1986 (12) TMI 360 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 2(12A) of the Bombay Sales Tax Act, 1959 for oil refineries manufacturing edible and non-edible oils.

Analysis:
The judgment of the High Court of Bombay, delivered by S.W. Puranik, J., pertained to a dispute involving oil refineries challenging the interpretation of section 2(12A) of the Bombay Sales Tax Act, 1959. The key question revolved around whether the petitioners' unit could be categorized as an "edible oil unit" as defined in the Act. The relevant section defines an "edible oil unit" as engaged in specific activities including crushing of oil seeds and manufacturing edible oil. The dispute arose when the petitioners procured washed cotton seed oil and converted it into refined cotton seed oil, leading to a disagreement on the classification of their activities under the Act.

The petitioners contended that since washed cotton seed oil was classified as non-edible oil, their manufacturing process did not fall under the definition of an "edible oil unit." The Deputy Commissioner of Sales Tax, however, ruled that the refined cotton seed oil produced by the petitioners constituted edible oil, thereby making their unit assessable to sales tax. The petitioners challenged this decision, arguing that their activities did not align with the definition provided in the Act.

During the proceedings, the petitioners' counsel highlighted that the Act specifically outlined four types of activities for determining an "edible oil unit," none of which fully applied to the petitioners' operations. The counsel emphasized the distinction between crushing oil seeds and refining washed cotton seed oil, asserting that the latter did not meet the criteria for an "edible oil unit" under the Act.

The Government Pleader supported the impugned order, contending that since the final product was edible oil, the entire unit should be classified as an "edible oil unit." However, the Court emphasized the need for a strict interpretation of taxing statutes, stating that only activities explicitly mentioned in the definition could constitute an "edible oil unit." The Court rejected the argument that the word "and" in the relevant section should be construed as "or," emphasizing the importance of adhering to the statutory language.

Ultimately, the Court held that the petitioners' unit did not qualify as an "edible oil unit" under the Act for refining washed cotton seed oil into refined cotton seed oil. The impugned order was deemed unsustainable and quashed, granting relief to the petitioners in line with their prayer. The Court clarified that while the petitioners' crushing activities fell under the Act, their eligibility certificate would be restricted solely to the refining of washed cotton seed oil. The writ petition was partly allowed, with costs not awarded in the circumstances.