1997 (1) TMI 507 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of ragi flour under the Karnataka Sales Tax Act, 1957.
2. Interpretation of entry 40-A of the Fifth Schedule of the Act.
3. Validity of the circular issued by the Commissioner of Commercial Taxes dated March 16, 1990.
4. Application of the principle of contemporaneo expositio.
5. Applicability of Supreme Court judgments in Alladi Venkateswarlu v. Government of Andhra Pradesh and Rajasthan Roller Flour Mills Association v. State of Rajasthan.

Detailed Analysis:

1. Taxability of Ragi Flour:
The respondents, traders in agricultural products including ragi and ragi flour, were assessed for tax under the Karnataka Sales Tax Act, 1957. They contended that under section 8 of the Act read with entry 40-A of the Fifth Schedule, they were exempt from paying tax on ragi flour. The appellants argued that ragi and ragi flour were distinct goods, and ragi flour was not exempt from tax.

2. Interpretation of Entry 40-A:
The learned single Judge, relying on Alladi Venkateswarlu's case, held that ragi included ragi flour as there was no separate entry for ragi flour in the Act. The Judge concluded that grinding ragi into flour did not change its identity but merely made it more useful, similar to the Supreme Court's finding in Alladi Venkateswarlu's case where parched rice and puffed rice were considered forms of rice.

3. Validity of the Circular:
The circular issued by the Commissioner of Commercial Taxes dated March 16, 1990, was set aside by the learned single Judge, who held it to be against the law.

4. Application of the Principle of Contemporaneo Expositio:
The learned single Judge applied the principle of contemporaneo expositio, using a notification dated March 30, 1994, which exempted ragi flour from tax, to interpret the legislative intent regarding entry 40-A. However, this principle was deemed inappropriate for recent statutes by the appellate court, referencing the Supreme Court's judgment in Oswal Agro Mills Ltd. v. Collector of Central Excise.

5. Applicability of Supreme Court Judgments:
The appellate court found that the writ petitions were covered by the Supreme Court's judgment in Rajasthan Roller Flour Mills case, which held that wheat and its products (flour, maida, suji) were distinct commodities. The principle established was that goods derived from primary commodities are different commercial entities. The court emphasized that exemptions must be construed strictly, favoring the state in case of ambiguity, as held in Novopan India Ltd. v. Collector of Central Excise and Customs.

The appellate court concluded that the learned single Judge's reliance on Alladi Venkateswarlu's case was misplaced. The correct precedent was Rajasthan Roller Flour Mills, which established that derived products (like ragi flour from ragi) are distinct and not covered by the primary commodity's exemption.

Conclusion:
The appellate court set aside the judgment of the learned single Judge, dismissing the writ petitions filed by the respondents. The appeals were allowed with costs, affirming the taxability of ragi flour under the Karnataka Sales Tax Act, 1957. The principle of contemporaneo expositio was deemed inapplicable, and the Supreme Court's judgment in Rajasthan Roller Flour Mills was held as the correct legal precedent.