1980 (9) TMI 243 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exigibility to tax of the turnover pertaining to sales of roasted coffee beans, pure coffee, and French coffee.
2. Whether French coffee falls within the scope of the entry "coffee" under item 37 of the First Schedule to the Kerala General Sales Tax Act.
3. Justification for remanding the case to the assessing authority for further evidence production.

Issue-wise Detailed Analysis:

1. Exigibility to Tax of Turnover Pertaining to Sales of Roasted Coffee Beans, Pure Coffee, and French Coffee:

The assessee, a dealer in various coffee products, contended that the sales turnover related to products processed at its Coimbatore factory from raw coffee beans purchased in Kerala should be exempt from tax. The Sales Tax Officer accepted this contention for roasted coffee beans and pure coffee powder but held that French coffee was taxable as it was sold for the first time within the state. The Appellate Assistant Commissioner concurred, taxing only the chicory content in French coffee, assuming the pure coffee content was derived from the already taxed raw coffee beans. The Tribunal upheld the state's contention that the evidence was insufficient to connect the products sold with the raw coffee beans purchased in Kerala, remanding the case for further evidence production.

2. Whether French Coffee Falls Within the Scope of the Entry "Coffee" Under Item 37 of the First Schedule to the Kerala General Sales Tax Act:

The Tribunal followed an earlier decision, concluding that French coffee is "coffee" within the meaning of entry 37. However, the High Court disagreed, emphasizing that French coffee, a mixture of 55% pure coffee and 45% chicory, cannot be regarded as "coffee" under entry 37. The Court referenced the Prevention of Food Adulteration Act, which treats coffee and coffee-chicory mixtures as distinct items. The Court concluded that French coffee is not the same as "coffee" and thus should be treated as first sales within the state, making it exigible to tax.

3. Justification for Remanding the Case to the Assessing Authority for Further Evidence Production:

The Tribunal's decision to remand the case for further evidence was contested by the state, arguing that the assessee had already been given ample opportunity to present evidence. The High Court found no justification for interfering with the Tribunal's remand order. However, for the assessment years 1969-70, 1970-71, and 1971-72, the remand was limited to considering the tax liability of the chicory content in French coffee since the state had not appealed the Appellate Assistant Commissioner's decision. For the years 1972-73, 1973-74, and 1974-75, the assessing authority was directed to investigate the sales turnover of roasted coffee beans and pure coffee, allowing the assessee to establish that these products were made from raw coffee beans purchased within the state.

Conclusion:

The High Court allowed the revision petitions partially, setting aside the Tribunal's view that French coffee is the same as "coffee" under entry 37. The sales of French coffee are to be treated as first sales within the state and are taxable. The remand order by the Tribunal was upheld, but with specific directions for different assessment years. The parties were directed to bear their respective costs.