1998 (7) TMI 655 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of barley and malt as separate commodities.
2. Taxability of malt under the Central Sales Tax Act, 1956.
3. Definition and classification of foodgrain and cereals.
4. Applicability of the notification dated April 30, 1977, to malt.

Detailed Analysis:

1. Classification of Barley and Malt as Separate Commodities:
The court initially decided that barley and malt are two different commodities, with malt being taxable separately from barley as an unclassified item at 8%. This decision was challenged, leading to a special leave petition before the Supreme Court and a rectification application before the High Court. The High Court directed the Sales Tax Tribunal to consider whether malt, derived from barley, could be classified as foodgrain or cereal under section 14 of the Central Sales Tax Act and relevant notifications.

2. Taxability of Malt under the Central Sales Tax Act, 1956:
The department argued that malt, being an industrial product used in manufacturing alcoholic beverages and food products like Horlicks and Boost, should not be classified as foodgrain or cereal. They cited various Supreme Court decisions to support their stance that malt is distinct from barley and should be taxed as an unclassified item.

3. Definition and Classification of Foodgrain and Cereals:
The court examined the definitions of "barley" and "malt" from various sources, including dictionaries and agricultural handbooks. It was noted that malt is essentially germinated barley and retains its identity as barley even after the malting process. The court referenced definitions that described malt as a form of grain and cereal, supporting the argument that malt should be considered a foodgrain.

4. Applicability of the Notification Dated April 30, 1977, to Malt:
The notification in question extended the definition of foodgrains to include cereals and pulses not listed in section 14 of the Central Sales Tax Act. The court concluded that since barley is a foodgrain, malt, being a form of barley, should also be classified as a foodgrain. The court emphasized that malt retains its food value and is used in various food products, reinforcing its classification as a cereal and foodgrain.

Conclusion:
The court determined that malt, derived from barley, is a foodgrain and falls under item No. 3 of the notification dated April 30, 1977. Consequently, malt should be taxed at the rate applicable to foodgrains under the said notification. The revision application was dismissed, and the court held that malt is entitled to be taxed at the rate provided under the notification, not as an unclassified item.

Final Judgment:
The revision application was dismissed, and there was no order as to costs. The court affirmed that malt is a foodgrain and should be taxed accordingly under the notification dated April 30, 1977.