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2018 (5) TMI 717 - HC - VAT and Sales TaxRelease of detained goods - sale of sugar - levy of penalty - rate of tax - respondent-dealer filed an appeal before the Appellate Assistant Commissioner (CT), on the ground that the consignment contained only sugar powder and therefore, it is an exempted commodity, falling under Entry 5 of the Third Schedule to the TNGST Act, 1959. Held that - Sugar is defined in Item No.8 of the First Schedule to the Central Excises and Salt Act, 1944 (Act 1 of 1944), which means any form of sugar containing more than 90 per cent of sucrose. Test report states that the sample sugar contained 96.3% of sucrose. Section states any form, which includes powder form also. When sugar is made into powder, it does not change the substantial identity and character or essential nature and it does not lose their natural form. Mere change into powdered form, does not change the essential nature of the commodity. In Rasoi Products v. Commercial Tax Officer 1980 (8) TMI 191 - CALCUTTA HIGH COURT , the Calcutta High Court held that when pepper, black pepper, white pepper and turmeric are powdered, there is no substantial change in the commodities and that the powders are not again liable to sales tax. Revision dismissed - decided against Revenue.
Issues Involved:
1. Whether the product sold by the dealer was sugar or a sweetening agent used for medicines. 2. Whether the product containing 96% sucrose and 4% starch qualifies as sugar. 3. Whether the Tribunal erred in not considering the Government Analyst's report. 4. Whether the penalty levied under section 12(2) was justified. Issue-wise Detailed Analysis: 1. Whether the product sold by the dealer was sugar or a sweetening agent used for medicines: The respondent-dealer sold Sugar N.F. (National Farinuiary, USA) to an interstate dealer, and the consignment was intercepted and detained. The dealer argued that the consignment contained only sugar powder, an exempted commodity under Entry 5 of the Third Schedule to the TNGST Act, 1959. The Tribunal upheld the Appellate Assistant Commissioner’s decision that the disputed product is sugar based on the analytical report and the definition in the Central Excise and Salt Act, 1944. The Tribunal found no evidence to suggest the product was anything other than sugar. 2. Whether the product containing 96% sucrose and 4% starch qualifies as sugar: The Government Analyst's report indicated that the sample contained 96% sucrose and 4% starch. The Appellate Assistant Commissioner and the Tribunal concluded that the presence of starch in small quantities did not alter the essential nature of the product as sugar. The Oxford dictionary defines "sucrose" as the chief component of cane or beet sugar. The Tribunal relied on precedents that minor changes in form do not alter the substantial identity of the product, thus classifying the product as sugar. 3. Whether the Tribunal erred in not considering the Government Analyst's report: The Tribunal did consider the Government Analyst's report, which confirmed the presence of 96% sucrose and 4% starch. The Tribunal concluded that the small percentage of starch did not change the product's classification as sugar. The Tribunal emphasized that the product's substantial identity and character remained sugar, despite the admixture of starch. 4. Whether the penalty levied under section 12(2) was justified: The Assessing Officer had levied a penalty of ?19,734/- under Section 16(c) of the Act. The Appellate Assistant Commissioner and the Tribunal found the penalty unjustified, as the assessment was made under Section 12(1) and not under Section 12(2). The Tribunal referred to case laws that supported the view that penalties could not be levied in such circumstances. Consequently, the penalty was deleted. Conclusion: The High Court dismissed the Tax Case Revision, answering the substantial questions of law against the revenue. The Court held that the product in question was indeed sugar, as defined under the relevant statutes, and the presence of starch did not alter its classification. The penalty levied was found to be unjustified, and the Tribunal's order was upheld. The tax case revision was dismissed with no costs.
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