1997 (2) TMI 509 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether maize oil manufactured and sold by the applicant is an edible oil.
2. Applicability of different definitions and standards of "edible oil" under various laws.
3. Interpretation of "edible oil" in common parlance versus technical standards.
4. Examination of relevant case law and precedents.

Issue-Wise Detailed Analysis:

1. Whether maize oil manufactured and sold by the applicant is an edible oil:
The core issue revolves around whether maize oil, in its crude form as sold by the applicant, qualifies as an edible oil. The Assessing Authority initially declined to classify maize oil as edible oil, arguing it required further processing to meet the standards under the Prevention of Food Adulteration Act, 1954. Consequently, a higher sales tax rate of 4% was levied instead of the concessional rate of 1%, resulting in an additional demand of Rs. 1,02,521.

2. Applicability of different definitions and standards of "edible oil" under various laws:
The term "edible oil" is not defined in the Punjab General Sales Tax Act or the Central Sales Tax Act. However, the Pulses, Edible Oil Seeds and Edible Oils (Storage Control) Order, 1977, defines "edible oil" as any oil used, directly or after processing, for human consumption, including hydrogenated vegetable oil. Additionally, the Ministry of Food and Civil Supplies, through a notification dated November 12, 1988, declared maize (corn) oil as an edible oil for manufacturing vegetable oil. The Prevention of Food Adulteration Rules, 1955, also lays down specific standards for maize oil.

3. Interpretation of "edible oil" in common parlance versus technical standards:
The court emphasized that the standards under the Prevention of Food Adulteration Rules are aimed at preventing food adulteration and ensuring public health, which may not be directly relevant for tax classification purposes. The court noted that the term "edible oil" should be interpreted based on its common usage. The court referenced several purchase orders and certificates indicating that the maize oil sold by the assessee met specific standards, such as containing less than 5% free fatty acids, making it suitable for use in manufacturing vegetable oil.

4. Examination of relevant case law and precedents:
The court examined various precedents:
- Chandausi Oil Mills v. Sales Tax Commissioner, U.P.: The term "edible" was interpreted to mean "fit to be eaten as food."
- Milkhi Ram Oil & Dall Mills v. State of Punjab: Washed cotton-seed oil was deemed an edible oil despite not meeting the Prevention of Food Adulteration Act standards.
- Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh: The term "coal" included "charcoal" based on common parlance.
- Bharat General and Textile Industries Ltd. v. State of Maharashtra: The court distinguished between edible and non-edible oils based on legislative enactments.
- Chhatar Extractions Pvt. Limited v. Excise and Taxation Commissioner, Punjab: Rice bran oil was not considered edible until refined.

The court concluded that maize oil, used as a major constituent in manufacturing vegetable ghee, falls within the common parlance understanding of "edible oil." The notifications and the common usage of maize oil in the food industry support this classification.

Conclusion:
The court answered the question in the affirmative, ruling in favor of the assessee and against the Revenue. Maize (corn) oil produced by the assessee-company is to be treated as edible oil for the purposes of taxation. The reference was answered affirmatively.