1987 (9) TMI 393 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of tax liability for scented supari and gutka under different entries of the M.P. General Sales Tax Act.

Detailed Analysis:

1. Background and Reference: The case involves a reference under section 44(1) of the M.P. General Sales Tax Act regarding the tax treatment of scented supari and gutka. The Commissioner of Sales Tax sought clarification on whether these items should be taxed at 8% under entry No. 39 of Part III or 10% under entry No. 1 of Part VI of Schedule II of the Act.

2. Contentions of the Parties: The assessee argued that scented supari and gutka should be considered processed betel nuts falling under entry No. 39, while the department contended that they should be classified under the residuary entry as goods not included in any other part of Schedule II.

3. Interpretation of "Processed": The Court analyzed the meaning of "processed" as it was not defined in the Act. Referring to a Supreme Court case, the Court highlighted that processing involves subjecting raw material to a specific treatment for marketability, which does not include mere mixing or adding of ingredients like scent, menthol, sugar, dhania, and aniseed to betel nut. Scented supari and gutka are mixtures of edible ingredients, including betel nut, and cannot be categorized as raw or processed betel nuts.

4. Decision: The Court concluded that scented supari and gutka do not qualify as processed betel nuts under entry No. 39 but fall under the residuary entry in Part VI of Schedule II. Therefore, the Board of Revenue was not justified in taxing them at 8% and instead should be taxed at 10% under entry No. 1. The reference was answered in the negative, favoring the department, with no order as to costs.

5. Outcome: The judgment clarifies the tax liability classification for scented supari and gutka, emphasizing the distinction between processed betel nuts and mixtures containing betel nut. The decision provides clarity on the interpretation of relevant entries in the M.P. General Sales Tax Act, ensuring consistent application of tax rates for similar products in the future.