2009 (12) TMI 863 - HC - VAT and Sales Tax

Whether the commodity in question, which is in the nature of by-product of maize is subjected to payment of sales tax under the Sales Tax Acts and if so, under which entry and if they are exempt from payment of sales tax then under which entry? Held that - When there is a specific entry dealing with exemption then in such event, the general entry dealing with the commodity would not be attracted. Its application gets excluded. The petition succeeds and is allowed. Impugned orders (annexures P17A to 17E) passed by the Upper Commissioner are quashed by issuance of writ of certiorari. As a result thereof, the assessing officer is directed to pass fresh assessment orders for the period in question treating the two commodities to be exempt from payment of sales tax under Central/State sales tax laws during the period under consideration.

Summary

Issues Involved:
1. Taxability of "maize oil" and "cake" under the Central Sales Tax Act (CST Act) and the Madhya Pradesh General Sales Tax Act (MPGST Act) and Madhya Pradesh Commercial Tax Act (MPCT Act).
2. Applicability of exemption notifications to "maize oil" and "cake."
3. Validity of the revision orders passed by the Upper Commissioner of Commercial Tax.

Detailed Analysis:

1. Taxability of "maize oil" and "cake":
The primary issue is whether "maize oil" and "cake," by-products of "maize," are taxable commodities under the CST Act and MPGST/MPCT Acts, and if so, at what rate. The petitioner's contention was that these by-products are exempt from sales tax, while the State argued they are taxable at 2%.

2. Applicability of exemption notifications:
The petitioner argued that "maize oil" and "cake" are exempt from sales tax under the exemption notification dated March 30, 1994, issued under section 12 of the MPGST Act, which exempts "cereals" and "by-products of cereals" from tax. The petitioner cited clause (i)(vii) of the Schedule appended to the notification and clause (ii) of entry 91 of Schedule I of the MPCT Act, 1994, which deals with the exemption of specified commodities, including "by-products of cereals."

3. Validity of the revision orders:
The petitioner challenged the revision orders passed by the Upper Commissioner of Commercial Tax, which upheld the assessment orders taxing "maize oil" and "cake" at 2%. The petitioner contended that the orders were erroneous and contrary to the exemption notification.

Judgment:
The court allowed the writ petitions, quashing the impugned orders and directing the assessing officer to pass fresh assessment orders treating "maize oil" and "cake" as exempt from sales tax.

Analysis:
- Exemption Notification and Relevant Entries:
The court examined the exemption notification dated March 30, 1994, and relevant entries from the CST Act and MPCT Act. It noted that "cereals" specified in clause (i) of section 14 of the CST Act and their "by-products" are exempt from sales tax. Since "maize" is specified as a "cereal" and "maize oil" and "cake" are its by-products, they fall within the exemption provided by the notification and clause (ii) of entry 91 of Schedule I of the MPCT Act.

- Interpretation of Exemption Provisions:
The court emphasized that to determine whether a commodity is exempt, it must be established that it is a "by-product" of "cereals" specified in section 14 of the CST Act. Once this is established, the commodity is exempt from sales tax.

- Rejection of State's Argument:
The court rejected the State's argument that "maize oil" and "cake" should be taxed under entry 18 or 38 of Schedule II of the MPCT Act, which deals with "by-products of maize and vegetable oil." The court held that the specific exemption entry takes precedence over the general taxing entry.

- Overruling Commissioner's Opinion:
The court overruled the opinion of the Commissioner in the case of Tirupati Starch and Chemicals Ltd., which had influenced the assessing and revisional authorities. The court stated that its interpretation of the relevant entries and exemption notification takes precedence.

- Directive for Fresh Assessment:
The court directed the assessing officer to reassess the petitioner for the relevant periods, treating "maize oil" and "cake" as exempt from sales tax.

Conclusion:
The court concluded that "maize oil" and "cake" are exempt from sales tax under the CST Act and MPGST/MPCT Acts by virtue of the exemption notification dated March 30, 1994, and relevant entries in the MPCT Act. The impugned orders were quashed, and the assessing officer was directed to pass fresh assessment orders accordingly.