1978 (11) TMI 145 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of "anand pashu ahar" under Gujarat Sales Tax Act, 1969.
2. Classification of "anand pashu ahar" under specific entries of the Gujarat Sales Tax Act, 1969.
3. Determination of whether "anand pashu ahar" is a mechanically produced cattle-feed or oilcake.
4. Application of relevant Government notifications and legislative intent.

Detailed Analysis:

1. Taxability of "anand pashu ahar" under Gujarat Sales Tax Act, 1969
The primary issue was whether "anand pashu ahar" is taxable under the Gujarat Sales Tax Act, 1969. The Deputy Commissioner of Sales Tax concluded that "anand pashu ahar," used as cattle-feed, retained the characteristics of oilcakes and thus was not exempt from tax under entry 21 of Schedule I. It was also determined that the product was not a mechanically produced cattle-feed, thus not covered by entry 25 of the Government notification issued under section 49. Consequently, it was classified under entry 11 of Schedule II-Part B, making it taxable.

2. Classification of "anand pashu ahar" under specific entries of the Gujarat Sales Tax Act, 1969
The Tribunal considered four entries: entry 21 of Schedule I, entry 25 of Schedule II-Part A, entry 11 of Schedule II-Part B, and entry 25 of the Government notification dated 29th April, 1970. The Tribunal stated that "all cattle-feeds are not exempt from tax" and emphasized that oilcakes are specifically excluded from entry 21 of Schedule I and are covered under entry 11 of Schedule II-Part B. Therefore, a product sold as cattle-feed must not fall within the category of an oilcake to be exempt.

3. Determination of whether "anand pashu ahar" is a mechanically produced cattle-feed or oilcake
The Tribunal examined whether "anand pashu ahar" ceased to be oilcake or retained its characteristics. The process described by the assessee involved cleaning cotton-seeds, removing cotton content, breaking the seeds, and crushing them to produce oilcakes. Additionally, salt and citric acid wash treatment were applied to remove toxic gossypol particles. Despite this, the Tribunal found no evidence that these processes altered the essential characteristics of oilcakes, concluding that "anand pashu ahar" remained oilcake and was taxable under entry 11 of Schedule II-Part B.

4. Application of relevant Government notifications and legislative intent
The Court noted that the Tribunal failed to distinguish between cattle-feed and oilcakes, both distinct commercial commodities. The relevant entries were:
- Entry 21 of Schedule I: Exempts non-mechanically produced cattle-feed, excluding oilcakes.
- Entry 25 of Schedule II-Part A: Covers mechanically produced cattle-feed.
- Entry 11 of Schedule II-Part B: Covers oilcakes and de-oiled cakes.
- Entry 25 of the Government notification: Exempts sales of mechanically produced cattle-feed from tax.

The Court emphasized that sales tax law aims to tax distinct commercial commodities. If "anand pashu ahar" emerged as a distinct commodity (cattle-feed) after processing oilcakes, it should be taxed accordingly. The Tribunal's failure to address whether "anand pashu ahar" became a distinct commercial commodity led to an erroneous conclusion.

Conclusion:
The Tribunal's approach was flawed as it did not properly assess whether "anand pashu ahar" transformed into a distinct commercial commodity. The Court declined to answer the reference, directing the Tribunal to re-evaluate the case in light of the observations made. The Tribunal must determine if "anand pashu ahar" is a mechanically produced cattle-feed and apply the appropriate tax entry. The reference was disposed of without a definitive answer, allowing the Tribunal to adjust its decision under section 69(4) based on the Court's guidance.