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TMI Blog1996 (4) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that with immediate effect the rate of tax payable by a dealer in respect of various goods would be as specified therein. Entry No. 21 of that notification provided that the tax on "loose tea when sold in bulk in 20 kilogram packages and above, but not in smaller packets within the packages of 20 kilogram or more" would be 4 per cent. All other tea would continue to be exigible at the general rate as applicable to residuary items which entry No. 100 of the same notification specified to be 10 per cent. 3.. The 1954 Act stood repealed on October 1, 1995, with the coming into force of the Rajasthan Sales Tax Act, 1994 (Act No. 22 of 1995) (hereinafter referred to as "the 1994 Act"). 4.. Section 12A of the 1954 Act pertained to determination of disputed questions. The corresponding, though not identical provision in the 1994 Act is section 40. 5.. M/s. Chopra Brothers (respondent No. 2 in petition No. 29 of 1996 before us) filed an application under section 12A of the 1954 Act before the Commissioner, Commercial Taxes, Rajasthan, which was treated as an application under section 40 of the 1994 Act by the Additional Commissioner (Commissioner is defined by the 1954 Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inned cotton was liable to tax and deduction of tax-paid goods was not allowable and in the absence of any provision in the 1954 Act the assessee was not entitled to set-off of tax paid on unginned cotton, set-off in the instant case was also not permissible. The Additional Commissioner by his order dated January 12, 1996, determined that the tax paid at 4 per cent would attract a further tax at 10 per cent if repacked in smaller packets and sold and no set-off would be possible. 9.. The petitions before us challenge this order of the Additional Commissioner. 10.. Mr. Vineet Kothari, learned Advocate for the petitioners, contended that the extraordinary jurisdiction of this Tribunal under section 8 of the RTT Act had to be invoked as they were not parties in the proceedings in which the impugned order was made and therefore, alternative remedies of appeals and revision were not available to them; that they were adversely affected and aggrieved by the impugned order and in the event of respondent, M/s. Chopra Brothers, not challenging the impugned order by way of appeal the impugned order would become final even against the petitioners which was an additional ground for invoki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set-off arises; that the remedies available under the 1954 Act or the 1994 Act cannot be availed of by the petitioners as they were not party to the proceedings before the Additional Commissioner and had therefore, per force to invoke the extraordinary jurisdiction of this Tribunal. 12.. He cited a plethora of rulings of our own High Court, other High Courts and the Supreme Court in support of his contentions which I will advert to at the appropriate place during the discussion of the pros and cons involved. 13.. Mr. S.L. Jain, learned counsel for M/s. Chopra Brothers (respondent No. 2 in petition No. 29 of 1996) confined himself to taking strong exception to the motives sought to be attributed to his client and the aspersions sought to be cast on him by the petitioners and their learned counsel in petition No. 29 of 1996 and asserted that they were baseless and totally unwarranted. His client had moved a bona fide application under section 12A of the 1954 Act as the matter could not be said to be beyond doubt and the Additional Commissioner by his impugned order had disposed of the matter according to the law as he found it. 14.. Mr. Sanjeev Johari, learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to in sub-section (1) unless it is satisfied that- (a) the applicant has availed of all remedial measures available to him under the relevant specified State Act; or (b) the remedial measures available under the provisions of the relevant specified State Act are not adequate and shall cause undue hardship to the applicant; or (c) the application referred to in sub-section (1) involves a substantial question of law relating to the interpretation of the Constitution of India or the specified State Act or Rules framed thereunder or jurisdiction of any of the authorities under the said specified State Act............" 19.. It would be seen that the extraordinary jurisdiction of the Tribunal can be invoked by any person, whereas the remedy of appeal under section 85 of the 1994 Act is available only to a dealer. "Any person" has a much wider connotation than the term "dealer". Two of the petitioners before us are associations of dealers of tea while the other two are dealers themselves. The "entries " in controversy are of vital interest to the tea trade at large and these associations or groups can definitely come within the ambit of persons aggrieved. Further, section 8 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government in the official gazette.... " (Emphasis* added). 25.. The term "prescribed" has been defined in section 2 of the 1954 Act to mean prescribed by the Rules made under the Act. 26.. Rule 15 of the 1955 Rules reads as under"15. Point of tax.-(1) The first point in the series of sales shall mean the first sale by a registered dealer in the State or such point in the series as may be notified by the State Government. (2) The last point in the series of sales shall be the sale in such series by a registered dealer to a consumer or to an unregistered dealer or to a registered dealer for purposes other than resale within the State. (3) The multiple point in the series of sales shall mean the sale in such series in the State by every registered dealer. (4) Unless otherwise specifically directed by the State Government by a notification, the tax payable under section 4 of the Act shall be at the first point in the series of sales by successive dealers. (Emphasis* added). Here italicised. 27.. The corresponding provision in the 1995 Rules is also rule 15 and reads as under: "15. Point of tax.-(1) The first point in the series of sales shall mean the first sale by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it appeals against a decision of the Allahabad High Court cited at [1972] 30 STC 239 (Bist Sons v. Commissioner of Sales Tax). Under the U.P. Sales Tax Act sale proceeds from agricultural produce were exempt. Here italicised. The assessee owned tea gardens. Tea leaves grown in the garden were sold after being processed and packed. The Allahabad High Court held that the sale proceeds of the processed and packed tea were sale proceeds from agricultural produce and hence exempt. The agricultural produce had to be in a saleable state and any process employed to make it saleable would not alter its nature. The decision of the Allahabad High Court was upheld by the Supreme Court. The test applied was substantial retention of character. It was mentioned that "unlike many agricultural products tea leaves are not marketable in the market fresh from the tea gardens. Nobody eats tea leaves.....Tea leaves are, therefore, only fit for marketing when by a minimal process they are made fit for human consumption.......and at no point of time it.....robbed the tea leaves, the agricultural produce, of their character of being, and continuing as such substantially...... " (Emphasis* added). "A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the tax had already been levied on chillies and spices out of which chilli powder and curry powder were produced. The matter came before the Kerala High Court which took note of the various tests prescribed in this regard by the Supreme Court including the common parlance test, the commercial parlance test, the dictionary meaning test, the user test and the substantial identity or essential nature test and by majority held that chillies when converted into chilli powder essentially remained the same commodity and were therefore, not taxable again but that when chilli powder and coriander powder were mixed to obtain curry powder the resultant commodity was neither chillies nor coriander but a different product which would be taxable but at the rate of 4 per cent as general goods. 34.. In Lipton India Limited v. State of Karnataka [1994] 95 STC 225, the Karnataka High Court held that by blending and packing of tea a distinct and new commodity does not emerge. The Karnataka Government to encourage new manufacturing units in the growth centres in the State extended a package of concessions including concessions in sales tax. Liptons set up a new factory for their blended packet t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n glass bangles and then taxed again as ornamental glass bangles. It was held that glass bangles did not become a different commercial commodity after ornamentation. Plain glass bangles and ornamental glass bangles were essentially the same commercial commodity. It was further held that under single point taxation the same commodity could not be taxed twice by introducing an artificial classification. By taxing the bangles twice the aggregate tax became 14 per cent which the court noted was higher than the highest maximum rate of 10 per cent prescribed at that time. The notification was declared ultra vires. 39.. In the case before us too under the impugned order of the Additional Commissioner an equally absurd situation results. Under the notification of March 27, 1995, tea is taxable either at 4 per cent or 10 per cent. It cannot be taxed at 14 per cent. The Additional Commissioner has correctly held that the question of set-off does not arise and is not permissible and therefore, tea which had been taxed at 4 per cent could not be taxed at 6 per cent. By the same token aggregating was ruled out also. Under the notification of March 27, 1995, no rate of tax on tea at 6 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bulk in 20 kg. packages and above but in smaller packets within the packages of 20 kg. or more or whatever shall not be subject to any sales tax at any other point in the subsequent sales in the series of sales. 42.. As already noted, in the Swan Bangle's case [1970] 25 STC 122 the Allahabad High Court had in a similar situation struck the offending notification down as ultra vires. The vires of entry No. 21 of the notification dated March 27, 1995 to which the impugned order of the Additional Commissioner relates has not been challenged before us. As the discussion in the immediately preceding paragraph would show the classification introduced, though artificial, is not unreasonable or arbitrary or illegal if understood and given effect to in the manner indicated in that paragraph and would not be ultra vires. 43.. We, therefore, accept the revision petitions and set aside the impugned order dated January 12, 1996, of the Additional Commissioner, Commercial Taxes Department, Jaipur and hold that tea taxed in accordance with entry No. 21 of the notification dated March 27, 1995 at the first point of sale in Rajasthan at 4 per cent shall not be taxed again as tea at any point in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in packages of 20 kgs. or more. Smaller packets would attract tax at general rate. The said entry is very clear even the sale of such tea in smaller packets, which was purchased as loose tea in packages of 20 kgs. or more, shall also be liable to be taxed at general rate as per entry No. 100 of the notification." 46.. Before I subject this quote to a standard of rational analysis in the light of the relevant provisions of law I think it proper to quote here entry No. 21 which was introduced by the Notification No. F. 4(11)FD/Gr. IV/95-49 dated March 27, 1995 as hereunder: Entry No. 21: Loose tea when sold in bulk in 20 kilogram packages and above, but not in smaller packets within the packages of 20 kilogram or more. 47.. Shorn of veils and vestments, this entry deals with "loose tea" and when cut up, for a proper understanding of the issues involved, into two parts reads as hereunder: (a) Loose tea when sold in bulk in 20 kilogram packages and above; and, (b) Loose tea when sold in smaller packets within the packages of 20 kilograms or more. 48.. In both these cases it is the tea which is covered by entry No. 21. It is the size of the packet or in other words the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the term "taxable turnover", as given in section 2(s) of the 1954 Act. It provides that there shall be deducted from the taxable turnover the amount of the proceeds of sale of goods which have already been subjected to tax under the 1954 Act. Similar provision exists in sub-clause (ii) of clause (42) of section 2 of the 1994 Act. A combined reading of the provisions mentioned above goes to show that sales tax means single point tax at the first point of sale in a series of sales. A commodity once subjected to tax cannot be taxed again so long as it retains its original character. Since tea retained its original character at both points of sale irrespective of the size of the packets and/or its quantity packaged in such packets and since it has been subjected to tax at the first point of sale it cannot be taxed over again. 50.. As mentioned earlier, since the honourable Technical Member has discussed the precedents in the light of the facts they turned on I don't think it necessary to discuss them over again. I shall rest content with the discussion of only one decision which the Bombay High Court handed down in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay [1959] 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion does not change its character when it is sold in smaller packets weighing less than 20 kilograms. Nor does the Additional Commissioner take into his consideration the fact that the law as contained in section 4 of 1994 Act authorises the imposition of sales tax at a single point and, when considered in the light of the rule 15 of the 1995 Rules, that too at the first point of sale in a series of sale in a case where the commodity retains its original character. If the order of January 12, 1996, is allowed to stand it will reduce the sales tax law as contained in section 5 of the 1954 Act (section 4 of the 1994 Act) together with the relevant rule 15 to absurdity. 52.. A reference has been made in the order of January 12, 1996 to the decision of the Rajasthan High Court in Pawan Kumar and Company v. A.C.T.O., Bhilwara (1996) 19 RTJS 1, wherein the honourable High Court held that the cotton was distinct from cotton seed. The process of ginning amounted to manufacturing process by which a separate commercial commodity, namely, cotton seed, came into existence. It was also held that there was no provision under sales tax law in Rajasthan for a set-off of the amount due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of law. No provision of law or rule or entry in the Schedule can be declared invalid unless it becomes absolutely essential to do so. The proper course of action to follow is to save it from such a catastrophe if it can be interpreted in such a way as to bring it in line with the other relevant provisions of law or rule. This is the course that we seek to follow in the present cases. It is in the light of this principle that entry No. 21 is to be considered. It provides for the imposition of sales tax at 4 per cent on loose tea when it is sold in packages/packets weighing 20 kilograms or more. This is a valid provision of law and is in line with the provisions contained in section 5 of the 1954 Act (now section 4 of the 1994 Act). Difficulty arises when loose tea is sold in smaller packets weighing less than 20 kilograms. Thus, this entry No. 21 may be construed in such a way as to provide that loose tea shall be subjected to tax at 4 per cent when sold in packets of 20 kilograms or more but once this is done it shall not be exigible to any further tax in a series of sale. Resultantly, loose tea when sold in smaller packets will not be exigible to tax over again. 55.. We m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajasthan Sales Tax Act, 1954, the last entry runs as under: "General rate, i.e., all goods that are not covered by item No. 1 to (last but one)." Packing has no relevance in such a notification issued under section 5 of the RST Act. "Goods" has been defined in section 2(h) of the RST Act, 1954 with no reference of packing. When a goods finds reference in any other entry, there is no question of applicability of the last entry. As such entry No. 21 will be applicable for "tea" and not last entry. 59.. Section 8(6), Rajasthan Taxation Tribunal Act, runs as under: "While deciding the subject-matter or case under sub-section (5), the Tribunal shall issue such direction or pass such order as it may deem fit. " The expression "as he deems fit" has been interpreted in Raja Ram Mahadev Paranjype v. Aba Maruti Mali AIR 1962 SC 753. It has been held in Babulal Nagar v. Shree Synthetics Ltd. AIR 1984 SC 1164, that the expression "as it thinks fit" has the same connotation, unless context otherwise indicates, "as it deems fit." The expression "as it deems fit" has been interpreted in Commissioner of Income-tax v. Walchand and Co. Private Ltd. [1967] 65 ITR 381 (SC); AIR 1967 SC 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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