1989 (9) TMI 380 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the conversion of coffee seeds into coffee powder alters the identity of the goods for the purpose of exemption u/s 5(3) of the Central Sales Tax Act, 1956.
2. Whether the appellant is entitled to a refund of the sales tax paid under protest.

Summary:

Issue 1: Identity of Goods for Exemption u/s 5(3)

The appellant, a private limited company engaged in growing and manufacturing tea and registered as a coffee exporter, secured an order to supply 2,000 tonnes of coffee powder to Romania. To fulfill this order, the appellant purchased coffee seeds at an auction held by the Coffee Board. The Board demanded sales tax at 6% on the sale, arguing that the appellant was not entitled to exemption u/s 5(3) of the Central Sales Tax Act, 1956, as the coffee seeds had been converted into coffee powder, thereby altering their identity.

The appellant contended that the identity of the goods remained the same, as the coffee seeds had only been roasted and ground into powder without any chemical process or addition of other materials. The learned single Judge dismissed the writ petition, holding that the identity of the goods had changed and thus the exemption was not applicable.

On appeal, it was argued that the word "those goods" in section 5(3) should include coffee powder made from the seeds purchased. The court referred to various precedents, including Deputy Commissioner of Sales Tax v. Pio Food Packers and Sterling Foods v. State of Karnataka, which supported the view that mere processing does not change the identity of the goods.

The court concluded that the coffee seeds, even after being roasted and ground into powder, retained their original identity. Thus, the exemption u/s 5(3) of the Act was applicable to the appellant's case.

Issue 2: Entitlement to Refund of Sales Tax

The appellant paid the sales tax under protest to secure the coffee seeds and fulfill its contract with the foreign buyer. The appellant sought a refund of the tax paid, arguing that the transaction was exempt u/s 5(3) of the Act. The learned single Judge denied the refund, stating that the levy was on the Coffee Board and not the appellant.

The court held that since the appellant had paid the tax under protest and the sale transaction was exempt u/s 5(3), the appellant was entitled to a refund. The court adopted the procedure from Consolidated Coffee Ltd. v. Coffee Board, directing the State to refund the tax to the Coffee Board, which would then pass it on to the appellant.

Conclusion:

The writ appeal was allowed with costs, and the court directed the State to refund the sales tax to the Coffee Board, which in turn would refund the appellant.