2017 (5) TMI 1540 - HC - VAT and Sales Tax

Classification of goods - whether watery coconut is a fruit covered by Entry 54 of Schedule I of the Chhattisgarh Commercial Tax Act, 1994? - Held that - the petitioners have made an attempt to persuade this Court to hold that watery coconut is not to be taxed as oil seed specified in clause (vi) of Section 14 of the Central Sales Tax Act, 1956, but is a fruit within the meaning of Schedule I, Entry 54 of the Chhattisgarh Commercial Tax Act, 1994. The legislature in Schedule I only included the fruits other than dry fruits including pind khajur and coconut. Coconut includes dry coconut as well as watery coconut as, watery coconut becomes dried coconut after some point of time - the petitioners contention that watery coconut is a separate class and distinct commodity from coconut in absence of any specific classification by the legislature, cannot be accepted. Watery coconut is not a fruit but is an oil seed within the meaning of clause (vi) of Section 14 of the Central Sales Tax Act, 1956, taxable at 4% as specified in item No.(viii) therein - petition dismissed - decided against petitioner.

Issues Involved:
1. Whether watery coconut is a fruit covered by Entry 54 of Schedule I of the Chhattisgarh Commercial Tax Act, 1994.
2. Whether the levy of tax on watery coconut as an oil seed is valid.

Issue-wise Detailed Analysis:

1. Whether watery coconut is a fruit covered by Entry 54 of Schedule I of the Chhattisgarh Commercial Tax Act, 1994:

The petitioners argued that watery coconut is a distinct commercial entity and should be exempted from tax under Entry 54 of Schedule I, which exempts "fruits other than dry fruits including pind khajur and coconut." They cited Supreme Court decisions, including P.A. Thillai Chidambara Nadar v. Additional Appellate Assistant Commissioner, which recognized coconut as a fruit, and Sri Siddhi Vinayaka Coconut & Co. v. State of Andhra Pradesh, which differentiated watery coconut from dry coconut. The petitioners claimed that Entry 54 is ambiguous and, thus, the benefit of ambiguity should be given to the assessee.

The respondents contended that watery coconut is an oil seed as per clause (vi) of Section 14 of the Central Sales Tax Act, 1956, and should be taxed accordingly. They argued that the popular meaning of terms in taxation statutes should prevail over scientific definitions, as emphasized in Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh. They also cited the Supreme Court's decision in Commissioner of Sales Tax, Madhya Pradesh v. Popular Trading Co., which held that watery coconut is an oil seed.

The court noted that a taxing statute must be construed strictly, and the subject is not to be taxed without clear words for that purpose. The Supreme Court has consistently held that equitable considerations are irrelevant in construing taxing statutes, and the primary object of such statutes is to raise revenue.

The court referred to the Supreme Court's decision in Popular Trading Co., which held that watery coconut is an oil seed, and in Ganpatlal Lakhotia v. State of Rajasthan, which stated that watery coconut is a coconut for all practical purposes. The court concluded that watery coconut could not be classified separately from coconut, as it eventually becomes dried coconut.

2. Whether the levy of tax on watery coconut as an oil seed is valid:

The court examined whether watery coconut falls within the ambit of the charging section by clear words used in the statute. It emphasized that if the words are ambiguous and open to two interpretations, the benefit should be given to the subject. However, it also stressed that logic, reason, or equitable considerations cannot influence the interpretation of a taxing statute.

The court referred to the principle that in the absence of a specific definition in the statute, the popular meaning of terms should be adopted. It cited the Supreme Court's decision in Indo International Industries, which held that the popular meaning of terms should be considered in taxation statutes.

The court observed that the legislature included "fruits other than dry fruits including pind khajur and coconut" in Schedule I, Entry 54 of the Chhattisgarh Commercial Tax Act, 1994. Since coconut includes both dry and watery coconut, and watery coconut eventually becomes dried coconut, the court held that watery coconut cannot be classified separately from coconut.

Based on the Supreme Court's decisions in Popular Trading Co. and Ganpatlal Lakhotia, the court concluded that watery coconut is an oil seed within the meaning of clause (vi) of Section 14 of the Central Sales Tax Act, 1956. Therefore, the levy of tax at 4% on watery coconut as an oil seed is valid.

Conclusion:

The court dismissed both writ petitions, holding that watery coconut is not a fruit but an oil seed within the meaning of clause (vi) of Section 14 of the Central Sales Tax Act, 1956. The State authorities acted within their jurisdiction in taxing watery coconut as an oil seed. The court found no illegality or perversity in the findings of the taxing authorities.

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