1995 (11) TMI 397 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry tax exemption for watery coconut under Entry Tax Act.

Detailed Analysis:
The judgment of the High Court of Madhya Pradesh pertains to the interpretation of the exemption from entry tax for watery coconut under the Entry Tax Act. The Tribunal referred a common question of law regarding the liability of watery coconut to entry tax under Entry Tax Act, based on the case of an assessee who traded in coconut and oil. The assessee contended that watery coconut should be exempt from entry tax, arguing that it falls within the definition of tender coconut and is not considered an oil-seed. The Tribunal rejected the appeals and held that watery coconut was not exempt from entry tax under Entry Tax Act.

The Court considered Section 6(1) of the Entry Tax Act, which specifies that tax shall be levied on goods listed in Schedule II at the rates mentioned in the corresponding entry. Entry 5(viii) of Schedule II specifically mentions "Coconut (i.e., copra excluding tender coconuts)," indicating that copra, excluding tender coconuts, is subject to tax. However, the provision does not explicitly include watery coconut, and the explanation of copra further clarifies this position, indicating that watery coconut is not a taxable item under the Act.

Referring to a Supreme Court decision in Sri Siddhi Vinayaka Coconut & Co. v. State of Andhra Pradesh, the Court highlighted that watery coconuts and dried coconuts are distinct commodities with different commercial uses. Additionally, a previous decision by the Court in Commissioner of Sales Tax, Madhya Pradesh, Indore v. Bakhat Rai and Co. established that not every article or seed capable of yielding oil qualifies as an oil-seed as per the law.

The Court emphasized that the key test is whether watery coconut can be classified as copra, as only copra is liable to tax under the Act. Since watery coconut does not meet the criteria to be classified as copra, it cannot be taxed. The Court concluded that the Tribunal erred in holding that watery coconut was not exempt from entry tax, ruling in favor of the assessee and against the department.

In conclusion, the Court answered the question in both reference applications negatively, in favor of the assessee. The reference applications were disposed of with no order as to costs, and the order was directed to be sent to the Tribunal for further proceedings in accordance with the law.