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TMI Blog2004 (1) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... e same only for the purpose indicated and shall make no attempt whatsoever for adulteration or misuse of the stocks. The Food Corporation of India will take a serious view of any breach of these conditions of sale. It will also not be open to the buyers to question the categorisation of the stock as shown in the tender." 3.. Petitioner made several purchases in pursuance of tender notices issued by the FCI for disposal of damaged rice and wheat fit for cattle and poultry feed between the assessment years 1993-94 to 1998-99. Petitioner contended that even damaged rice and wheat continued to be "wheat" and "rice" and therefore they were exempted from payment of tax under Schedule V to the Act. It would appeal that FCI was however collecting sales tax at 2 per cent under Part A, entry 6 of Schedule II treating the damaged rice/wheat as animal feeds. The petitioner claims to have paid such sales tax at 2 per cent under protest, to obtain release of the goods. 4.. When matter stood thus, the Commissioner of Commercial Taxes, Karnataka issued a clarification dated August 18, 1994 to the FCI stating that damaged rice and wheat, which are unfit for human consumption is taxable at 8 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I) to expedite the refund of sales tax; and (c) For quashing the letter dated May 30, 2000 demanding sales tax at 10 per cent + cess at 5 per cent in regard to sales of damaged rice with effect from October 28, 1998. 6.. First respondent (FCI) contends that it had collected sales tax as per the clarification issued by the Commissioner of Commercial Taxes that sale of damaged wheat and rice are taxable under section 5(1) as general goods not classified under any of the Schedules and that the sales tax collected from the petitioner has already been remitted to the Commercial Tax Department. First respondent also submitted that assessments have been concluded by assessing the turnover relating to sales of damaged wheat/rice made to the petitioner, to tax under section 5(1) of the Act. It therefore, contends that it is not liable to refund any tax amount to the petitioner. 7.. The State has contended that only rice and wheat meant for human consumption are exempt from tax under Schedule V and damaged wheat/rice which are unfit for human consumption cannot be considered as "wheat/rice" or "cereals". It is submitted that wheat and rice which is damaged, loses its original character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Schedule which reads thus: "Animal feed and feed supplements, i.e., processed commodity sold as 'poultry feed', 'cattle feed', 'pig feed', 'fish feed', 'fish meal', 'prawn feed', 'shrimp feed' and feed supplements and mineral mixture concentrates, intended for use as feed supplements." What is sold by FCI is not a processed commodity. To fall under entry 6 of Part A of the Second Schedule, an animal feed should be a processed commodity. As damaged wheat/rice sold by FCI is not a processed commodity, the said goods will not fall under entry 6 of Part A of the Second Schedule, even though such damaged wheat/rice is intended to be used as cattle/poultry feed. 12.. The term "cereals" is not defined under the Act. Section 14 of the Central Sales Tax Act, 1956 defines "cereals" as paddy, rice, wheat, jowar or milo, bazra, maize, ragi, kodon, kutki and barely. The fact that rice and wheat fall under "cereals" is not disputed by either side. 13.. A learned single Judge of this Court in Yarana Feeds Farms v. Assistant Commissioner of Commercial Taxes (Assessments), Hubli [1990] 77 STC 144, considered the question as to whether dry fish which was "non-edible", that is not fit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contaminated rice is not a rice product so as to come within the scope of this proviso. We are unable to agree................... We do not find any warrant in the proviso for restricting the scope of the expression 'rice product' only to edibles. If that proviso had stated that it would apply only to edibles, then the contention of the learned Government Pleader would be correct. However, in the absence of any such restriction in the proviso we consider that the proviso cannot be construed as if it related only to edible items. It is common knowledge that even edible items are sometimes used for non-food purposes. Therefore, the way in which the particular product is used is not the criterion but it is the quality of the product that determines its eligibility to come within the proviso. The quality of the present product is such that it falls within 'rice product'." 15.. In Commissioner of Sales Tax, U.P. v. Prag Ice and Oil Mills [1975] 35 STC 520, a division Bench of the Allahabad High Court considered the question whether non-edible groundnut oil which contained large quantity of impurities would be "groundnut oil" liable to be taxed at the concessional rate of one per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant entry would have said so. Where the description is merely "rice/wheat " it will refer to inedible rice/ wheat also and where the description is merely "vegetable oil" it will include vegetable oil which has gone bad or rancid and therefore unedible. 18.. On behalf of the Revenue, it was contended that a division Bench of this Court has taken a somewhat different view in S.V. Halavapalli and Sons v. Commissioner of Commercial Taxes [1984] 57 STC 343. In that case, the division Bench considered the question whether the term "cereals" would include "seeds"? It was contended that seeds of paddy, ragi, jowar, maize, etc., were cereals. After referring to section 14 of the Central Sales Tax Act and the definition in several dictionaries, the division Bench came to the conclusion that the dictionary meaning of cereal was a "grain of a grass family yielding starchy seeds suitable for and used as food for man, and livestock". The court distinguished between "foodgrains" that are grown for being used as human foods, and sowing seeds which are not intended to be consumed. The division Bench held that "seeds" were not intended for consumption and in fact unfit for consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, oats and sorghum grown in North America, Europe and Australia is fed to livestock to produce meat, dairy and poultry products." 19.6 The New Encyclopaedia Britannica (15th Edition Volume 3 page 37) gives the following information: "Cereal" also called grain, any grass yielding starchy seeds suitable for food. The cereals most commonly cultivated are wheat, rice, rye, oats, barely, corn (maize) and sorghum..... As human food, cereals are usually marketed in their raw grain form or as ingredients of various food products; as animal feed, they are consumed mainly by livestock and poultry, which are eventually rendered as meat, dairy and poultry products for human consumption; and they are used industrially in the production of a wide range of substances, such as glucose, adhesives, oils and alcohols. 20.. The decision in Halavapalli [1984] 57 STC 343 (Kar) does not advance the case of the State that the term "cereal" refers only to grains meant for human consumption. "Cereals" in common parlance means a grain of the grass family like wheat, rice, jowar, oats, maize, etc., used as food for man and livestock. To put it differently, any grain which is edible is cereal. "Edible" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorises the damaged grains as fit only for manure or fit only for manufacture of inedible industrial starch, then it will not be a "cereal" falling under entry 15 of the Fifth Schedule. 22.. In the view we have taken, the decision of the Supreme Court relied on by the State in Indian Express (P.) Ltd. v. State of Tamil Nadu [1987] 67 STC 474 holding that old newspapers sold as waste paper are not "newspapers", and the decisions of this Court in Prabhat Rolling Metal Works v. Commissioner of Commercial Taxes in Karnataka [1988] 69 STC 359 holding that old aluminium vessels sold as scrap are not "aluminium vessels" and in Novelty Dress Manufacturing Company v. Karnataka Appellate Tribunal [1998] 109 STC 14 holding that cotton rags sold as waste are not "cotton fabrics", are of no assistance in this case. Re: Point No. (ii): 23.. FCI, by its letter dated May 30, 2000 called upon the petitioner to pay sales tax at 10 per cent plus 5 per cent of tax as cess in regard to sale of damaged rice already effected. In view of our decision on point (i), it has to be held that FCI is not entitled to claim any tax on damaged rice/wheat sold for use as cattle/poultry feed. Re: Point No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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