1990 (8) TMI 364 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of taxability of sugar-candy under the Orissa Sales Tax Act, 1947.

Analysis:
The case involved a reference under section 24(1) of the Orissa Sales Tax Act, 1947, regarding the taxability of sugar-candy. The Revenue questioned whether the Judicial Member was correct in holding sugar-candy as tax-free despite being specifically made taxable at 4 per cent from May 1, 1976, by a Finance Department notification. The dealer argued that sugar-candy is similar to sugar, which is exempt from tax, citing a previous decision. The Tribunal allowed the dealer's appeals, leading to the reference before the High Court.

The Department contended that sugar-candy was explicitly mentioned as taxable at 4 per cent in a notification under section 5 of the Act from May 1, 1976. They argued that sugar and sugar-candy are distinct commercial commodities, with sugar being tax-free under section 6 of the Act, while sugar-candy is taxable. On the other hand, the dealer asserted that there is no difference between sugar and sugar-candy, relying on a previous decision. The Court noted that while sugar-candy falls under the category of sugar when not treated separately, if it is identified as a distinct commodity for taxation purposes, it cannot be considered tax-free like sugar.

The Court emphasized that sugar-candy was not listed separately in the tax-free category under the Act before the notification dated April 23, 1976. The notification specifically mentioned sugar as tax-free but introduced sugar-candy as taxable at 4 per cent from May 1, 1976. The Court highlighted the clear intention of the notifying authority to tax sugar-candy separately from sugar. Therefore, the Court concluded that sugar-candy is taxable from May 1, 1976, and cannot be considered tax-free like sugar.

In a unanimous decision, the Court answered the question against the dealer, stating that the Judicial Member was not justified in holding sugar-candy as tax-free when it had been made taxable at 4 per cent from May 1, 1976. The reference was thus answered in the negative, affirming the taxability of sugar-candy as per the Finance Department notification.

The judgment, delivered by Justices S.C. Mohapatra and J.M. Mahapatra, clarified the distinction between sugar and sugar-candy for tax purposes, emphasizing the specific notification introducing sugar-candy as a taxable commodity.