1977 (4) TMI 162 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the proviso to section 3(1) of the Tamil Nadu General Sales Tax Act, 1959 regarding the levy of tax on rice starch sold by the assessee.

Analysis:
The High Court of Madras considered the revision petition filed by the State against the Sales Tax Appellate Tribunal's order regarding the levy of tax on rice starch sold by the assessee. The main issue was whether the rice starch sold by the assessee falls within the scope of the proviso to section 3(1) of the Tamil Nadu General Sales Tax Act, 1959, and should be taxed at 1 per cent. The assessee claimed that the starch made from contaminated rice should be considered a rice product and taxed at a lower rate. The lower authorities had taxed it at 3 per cent, but the Tribunal ruled in favor of the assessee, applying the proviso and levying tax at 1 per cent.

The proviso to section 3(1) specifies that certain items, including rice products, are subject to a tax rate of one per cent. The State argued that the concessional rate of tax should apply only to edibles and not inedibles. However, the Court disagreed, stating that the starch made from rice qualifies as a rice product since it came from rice, similar to rice flour or rice bran. The Court noted that the proviso does not restrict the term "rice product" to only edibles, and the quality of the product, not its use, determines its eligibility for the concessional tax rate.

The Court emphasized that the proviso should not be construed as applicable only to edible items, as even edible items can be used for non-food purposes. Since the rice starch met the quality criteria of being a "rice product," the Tribunal correctly applied the proviso and taxed it at 1 per cent. Consequently, the Court dismissed the tax revision petition filed by the State and awarded costs to the assessee.