1998 (6) TMI 542 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Correctness of the judgment in State of Andhra Pradesh v. Jayanti Oil Mills Private Ltd. (1995) 20 APSTJ 255.
2. Interpretation of entry 24(a) and 24(b) of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957.
3. Discrimination in tax rates for groundnut oil extracted from groundnut versus groundnut oil cake.
4. Violation of Article 14 of the Constitution of India.

Summary:

1. Correctness of the Judgment in Jayanti Oil Mills Case:
The judgment in Jayanti Oil Mills Private Ltd. (1995) 20 APSTJ 255 was questioned for its literal interpretation of entry 24(a) and (b) of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957. The learned Judges felt that the judgment required reconsideration, particularly in the context of discriminatory rates of tax based on the source of the groundnut oil.

2. Interpretation of Entry 24(a) and 24(b):
Entry 24 of the First Schedule to the Act differentiates between groundnut oil extracted from groundnut that has already met tax (taxed at 2 paise in the rupee) and groundnut oil not covered by this sub-item (taxed at 6 paise in the rupee). The court noted that the end-product, groundnut oil, should not be subjected to different tax rates based on the raw material used for its extraction.

3. Discrimination in Tax Rates:
The court found that the same end-product, groundnut oil, was subjected to different tax rates depending on whether it was extracted from groundnut or groundnut oil cake. This was deemed arbitrary and discriminatory. The court highlighted that groundnut oil extracted from groundnut cake should not cost more than oil extracted directly from groundnut, as both are essentially the same product.

4. Violation of Article 14:
The court declared that entry 24(a) suffers from discrimination and is violative of Article 14 of the Constitution of India. The court emphasized that groundnut oil, regardless of whether it is extracted from groundnut or groundnut cake, should be subjected to the same rate of tax. The judgment in Jayanti Oil Mills' case was overruled for not considering the issue from the angle of Article 14.

Conclusion:
The court concluded that groundnut oil extracted from groundnut cake, which has already suffered tax, should be subjected to the same rate of tax as groundnut oil extracted from groundnut. Entry 24(a) of the First Schedule to the Act was declared discriminatory and violative of Article 14 of the Constitution of India. The reference was answered accordingly.