2004 (4) TMI 543 - HC - VAT and Sales Tax

Summary

Issues:
1. Acceptance of account books despite discrepancies during assessment.
2. Taxability of "dalia" at the rate of 4 per cent as foodgrains.

Issue 1: Acceptance of Account Books
The Commissioner of Sales Tax raised the issue of whether the Sales Tax Tribunal was legally justified in accepting the account books of the dealer despite discrepancies detected during assessment and a survey. The Tribunal's decision to accept the account books was challenged. However, during arguments, the learned Standing Counsel focused only on the second question, indicating that the first question was considered a question of fact and not pressed seriously. As a result, the primary focus shifted to the taxability of "dalia."

Issue 2: Taxability of "Dalia"
The dispute centered around whether "dalia" should be taxed at the rate of 4 per cent as foodgrains or considered an entirely different commodity. The dealer argued that "dalia" was broken wheat and should not be categorized under ata, maida, or suji. The assessing authority treated "dalia" as an unclassified item and levied tax on it at 4 per cent. The Tribunal, in the second appeal, held that "dalia" constituted broken foodgrains and should not be taxed as a separate commodity since it was similar to unsplitted or unprocessed foodgrains. The Tribunal's decision was based on Notification No. 5787, which classified foodgrains at a tax rate of 4 per cent.

Legal Interpretation and Precedents
The judgment referred to various amendments to Section 3-D of the U.P. Sales Tax Act and relevant case laws to determine the taxability of processed foodgrains. The retrospective effect of Explanation II was highlighted, emphasizing that split or processed foodgrains are considered different from unsplit or unprocessed foodgrains for taxation purposes. The court cited precedents such as Commissioner of Sales Tax v. Badrimal Hiralal and Tilok Chand Prasan Kumar v. Sales Tax Officer to interpret the legal provisions. It was established that "dalia" was akin to broken wheat and not a distinct commercial commodity, aligning with common parlance and commercial sense.

Conclusion
The High Court upheld the Tribunal's decision, ruling that "dalia" should not be taxed as a separate commodity but treated as broken foodgrains similar to unsplitted or unprocessed foodgrains. The judgment emphasized the common understanding of "dalia" as broken wheat and its use in producing flour. Consequently, the revision filed by the Commissioner of Sales Tax was dismissed, affirming the Tribunal's justified view on the taxability of "dalia" as foodgrains.