1991 (9) TMI 337 - HC - VAT and Sales Tax

Summary

Issues:
Whether the sale of mixture of articles which are exempt is exigible to tax?

Analysis:
The case involved a tax (revision) issue where the assessee challenged the order of the Tamil Nadu Sales Tax Appellate Tribunal regarding the taxation of a mixture of exempt articles. The assessee, a registered dealer, sold a mixture of various exempt items under the brand name "J.K. Feeds." The assessee contended that since the individual articles were exempt from sales tax, the compounded mixture should also be exempt. However, the sales tax authorities disagreed and imposed tax and penalty on the sales. The dispute centered around whether the mixture constituted a new taxable commodity or not.

The notification dated March 4, 1974, provided exemptions for specific items, including cattle feed, bangles, and firewood. Subsequent amendments refined the exemption, including specific items like rice bran, wheat bran, and dust of pulses and grams. The assessee's mixture included ingredients like rice bran, wheat bran, dust of pulses and grams, cholam, ragi, and salt, all of which were exempted at various times. The court examined the process of mixing and powdering the ingredients and concluded that it did not create a new taxable commodity. The authorities mistakenly believed that some ingredients were not exempt, but the court clarified that all components were covered by exemption notifications.

Referring to a previous case, the court emphasized that the mere mixing of exempt ingredients does not result in a new taxable product. Citing another case, the court reiterated that mixing ingredients previously subjected to sales tax does not make the resulting mixture taxable. Based on the facts and legal precedents, the court held that the mixture sold by the assessee, comprising only exempt ingredients, was not subject to sales tax. Consequently, the court allowed the revision petition, overturning the decisions of the lower authorities.

In conclusion, the court ruled in favor of the assessee, determining that the sale of a mixture of exempt articles was not exigible to tax. The court set aside the orders of the Tribunal and subordinate authorities, with no costs imposed on either party.