1991 (4) TMI 393 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of entry 44 of Schedule B of the Punjab General Sales Tax Act, 1948 regarding de-oiled cakes falling within the nomenclature of oil-cakes.

The judgment of the Court addressed the controversy surrounding the classification of de-oiled cakes under entry 44 of Schedule B of the Punjab General Sales Tax Act, 1948. Initially, the entry only mentioned "fertilizers," but later, the words "except oil-cakes" were added through a notification issued in 1972. The case involved Messrs. United Oil Mills, engaged in manufacturing solvent oil, selling de-oiled cakes locally and in inter-State commerce. The Assessing Authority considered de-oiled rice bran cakes as fodder and exempt from tax but deemed other de-oiled cakes as taxable. This decision was upheld in appeals and by the Tribunal, leading to the reference question on whether de-oiled cakes should be considered oil-cakes and taxable as such.

The Court referred to the historical context where the controversy arose regarding whether oil-cakes were fodder or fertilizers exempt from sales tax. A prior judgment had held that oil-cakes were both fodder and fertilizers, thus not liable for tax. Subsequently, the 1972 notification excluded oil-cakes from the exemption granted to fertilizers under entry 44. The key question was whether de-oiled cakes should be considered oil-cakes under the same entry, thereby denying them exemption from sales tax.

The argument presented by the respondent-State's counsel emphasized that de-oiled cakes should be classified as oil-cakes due to the residual oil content remaining after extraction. This position was supported by legal precedents where processed products were still considered the original substance. Conversely, the assessee's counsel argued that since the Legislature treated oil-cakes and de-oiled cakes as distinct categories in a separate entry, common parlance could not dictate that de-oiled cakes fell under the oil-cakes category. The legislative distinction between oil-cakes and de-oiled cakes supported the conclusion that de-oiled cakes should be exempt from sales tax.

Ultimately, the Court ruled in favor of the assessee, concluding that de-oiled cakes should be considered fertilizers and therefore exempt from sales tax based on the legislative differentiation between oil-cakes and de-oiled cakes. The reference was answered in the negative, favoring the assessee, with no costs imposed.