1986 (6) TMI 233 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exemption of "lisa sugar" under Section 8 of the Karnataka Sales Tax Act.
2. Interpretation of the term "sugar" in the context of the Karnataka Sales Tax Act.
3. Applicability of the definition of "sugar" from the Central Excises and Salt Act, 1944, and the Central Sales Tax Act, 1956.
4. Legality of the Commissioner's direction to assess the turnover under Section 5(1) instead of Section 5(4) of the Act.

Issue-wise Detailed Analysis:

1. Exemption of "lisa sugar" under Section 8 of the Karnataka Sales Tax Act:
The assessee, a partnership firm engaged in the manufacture and sale of "lisa sugar," claimed exemption from payment of tax on the sales turnover of "lisa sugar" under Section 8 of the Karnataka Sales Tax Act. The CTO initially accepted this claim. However, the Commissioner, upon review, directed the CTO to levy tax on the sales turnover of "lisa sugar" under Section 5(1) of the Act. The primary contention was whether "lisa sugar" qualified as "sugar" under Entry 31-B of the Fifth Schedule, which exempts certain goods from tax.

2. Interpretation of the term "sugar" in the context of the Karnataka Sales Tax Act:
The court examined whether "lisa sugar" could be considered "sugar" under Entry 31-B of the Fifth Schedule. The definition and understanding of "sugar" were analyzed based on common parlance and commercial sense. The court referenced several precedents, including the Supreme Court's ruling in Indo International v. Commissioner of Sales Tax, which emphasized interpreting tax items based on their popular meaning rather than scientific or technical definitions. The court concluded that "lisa sugar," which contains additives like glucose and starch and is used exclusively for confectionery, does not retain the identity of ordinary sugar as understood in common parlance.

3. Applicability of the definition of "sugar" from the Central Excises and Salt Act, 1944, and the Central Sales Tax Act, 1956:
The assessee argued that the definition of "sugar" in the Central Excises and Salt Act, 1944, and adopted in Section 14(viii) of the Central Sales Tax Act, 1956, should apply. However, the court noted that the State Act deliberately did not adopt this definition. The court held that the definition of "sugar" in the Central Acts was specific to those Acts and not applicable to the Karnataka Sales Tax Act. Therefore, the definition of "sugar" in the context of the State Act should be interpreted independently.

4. Legality of the Commissioner's direction to assess the turnover under Section 5(1) instead of Section 5(4) of the Act:
The court examined whether the Commissioner's direction to assess the sales turnover of "lisa sugar" under Section 5(1) was legal. Given that "lisa sugar" was determined to be a different commodity from ordinary sugar and not covered by any specific entries in the Second and Third Schedules, it was classified as an unclassified article. As such, it attracted tax under Section 5(1) of the Act. The court found the Commissioner's direction to be legal and valid.

Conclusion:
The court upheld the Commissioner's decision to levy tax on "lisa sugar" under Section 5(1) of the Karnataka Sales Tax Act, dismissing the appeal. The court emphasized that "lisa sugar" did not qualify as "sugar" under Entry 31-B of the Fifth Schedule and was not exempt from tax. The court also clarified that the definition of "sugar" in the Central Acts was not applicable to the State Act, and the interpretation should be based on common parlance and commercial sense. The appeal was dismissed, and each party was directed to bear its own costs.