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2022 (8) TMI 698 - HC - VAT and Sales TaxClassification of manufactured goods - Robinson Barley - Purity Barley - taxable under the entry meant for cereals covered under Entry 16 List C @ 4% or under the residual entry at 12%? - HELD THAT - In the present case, as correctly noted in the judgment in SATYANARAYAN BHANDAR VERSUS STATE OF ORISSA AND OTHERS 2006 (8) TMI 552 - ORISSA HIGH COURT , the words used by the legislature in the delineation of articles are to be understood in the trade sense i.e. the commercial understanding of the terms used and not in their scientific and technical sense. In other words, the Court is required to apply the common parlance test . In the present case, there can be no doubt that in trade parlance Robinson Barley and Purity Barley would not be simply understood as barley - In other words, they are identifiable, distinct, commercial products different from ordinary barley . If a customer went to a shop and asked for barley, such customer would not be supplied Robinson Barley or Purity Barley. Conversely, if the customer was to ask for Robinson Barley or Purity Barley, then he would not be supplied with plain barley. The distinct commercial product Robinson Barley cannot, as pointed out in Satyanarayan Bhandar be classified as cereal which is taxable @4% and has to be brought under the residual entry taxable @ 12%. The question framed is answered in favour of the Department and against the Assessee by holding that Robinson Barley and Purity Barley manufactured by the Petitioner should be taxed under the residual Entry 189 of List C of the Rate Chart appended to the OST Act and not Entry 25 relating to cereals - revision petition dismissed.
Issues Involved:
1. Classification of Robinson Barley and Purity Barley under the Orissa Sales Tax Act, 1947. 2. Applicability of Section 14 and Section 15 of the Central Sales Tax Act, 1956. 3. Interpretation of relevant entries in the rate chart and their applicability. 4. Burden of proof in tax classification. 5. Commercial understanding and common parlance test in tax classification. Detailed Analysis: 1. Classification of Robinson Barley and Purity Barley under the Orissa Sales Tax Act, 1947: The primary issue is whether Robinson Barley and Purity Barley should be classified under Entry 25 of List C, which pertains to cereals taxable at 4%, or under the residual Entry 189, taxable at 12%. The Sales Tax Officer (STO) and the Orissa Sales Tax Tribunal had previously rejected the Petitioner's plea that these products were cereals. The Court noted that the products underwent processes that included the addition of calcium and iron, making them distinct commercial products different from plain barley. 2. Applicability of Section 14 and Section 15 of the Central Sales Tax Act, 1956: Section 14 of the CST Act declares certain goods, including cereals like barley, to be of special importance in inter-state trade or commerce. Section 15 imposes restrictions on the tax rate for these goods, capping it at 4%. The Petitioner argued that Robinson Barley should be classified under this provision. However, the Court referenced the decision in Satyanarayan Bhandar, which held that Robinson Barley, being a processed commodity, does not fall under the category of cereals as defined in Section 14 and thus does not benefit from the tax cap. 3. Interpretation of Relevant Entries in the Rate Chart and Their Applicability: The Court examined the relevant entries in the rate chart. Entry 25 lists cereals other than certain specified types, taxable at 4%, while Entry 189 is a residual entry for all other goods, taxable at 12%. The Court reiterated the finding in Satyanarayan Bhandar that Robinson Barley, due to its processing and fortification, is a distinct commercial product and does not fall under the plain cereal category. Therefore, it should be taxed under the residual entry. 4. Burden of Proof in Tax Classification: The Petitioner argued that the burden of proof to classify goods under a specific tax entry lies with the Revenue. The Court agreed but noted that the Revenue had met this burden by demonstrating that Robinson Barley is a distinct commercial product due to its processing and fortification. The Court emphasized that there was no ambiguity in the classification that needed to be resolved in favor of the Petitioner. 5. Commercial Understanding and Common Parlance Test in Tax Classification: The Court applied the "common parlance test," which requires understanding the terms used in tax entries in their trade sense rather than scientific or technical sense. It concluded that in trade parlance, Robinson Barley and Purity Barley are not simply understood as barley. They are distinct commercial products, and thus, cannot be classified under the cereal category taxable at 4%. The Court referenced several precedents, including Dunlop India Ltd. v. Union of India, to support this interpretation. Conclusion: The Court dismissed the revision petitions, holding that Robinson Barley and Purity Barley should be taxed under the residual Entry 189 of List C of the Rate Chart appended to the OST Act at 12%, and not under Entry 25 relating to cereals at 4%. The judgment reaffirmed the principles of commercial understanding and the common parlance test in tax classification, emphasizing that processed and fortified products are distinct from their raw counterparts.
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