1978 (8) TMI 215 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Reimbursement of tax paid on paddy when rice is taxed under the Central Sales Tax Act.
2. Applicability of statutory amendments to the Central and State Acts.
3. Interpretation of tax rates and exemptions under the Central and State Acts.
4. Classification of paddy and rice as different commodities under sales tax laws.

Summary:

Issue 1: Reimbursement of Tax Paid on Paddy
The primary issue in the group of writ petitions is whether the tax paid on paddy, from which rice is procured and taxed under the Central Sales Tax Act (74 of 1956), should be reimbursed to the exporter. Dealers who paid tax on paddy demanded reimbursement. In some cases, the revenue initially reimbursed the exporter but later rescinded the order, prompting the dealers to seek the court's intervention to prevent such rescission.

Issue 2: Applicability of Statutory Amendments
The Central Act 74 of 1956 was amended by Act 103 of 1976, and the State Act 6 of 1957 was amended by the Andhra Pradesh Ordinance 18 of 1976, both effective from 7th September 1976. These amendments included paddy and rice as cereals of special importance in inter-State trade and commerce. Explanation III in the Third Schedule of the State Act 6 of 1957 states that the tax on rice procured from paddy should be reduced by the amount of tax levied on paddy.

Issue 3: Interpretation of Tax Rates and Exemptions
The State Government contended that the tax on rice under the Central Act is four per cent, the same as the tax on paddy under the State Act, making the dealers' claims untenable. However, the court referred to previous decisions, including the case of State of A.P. v. O. Venkateswarlu & Bros., which held that the tax on rice involved in inter-State trade procured from paddy should be reduced by the amount of tax levied on paddy. The court concluded that section 8(2A) and section 15(c) of the Central Act, read with items 21 and 22 of the State Act and explanation III in the Third Schedule, support the reduction of tax on rice by the amount of tax paid on paddy.

Issue 4: Classification of Paddy and Rice
The court rejected the argument that paddy and rice are not different commodities under the sales tax laws. It emphasized that goods should be construed from the standpoint of "popular sense" and "commercial sense," not based on botanical names or dictionary meanings. The Supreme Court in Ganesh Trading Co. v. State of Haryana held that paddy and rice are two different items, reinforcing that the contention of treating them as the same commodity is untenable.

Conclusion:
The court held that the tax paid on paddy is liable to be reduced or reimbursed when rice procured from such paddy is involved in inter-State trade. The writ petitions were allowed with the directions indicated, and no order was made for costs. Advocate's fee was set at Rs. 150 in each case. Petitions allowed.