1983 (12) TMI 263 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "neem ki khali" as manure (fertilizer) or oil-cake.
2. Exemption from tax under Notification No. ST-3470/X dated 16th July, 1956.
3. Applicability of Notification No. ST-II-2995/X-6(7)-73 dated 3rd April, 1975, and its amendment.
4. Interpretation of conflicting tax exemption entries.

Detailed Analysis:

1. Classification of "neem ki khali" as manure (fertilizer) or oil-cake:
The primary issue was whether "neem ki khali" (oil-cake of neem) should be classified as a manure (fertilizer) or an oil-cake for tax purposes. The Tribunal held that "neem ki khali" is a kind of manure and not an oil-cake, thus exempting it from tax. The learned Standing Counsel argued that "neem ki khali" falls under the category of oil-cake and should be taxed accordingly. The counsel for the assessee contended that "neem ki khali" is primarily used as manure and not as cattle feed, thus qualifying it as a fertilizer.

2. Exemption from tax under Notification No. ST-3470/X dated 16th July, 1956:
Notification No. ST-3470/X dated 16th July, 1956, exempts "fertilizers, other than chemical fertilizers" from tax. The learned Standing Counsel argued that "neem ki khali" does not fall under the category of fertilizer and thus should not be exempt from tax. However, the assessee's counsel argued that "neem ki khali" is generally used as a fertilizer and should thus be exempt under this notification.

3. Applicability of Notification No. ST-II-2995/X-6(7)-73 dated 3rd April, 1975, and its amendment:
Notification No. ST-II-2995/X-6(7)-73 dated 3rd April, 1975, made oil-cake liable to tax, which was later amended to increase the tax rate from 2% to 4%. The learned Standing Counsel argued that all types of oil-cakes, including "neem ki khali," are taxable under this notification. The Tribunal, however, noted that the exemption for fertilizers under Notification No. ST-3470/X dated 16th July, 1956, was never amended to exclude oil-cakes used as fertilizers. Therefore, "neem ki khali," being used as a fertilizer, should continue to enjoy the exemption.

4. Interpretation of conflicting tax exemption entries:
The Tribunal considered previous judgments to resolve the conflict between the two notifications. It was noted that if a commodity falls under two conflicting entries, the entry granting the exemption should be applied, as per the principle established in Diwan Rubber Industries v. Commissioner of Sales Tax and Commissioner of Sales Tax v. Onkar Nath Jagdish Prasad. The Tribunal found that "neem ki khali" is commonly known and used as a fertilizer, thus falling under the exemption provided by Notification No. ST-3470/X dated 16th July, 1956.

Conclusion:
The Tribunal's decision to classify "neem ki khali" as a fertilizer and exempt it from tax under Notification No. ST-3470/X dated 16th July, 1956, was upheld. The judgment emphasized that the exemption for fertilizers was never amended to exclude oil-cakes used as fertilizers, thereby allowing "neem ki khali" to continue enjoying tax exemption. The revision was dismissed, and both parties were directed to bear their own costs.