1990 (8) TMI 375 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether wheat bran and bran flakes fall under the exemption notification issued under section 17(1) of the Tamil Nadu General Sales Tax Act, 1959, under the heading "cattle feed."
2. Whether the amounts shown separately under the heading "administrative charges" in the sale bills of the appellants are includible in the taxable turnover.

Detailed Analysis:

1. Exemption of Wheat Bran and Bran Flakes:

The primary issue was whether wheat bran and bran flakes qualify for exemption as "cattle feed" under the Tamil Nadu General Sales Tax Act, 1959. The appellants argued that wheat bran is undoubtedly a cattle feed and should be exempt from tax. They contended that the Board of Revenue's view that wheat bran could be used for extracting oil or as chicken-feed and thus not qualify for exemption unless sold explicitly as cattle feed was incorrect. The appellants supported their argument by citing various judgments, including Mahabir Flour Mills v. Commissioner of Commercial Taxes, M.P. Shoe House v. State of M.P., and Sree Ramakrishna Cattle-feed Manufacturers v. Commercial Tax Officer.

The court noted that the exemption notification did not prescribe any condition that wheat bran must be sold exclusively as cattle feed to qualify for exemption. The court found that the Board of Revenue's assumption that wheat bran could be used for other purposes was not supported by the exemption notification. The court referred to the amendments to the notification, which did not alter the position that wheat bran is considered cattle feed. The court also considered letters exchanged between the Board of Revenue and the Southern India Roller Flour Mills Association, which clarified that wheat bran and bran flakes are exempt from tax.

The court concluded that wheat bran and bran flakes are eligible for exemption under the notification dated March 4, 1974, as amended, and the Board of Revenue's order to the contrary could not be sustained.

2. Inclusion of Administrative Charges in Taxable Turnover:

The second issue was whether "administrative charges" shown separately in the sale bills should be included in the taxable turnover. The appellants argued that these charges were post-sale charges collected and handed over to the Civil Supplies Department as per the directions of the Commissioner of Civil Supplies. They contended that the charges were not part of the sale price but were collected on behalf of the Civil Supplies Department to cover inspection and quality control expenses.

The court examined the circulars and government orders that mandated the collection of administrative charges and found that these charges were collected as a separate item and were not part of the sale price. The court referred to several judgments, including Joint Commercial Tax Officer v. Spencer & Co., E.I.D. Parry (India) Ltd. v. State of Tamil Nadu, Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax, and Food Corporation of India v. State of Kerala, which supported the view that such charges do not form part of the taxable turnover.

The court concluded that the administrative charges collected by the appellants and passed on to the Civil Supplies Department do not form part of the taxable turnover. The court noted that the Revenue had accepted a similar view in a previous decision by the Tamil Nadu Sales Tax Appellate Tribunal.

Conclusion:

The court allowed the appeals, holding that wheat bran and bran flakes are exempt from tax under the relevant notification and that administrative charges collected by the appellants do not form part of the taxable turnover. The court did not award any costs.