th February 1965 was still in effect and had not been rescinded. The court clarified that the impugned notification was a composite notification issued under Section 3-D(1) and Section 21 of the General Clauses Act, which allowed the State Government to rescind previous notifications. The judgment stated, "The power to rescind a notification is to be found under section 21 of the U.P. General Clauses Act."

5. Whether the State Government has adequately specified the foodgrains subject to tax:
The petitioners contended that the State Government had not adequately specified the foodgrains subject to tax. The court disagreed, stating that the specification could be achieved by enumerating the foodgrains or through elimination. The judgment concluded, "The notification mentions only foodgrains without specifying all of them. It includes cereals and pulses and excludes certain grains. This, in our opinion, is adequate specification."

Conclusion:
The court held that the petitioners were rightly being asked to pay the purchase tax on the turnover of the purchases of paddy. The petitions were dismissed, and the judgment concluded with the statement, "The petitions fail and are dismissed. There will be no order as to costs."

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