1979 (3) TMI 186 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether cashew kernel is exigible to sales tax at the point of first purchase in the State when the cashewnut from which it has been taken out had already been subjected to tax.

Issue-wise Detailed Analysis:

1. Whether cashew kernel is exigible to sales tax at the point of first purchase in the State when the cashewnut from which it has been taken out had already been subjected to tax:

The petitioners, who are dealers in cashew kernel, argued that the cashewnut had already suffered taxation and thus the kernel should not be taxed again. The assessing authorities and the Sales Tax Appellate Tribunal, however, held that kernel is a different commodity from cashewnut and both are liable to be taxed at the point of their first purchases in the State. The main question to be decided was whether cashewnut and kernel mentioned in item 12 of the Second Schedule of the A.P. General Sales Tax Act, 1957, are different commodities and are separately taxable.

The petitioners' counsel raised three contentions:
1. Cashewnut and kernel are not two different commodities but, in substance, are one commodity.
2. Cashewnut includes and contains kernel and, when the former has been taxed, the latter cannot be separately taxed.
3. When two views on the meaning of an entry in taxation law are possible, the courts should adopt the view favorable to the assessee.

The court examined the relevant provisions of the Andhra Pradesh General Sales Tax Act, 1957. Section 5(2)(b) specifies that goods in the Second Schedule, including "cashewnut and kernel," are taxable only at the point of first purchase in the State. The court noted that the intention of the legislature was to levy tax only at the point of first purchase in the State on cashewnut and kernel.

The court also considered the common and commercial parlance, which generally does not distinguish between cashewnut and its kernel. It was observed that when a purchaser asks for cashewnut in the market, they mean its kernel. The court relied on several precedents, including the Supreme Court's decisions in Mangulu Sahu Ramahari Sahu v. Sales Tax Officer and Alladi Venkateswarlu v. Government of Andhra Pradesh, which supported the view that cashewnut and kernel are not distinct commodities.

The court further noted that the word "and" in item 12 of the Second Schedule should not be construed to mean that both cashewnut and kernel are separately taxable. Instead, it is used to remove ambiguity and ensure exhaustive enumeration of the goods belonging to the same category. The court concluded that cashewnut and kernel are essentially the same commodity, and once cashewnut has been subjected to tax, the kernel cannot be taxed again.

The court also emphasized the well-accepted rule of construction that if a taxing provision is ambiguous and reasonably capable of more than one interpretation, the interpretation which is beneficial to the subject must be adopted.

Conclusion:

The court held that item 12 of the Second Schedule deals only with cashewnut, whether in the form of cashewnut or in the form of kernel. Therefore, kernel cannot be independently taxed when the cashewnut from which it has been taken out had already been subjected to tax. Consequently, the tax revision cases and writ petitions were allowed, and the parties were directed to bear their own costs.