2008 (3) TMI 632 - HC - VAT and Sales Tax

Whether maize and flattened maize (maize poha) are one and the same commodity so as to be covered by the term maize under the heading cereal in entry No. 9 of the Second Schedule to the Kerala General Sales Tax Act, 1963 or a different commodity liable to be assessed as an unclassified item taxable under the residuary entry? Held that - Having regard to the employment of the words that is to say , we cannot expand the scope of the entries. In doing so, we would be unjustifiably interfering with the power of the State to levy tax on a commodity which is commercially different from cereal in question, namely, maize. Undoubtedly, maize poha is the product of manufacture. What was not edible is transformed into the edible form. As found by the Tribunal, it differs in size, shape and structure. It has a higher utility. We also find merit in the finding of the Tribunal that the raw material is consumed. We would accordingly hold that maize and maize poha are commercially different commodities, and maize poha is not covered by the term maize under cereal in entry 9 of the Second Schedule to the KGST Act. Accordingly, we reject these revision petitions and confirm the orders passed by the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode.

Issues Involved:
1. Whether maize and flattened maize (maize poha) are the same commodity under the term "maize" in the Second Schedule to the Kerala General Sales Tax Act, 1963, or if they are different commodities liable to be assessed under the residuary entry.

Issue-wise Detailed Analysis:

1. Nature of Maize and Maize Poha:
The primary issue in these tax revision cases is the classification of maize and maize poha under the Kerala General Sales Tax Act, 1963 (KGST Act). Specifically, the court considered whether maize poha falls under the term "maize" in entry 9 of the Second Schedule, which lists cereals, or if it should be classified as an unclassified item under the residuary entry.

2. Assessment and Appellate Authority Findings:
The assessments for the years 1991-92, 1997-98, 1998-99, 1999-2000, and 2000-01 were completed by the assessing authority, which found maize and maize poha to be commercially different commodities. This view was confirmed by the first appellate authority. However, the Kerala Sales Tax Appellate Tribunal initially held that maize and maize poha are the same commodity, a decision later challenged by the State and remanded by the High Court for reconsideration.

3. Tribunal's Post-Remand Findings:
Upon remand, the Tribunal concluded that maize and maize poha are commercially different commodities due to the manufacturing process involved in converting maize into maize poha. This finding was based on the Supreme Court's decision in the Rajasthan Flour Mills case [1993] 91 STC 408, which emphasized that a new and different article must emerge from the manufacturing process to be considered a separate commodity.

4. Arguments by Assessee:
The assessee argued that maize poha is obtained by mere steaming and flattening of maize without adding any ingredients, and thus retains its identity as a cereal. They cited the Allahabad High Court's decision in Commissioner of Sales Tax v. Anand Ram Hari Ram [1982] UPTC 987, which held maize poha to be a food grain (cereal), and relied on the Supreme Court's rejection of the State's special leave petition in that case.

5. Arguments by Revenue:
The Revenue contended that maize poha, being a processed product, is a commercially different commodity from maize. They referenced several Supreme Court decisions, including State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 and State of Karnataka v. B. Raghurama Shetty [1981] 47 STC 369, to support their argument that processed products should be treated as distinct commodities for tax purposes.

6. Court's Analysis and Conclusion:
The court examined the nature of maize and maize poha, noting that maize is a cereal included under entry 9 of the Second Schedule to the KGST Act. However, the process of heating, steaming, and flattening maize to produce maize poha results in a new commercial commodity with different characteristics and uses. The court applied the principles laid down in the Rajasthan Flour Mills case and other relevant decisions to conclude that maize and maize poha are commercially different commodities. Therefore, maize poha does not fall under the term "maize" in entry 9 of the Second Schedule and should be classified under the residuary entry.

7. Final Judgment:
The court rejected the revision petitions filed by the assessee and confirmed the orders passed by the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode, which classified maize poha as an unclassified item taxable under the residuary entry. All pending interlocutory applications were dismissed, and no order was made as to costs.

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