1997 (7) TMI 602 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of whether sugar candy falls within the ambit of entry 31-B of the Fifth Schedule to the Karnataka Sales Tax Act, 1957.
2. Determination of tax liability on sugar candy based on statutory definitions and schedule entries.
3. Application of legal precedent from the Supreme Court regarding the classification of commodities made from sugar.

Analysis:

The judgment addressed the issue of whether sugar candy, known as "kallusakkare," is exempt from tax under the Karnataka Sales Tax Act, 1957. The appellant, a registered dealer in sugar candy, challenged a communication from the Commissioner of Commercial Taxes, contending that sugar candy should be exempt from tax under entry 31-B of the Fifth Schedule. The Court examined the manufacturing process of sugar candy and noted that it contains over 90% sucrose, meeting the statutory definition of "sugar." This finding led to the conclusion that sugar candy falls under entry 31-B and is exempt from tax.

The Court delved into the relevant provisions of the State Act, specifically Section 5 for tax levy and Section 8 for exemptions. It compared the entries in the Second Schedule (S. No. 18A) and the Fifth Schedule (S. No. 31-B) to determine the tax applicability to sugar candy. By referencing the Central Act and the Tariff Act, which define "sugar" as having over 90% sucrose content, the Court established that sugar candy qualifies as "sugar" for taxation purposes. This interpretation led to the exemption of sugar candy from tax liability under the State Act.

Drawing on a Supreme Court precedent in the case of State of Gujarat v. Sakarwala Brothers, the Court highlighted the broad definition of "sugar" encompassing various forms of sugar-based commodities. The precedent emphasized that statutory definitions may differ from common parlance and should be applied accordingly. By applying this precedent to the present case, the Court overturned the lower court's decision and declared that sugar candy is indeed covered by entry 31-B of the Fifth Schedule, thus exempt from tax. The judgment concluded by allowing the writ appeal and setting aside the impugned order, with no costs awarded.

In summary, the judgment clarified the classification of sugar candy under the Karnataka Sales Tax Act, emphasizing statutory definitions and schedule entries. By aligning the composition of sugar candy with the definition of "sugar" and referencing legal precedents, the Court determined that sugar candy is exempt from tax liability.