2009 (1) TMI 834 - AT - VAT and Sales Tax

Summary

Issues:
1. Interpretation of entry 35B of Schedule A to the West Bengal Value Added Tax Act, 2003 regarding taxation on de-husked water-melon seeds.

Analysis:
The petitioner, carrying on a proprietary business, raised a question on whether de-husked water-melon seeds should be taxed under entry 35B of Schedule A to the VAT Act or as a residual item under Schedule CA. The petitioner argued that the term "seed" should be understood in its common commercial usage and that de-husked water-melon seeds should be considered seeds falling under the exempted category. The petitioner relied on a Supreme Court decision stating that items treated as seeds in commercial circles should be considered as such for tax purposes.

The respondent contested the petition, claiming that de-husked water-melon seeds do not qualify as seeds under entry 35B as they lose germination capacity after de-husking and are not used for agricultural purposes but for enhancing taste in cooked items. The respondent argued that seeds with germination capacity should only be classified as seeds under the relevant entry.

The Tribunal analyzed the arguments and observed that the entry in question pertains to seeds used for agricultural or horticultural activities, defining "variety" as a sub-division of seeds identifiable by growth, yield, etc. It noted that the petitioner's seeds, after processing for cooking purposes, lose germination capacity and become a distinct commercial commodity with a different use. The Tribunal emphasized that the exemption for seeds under the entry is intended for agricultural or horticultural use, excluding items like de-husked water-melon seeds that do not serve that purpose.

To further evaluate the matter, the Tribunal sent samples of the seeds to an expert laboratory, which confirmed that 94% of the samples were dead seeds without germination capacity. Citing legal and common understanding that seeds are those capable of germination, the Tribunal concluded that de-husked water-melon seeds, lacking germination properties, do not meet the definition of seeds for tax exemption. Thus, the petition was disposed of with no costs awarded.

The Chairman concurred with the decision, affirming the Tribunal's analysis and conclusion regarding the classification of de-husked water-melon seeds for taxation under the VAT Act.