2015 (5) TMI 61 - HC - VAT and Sales Tax

Classification - Whether RB Acid Oil and RB Fatty Acid can be considered as distinct and different from Rice Bran Oil - Held that - When un-refined raw rice bran oil is subjected to a process of refining, two distinct and different commodities namely RB Fatty Acid and RB Acid Oil had also emerged. Therefore, the manufacturing process had altered the identity of one commercial commodity and new commercial commodities had emerged. The law of sales tax is also concerned with goods of various descriptions. It cannot be disputed that the two commodities namely RB Fatty Acid and RB Acid Oil, which are of commercially different category and description, had emerged during the process of manufacture of Rice Bran Oil. The principle which is fairly well settled is that the words or expressions under the statute must be construed in the sense in which they are understood in the trade, by the dealer and the consumer because it is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the Statute was enacted. Therefore, the test is how the product is identified by the class or section of people dealing with or using the product. Rice Bran Oil which is fit for human consumption can only be a different and distinct commodity from the other two commodities viz., RB Fatty Acid and RB Acid Oil as the former is fit for human consumption while the latter two commodities are only used in the process of manufacture of soaps/cattle feed. It is pertinent to note that RB fatty acid and RB acid oil and Rice Bran oil are considered as distinct and different commodities for the purpose of levy and collection of excise duty. - As a sequel we find that the order of the respondent, which is impugned, is in accordance with the law and does not brook interference - Decided against assessee.

Issues Involved:
1. Classification of Rice Bran Fatty Acid and Rice Bran Acid Oil under the APGST Act.
2. Applicability of tax rates prior to the amendment.
3. Interpretation of relevant statutory entries and amendments.
4. Consideration of judicial precedents in determining the classification.

Detailed Analysis:

1. Classification of Rice Bran Fatty Acid and Rice Bran Acid Oil under the APGST Act:
The core issue revolves around whether Rice Bran Fatty Acid (RB fatty acid) and Rice Bran Acid Oil (RB acid oil) should be classified as general goods or as falling under a specific entry in the APGST Act. The appellant argued that these products should be treated under entry 24(c) of the first schedule of the APGST Act, attracting a lower tax rate of 1%. The Commissioner, however, revised the rate to 4%, treating these products as distinct and different from Rice Bran Oil.

2. Applicability of Tax Rates Prior to the Amendment:
The appellant contended that RB fatty acid and RB acid oil were considered distinct commodities for tax purposes only after the introduction of entry 24-F on 01.11.2000. Since the assessment year in question was 1998-99, the appellant argued that the lower tax rate should apply. The court, however, did not accept this argument, stating that amendments to statutory entries can clarify existing positions rather than altering them.

3. Interpretation of Relevant Statutory Entries and Amendments:
The court examined various entries in the schedule of the APGST Act, including 24-A, 24-B, 24-C, and 24-F. It was noted that entry 24-F, which specifically mentions Sledge Oil, Acid Oil, and Fatty Acid, was introduced after the assessment year. The court concluded that the introduction of this entry does not retroactively affect the classification of RB fatty acid and RB acid oil for the year 1998-99.

4. Consideration of Judicial Precedents in Determining the Classification:
The appellant relied on several judicial precedents to support their argument. These included decisions from the Supreme Court and other high courts, which dealt with the classification of similar products under different tax statutes. However, the court distinguished these cases based on the specific facts and statutory provisions applicable to the present case. The court emphasized that the functional utility and commercial understanding of the products are crucial in determining their classification.

Conclusion:
The court applied several tests to determine whether RB fatty acid and RB acid oil are distinct and different from Rice Bran Oil. These tests included examining the commercial understanding, functional utility, and economic perspective of the products. The court concluded that RB fatty acid and RB acid oil are indeed distinct and different from Rice Bran Oil, as the former are used in manufacturing soaps and cattle feed and are not fit for human consumption. Consequently, the court upheld the Commissioner's order, which revised the tax rate from 1% to 4% for the interstate sales turnovers of these products.

Judgment:
The special appeal was dismissed, and the court found no merit in the appellant's contentions. The order of the Commissioner was upheld, and the revised tax rate of 4% was deemed appropriate. There was no order as to costs, and any pending miscellaneous petitions were closed.

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