2010 (9) TMI 973 - HC - VAT and Sales Tax

Whether caster de-oiled cake, neem de-oiled cake and mahua de-oiled cake are covered by entry 27 in Schedule B to the Act dealing with organic manure and chemical fertilizer, which were tax-free? Held that - Finding recorded by the Tribunal that items in question will fall under entry 27 and not under entry 6 of Schedule C does not call for any interference. No doubt, the items in question may appear to be specifically falling in entry 6 of Schedule C, having regard to the finding that the only use to which the items could be put was organic manure, the said items will stand excluded from entry 6 of Schedule C and will fall under entry 27 of Schedule B, as held by the Tribunal. Appeal dismissed.

Issues Involved:
1. Classification of caster de-oiled cake, neem de-oiled cake, and mahua de-oiled cake under the Haryana Value Added Tax Act, 2003.
2. Interpretation of entries in Schedule B and Schedule C of the Act.
3. Application of common parlance test and user test for classification of commodities.
4. Consideration of expert opinions and external aids in statutory interpretation.

Detailed Analysis:

1. Classification of Caster De-oiled Cake, Neem De-oiled Cake, and Mahua De-oiled Cake:
The primary issue was whether these items should be classified under entry 27 of Schedule B as "organic manure and chemical fertilizer," which are tax-free, or under entry 6 of Schedule C as "oil-cakes and de-oiled cakes," which are taxable at four percent. The Tribunal held that these items are organic manure and fall under entry 27, making them tax-free.

2. Interpretation of Entries in Schedule B and Schedule C:
The Tribunal's decision was based on the interpretation of the specific entries:
- Schedule B, Entry 27: "Organic manure and chemical fertilizer."
- Schedule C, Entry 6: "Oil-cakes and de-oiled cakes including de-oiled rice bran."

The Tribunal concluded that the items in question, being organic manure, fall under entry 27 of Schedule B. The court noted that these items increase organic matter in the soil and release plant nutrients, which aligns with the definition of organic manure.

3. Application of Common Parlance Test and User Test:
The Tribunal applied the common parlance test and user test to determine the classification. It was noted that:
- Common Parlance Test: The items are known in trade as organic manure.
- User Test: The items are used primarily as organic manure and not as cattle feed, which is a key characteristic of oil-cakes.

The court referenced several judgments to support the application of these tests, including:
- Dunlop India Ltd. v. Union of India: Emphasized the importance of common parlance in interpreting taxing statutes.
- Commissioner of Sales Tax v. Ram Chandra Asha Ram: Applied the predominant user test when a commodity could be put to more than one use.

4. Consideration of Expert Opinions and External Aids:
The court considered expert opinions and external aids in its interpretation:
- Expert Opinion: The Director of Agriculture, Haryana, classified the items as organic manure, which does not require a license under the Fertilizer (Control) Order, 1985.
- External Aids: The court referred to technical literature and industry practices to understand the nature and use of the items.

Conclusion:
The court upheld the Tribunal's decision, stating that the items in question are indeed organic manure and fall under entry 27 of Schedule B, making them tax-free. The court dismissed the writ petition, emphasizing that the classification should be based on the predominant use and common parlance understanding of the items.

Judgment:
The writ petition was dismissed, affirming the Tribunal's decision that caster de-oiled cake, neem de-oiled cake, and mahua de-oiled cake are classified as organic manure under entry 27 of Schedule B of the Haryana Value Added Tax Act, 2003.

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