2004 (1) TMI 690 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the disputed commodity is rice husk and hence taxable at the first purchase as per Notification Nos. 5787/8th September, 1981 and 3712/5th June, 1985.
2. Whether paddy husk and rice husk are different commodities.
3. Whether the commodity purchased by the assessee is paddy husk or rice husk.

Detailed Analysis:

Issue I: Taxability of the Commodity as Rice Husk
The primary issue was to determine if the disputed commodity, paddy husk, is considered rice husk and thus taxable under Notification Nos. 5787/8th September, 1981, and 3712/5th June, 1985. The case of the revenue was that paddy husk is essentially rice husk and should be taxed under these notifications. Conversely, the dealer argued that paddy husk and rice husk are distinct commodities, and paddy husk is not covered under the mentioned notifications. The Tribunal and subsequent analysis concluded that paddy husk is not rice husk and is therefore not taxable under the specified notifications.

Issue II: Distinction Between Paddy Husk and Rice Husk
The court examined whether paddy husk and rice husk are different commodities. The Tribunal referred to various notifications and expert reports to conclude that paddy husk, the outer covering of paddy, is distinct from rice husk. Rice husk is obtained during the polishing process of rice and contains oil elements, unlike paddy husk. The notifications issued on 6th June 1996 and 30th September 2000, which separately list rice husk and paddy husk, reinforce this distinction. The court upheld the Tribunal's finding that paddy husk and rice husk are different commodities.

Issue III: Nature of the Commodity Purchased by the Assessee
The commodity in question was paddy husk, purchased by the assessee and used as fuel in their boiler. The Tribunal's findings, supported by expert reports and agricultural references, clarified that paddy husk does not contain oil and is not the same as rice husk. The court noted that the intention of the Legislature was to tax rice husk containing oil, which is not the case with paddy husk. Therefore, the commodity purchased by the assessee was paddy husk, not rice husk.

Conclusion:
The court dismissed the revisions, affirming that paddy husk and rice husk are distinct commodities. Paddy husk, being the outer covering of paddy and lacking oil content, is not taxable under the notifications in question. The subsequent notifications and expert opinions further supported this interpretation, leading to the conclusion that the assessee's purchases of paddy husk are not liable to tax as rice husk.