1984 (10) TMI 204 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether "cashew and its kernel" in item 88 of the Second Schedule are two different commodities or one commodity.

Detailed Analysis:
The judgment delivered by the Karnataka High Court pertains to a revision petition under section 23(1) of the Karnataka Sales Tax Act, 1957, challenging the levy of purchase tax on the turnover of raw cashewnuts for a specific assessment year. The petitioner, a company dealing in various commodities including cashewnuts, contested the tax imposed on the purchase of raw cashewnuts under section 6 of the Act. The assessing authority had determined the value of the purchased cashew and imposed tax on it, which was upheld by the appellate authorities. The Karnataka Appellate Tribunal partially allowed the appeal, confirming the tax on the purchase of raw cashewnuts but modifying the tax on the sale of cashew kernels. The core issue in question was whether "cashew and its kernel" should be considered as two distinct commodities or one commodity for tax purposes.

The judgment delves into the legislative history and amendments related to the classification of "cashew and its kernel" under the Sales Tax Act. It highlights the changes brought about by various amendment Acts, including the insertion of explanation VI to the Second Schedule, which exempts tax on the kernel pressed out of cashew if tax has been paid on the cashew itself. The court examines the provisions of section 6 of the Act, which outline the conditions for the levy of purchase tax, emphasizing that the goods purchased must be used in manufacturing or disposed of in a certain manner.

The arguments presented by both parties are scrutinized by the court. The petitioner's counsel contended that cashew and its kernel should be treated as one commodity, citing the legislative intent behind the amendments and the placement of both items under the same heading in the schedule. Conversely, the Government Advocate argued that the conversion of raw cashew into edible kernel results in a different commercial commodity, justifying the levy of tax on the purchase of raw cashewnuts.

The court references previous judgments, including one by the Supreme Court, which established that cashewnuts and kernels are commercially distinct commodities. While the petitioner relied on a decision from the Andhra Pradesh High Court, the Karnataka High Court disagreed with that interpretation, emphasizing the Supreme Court's definitive stance on the matter. The court also dismisses the argument that the placement of cashew and its kernel under the same entry implies they are one commodity, citing precedents that clarify such categorizations.

Ultimately, the court concludes that the legislative intent behind the amendments and the application of section 6 of the Act warrant the imposition of tax on the purchase turnover of raw cashewnuts. The exemption clause in explanation VI is interpreted as a concession to exempt tax on the kernel, not indicative of treating both items as a single commodity. As all conditions for the levy of tax under section 6 are met, the court upholds the tax on the purchase turnover of cashew, dismissing the petition with no costs awarded.