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TMI Blog2005 (10) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... pulses" and are treated to be "cereals" in all its forms as provided in entry 6 of Schedule I or "pulses in all its forms" as provided in entry 48 of Schedule I respectively belonging to the list of exempted items for the purpose of exemption from sales tax in reference to section 9(1) of "the Act 1993" or whether these wheat, paddy, mustard pulses sold by petitioner as seeds are to be taxed at 8 per cent treating these as seeds in entry "otherwise" covered by entry 2 of Schedule III of "the Act 1993"? 4.. The facts necessary for adjudication of the present civil rule are that the petitioner, Assam Seeds Corporation Ltd. (in short called "the Corporation") is a public sector undertaking of State Government and registered under "the Act 1993" dealing in various kinds of "seeds" wheat, pulses, paddy" as seeds, mustard as seed, and in course of its business it purchases various seeds from the registered growers or from various corporations like West Bengal Seeds Corporation, National Seeds Corporation, State Firm Corporation of India, etc. The petitioner-corporation makes entire sales to the Agricultural Department of the State Government under various schemes. 5.. Section 9(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be said to be one of the items of cereals and the same cannot be made taxable only on the basis of its use and nomenclature given to it. The revisional authority/Joint Commissioner of Taxes/respondent No. 2 herein has dismissed the revision application by the impugned order dated May 12, 1998 relying upon the decision of the Karnataka High Court in S.V. Halavapalli and Sons v. Commissioner of Commercial Taxes [1984] 57 STC 343, simply by observing that the issues involved in the present case are finally decided, i.e., seeds are not cereals and are liable to be taxed. According to learned counsel for the petitioner the revisional authority has failed to consider that the above decision in Halavapalli and Sons [1984] 57 STC 343 (Kar.), was dealing with the items of "cereals" and the issue before the Karnataka High Court was whether the various kinds of seeds like, Bajra, Jowar, etc., can be said to be cereals and whether the same will be exempted from payment of sales tax. The entry under interpretation before the Karnataka High Court was made restricted in term, inasmuch as the court was interpreting the items "cereals" only, whereas, for the entry, "cereals in all its forms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be interpreted not as understood according to strict dictionary, technical, scientific, botanical meaning but have to be understood and construed in its popular sense, i.e., the sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. If so understood and interpreted and given the popular sense meaning, then it only means that 'cereals' ..are grains that are edible or fit for human consumption. It may be, the cereals, if sown, produce sapplings but they are not used as seeds to raise a new crop. In the same way 'seeds' are to be interpreted as is understood in common parlance and given its popular sense meaning and if so understood, it only means seeds of a cereal grown or used for raising a new crop. Therefore, seeds are not cereals. It also held that if the identity is lost and a different commercial commodity is produced as a result of subjecting it to a process, then the resulting commercial commodity is not the same commodity and therefore the assessees cannot claim exemption. The court further held that 'seed' requires minimum period of germination and purity. The seeds are now not fit for human consumption being ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cereals as found in Oxford Dictionary, as any kind of grain used as food and for "pulses" as "edible seeds, peas, beans, lentils, etc.". According to the State the petitioner/corporation, deals in "seeds" which is meant for the purposes of germination, leading to reproduction through cultivation and not for the purpose of use as food. In fact such seeds cannot be used as food as they are treated with chemicals in most cases. Revision petition was dismissed on the ground that seeds are not "cereals" or "pulses" to be exempted from payment of tax. Moreover, the very activity of the petitioner/corporation is confined to procurement of seeds, plantation of seeds and sale of seeds only for the purpose of reproducing from the seeds. All the sales made by the petitioner are not at all for consumption as food by the purchasers. Seeds dealt by the petitioner/corporation also undergo certain special processes for preservation, for saving them from insects, by using medicines and chemicals for handling transportation and packaging, etc., and these are completely not meant for human and animal consumption. Nobody goes to the petitioner to buy seeds as food items besides the prices of seed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construe entry 1 of Schedule 3 to the Assam Sales Tax Act, 1947, which exempted from taxation 'all cereals and pulses including all forms of rice'. The question before the Assam High Court was whether chira, which is beaten rice, and muri, which is parched rice, could be classified as rice in all forms. The stand taken by the Revenue was that a product of an article could not be said to be the same as the article itself, and what was exempted being a form of rice, chira and muri were not exempted. The Assam High Court rejected this contention. It held that the word 'forms' could not be confined to mere varieties of rice, as that would be putting a construction upon the language of the entry which unwarrantably narrowed its meaning. It further held that the idea behind the said entry was to exclude all cereals from taxation and that chira and muri, to all intents and purposes, were cereals and had not lost their character of cereals by any process of transformation so as to be called by any other name. In Ghasi Ram Hari Ram v. Commissioner of Sales Tax, Delhi [1972] 30 STC 88 at page 90-91 the Delhi High Court had to construe entry 1 of Schedule II to the Bengal Finance (Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Dictionary defines the term " 'cereals' relating to grain or to the plants that produce it: made of grain a plant (as a grass) yielding farinaceous seeds suitable for food (as wheat, maize, rice); also, the seeds or grains so produced either in their original state or commercially prepared; a prepared foodstuff of grain (as oatmeal or corn flakes) used specially as a breakfast food". Encyclopaedia Britannica (Volume 5 at page 203) explains cereals thus: "Cereals, or grains, are members of the grass family that are cultivated primarily for their starchy seeds (technically dry fruits), which are used for human food, feed for livestock, and as a source of industrial starch. Wheat, rice, maize (called corn in the U.S. and Canada), rye, oats, barley, sorghum, and some of the millets are the common cereals. ........ Wheat, rice, and rye are grown primarily for consumption as human food, while much of the maize, barley, oats and sorghum grown in North America, Europe and Australia is fed to livestock to produce meat, dairy, and poultry products." According to the dictionary meaning "cereals" mean a grain or a plant of the grass family (like wheat, rice, maize, ragi, jowar, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and puffed rice and therefore "atukulu" (parched rice) and "muramaralu" (puffed rice) are rice within the meaning of entry 66(b). 18.. In Kapildeoram Baijnath Prosad [1954] 5 STC 365, the Assam High Court, interpreting entry 1 of the Third Schedule to the Assam Sales Tax Act, 1947, which exempted from taxation "all cereals and pulses including all forms of rice" had to consider whether chira, which is beaten rice, and muri, which is parched rice could be classified as rice "in all forms" and held that the word "forms" could not be confined to mere varieties of rice, as that would be putting a construction upon the language of the entry which unwarrantably narrowed its meaning and the idea behind that entry was to exclude all cereals from taxation and that chira and muri, to all intents and purposes, were cereals and had not lost their character of cereals by any process of transformation so as to be called by any other name and are therefore exempt from sales tax. 19.. In Ghasi Ram Hari Ram [1972] 30 STC 88, the Delhi High Court construing entry 1 of the Second Schedule to the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, which exempted from taxes all cereals i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon sense" rule of interpretation. 23.. The Supreme Court in Alladi Venkateswarlu's case [1978] 41 STC 394, interpreted the word "rice" to include "atukulu" (parched rice) and "muramaralu" (puffed rice), the Assam High Court in Kapildeoram Baijnath Prosad's case [1954] 5 STC 365, and the Delhi High Court in Ghasi Ram Hari Ram's case [1972] 30 STC 88, have interpreted the words "all forms of rice" to include beaten rice and parched rice, the Bombay High Court in Sultan Shev's case [1977] 40 STC 583, and the Patna High Court in India Sewai's case [1980] 45 STC 28 have interpreted the words "cereals and pulses in all forms" to include shevaya or vermicelli. But in all those cases, the goods or articles in question were only in a new form or appearance without any addition of ingredients or any changes in their character. The goods had not so changed their identity as not to be discernible as "cereals" fit for human consumption as articles of food. The conclusions in those cases were based on the language of the entries and the use of the words "all forms" was decisive in construing them. 24.. In the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tendent of Taxes [1986] 62 STC 21 (Gauhati) [FB]; (1986) 1 GLR 186 [FB], Commissioner of Sales Tax v. Macneil Barry Ltd. [1986] 61 STC 76 (SC), Filterco v. Commissioner of Sales Tax [1986] 61 STC 318 (SC), Thillai Chidambara Nadar v. Additional Appellate Assistant Commissioner [1985] 60 STC 80 (SC), Chiranjit Lal Anand v. State of Assam [1985] 60 STC 89 (SC), Indo International Industries v. Commissioner of Sales Tax [1981] 47 STC 359 (SC) and Delhi Cloth General Mills Co. Ltd. v. State of Rajasthan [1980] 46 STC 256 (SC), has observed as below: "..........In a taxing statute, words of every day use must be construed not in the scientific or technical sense but as understood in common parlance. If a statute contains language, which is capable of being construed in a popular sense such a statute should not be construed, according to the strict or technical meaning of the language contained in it but it should be construed in its popular sense, meaning of course by the words 'popular sense' that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. If any term or expression has been defined in the enactment then it must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to their popular sense'." 28.. In Mukesh Kumar Aggarwal Co. v. State of Madhya Pradesh [1988] 68 STC 324; AIR 1988 SC 563, the Supreme Court has observed as below: "In a taxing statute words which are not technical expressions or words of art, but are words of everyday use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance, i.e., 'that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it'. Such words must be understood in their 'popular sense'. The particular terms used by the Legislature in the denomination of articles are to be understood according to the common, commercial understanding of those terms used and not in their scientific and technical sense 'for the Legislature does not suppose our merchants to be naturalists or geologists or botanists'. The expression 'timber', it seems to us, has an accepted and well-recognised legal connotation and is nomen juris. It has also a popular meaning as a word of everyday use. In this case, the two meanings of 'timber', the legal and the popular, coalesce and are broadly subsumed in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed as understood in common parlance and it must be given its popular sense meaning "that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it". Proceeding further the Supreme Court took the view that ginger is a vegetable grown in a kitchen garden or in a farm and is used for the table and though it is not a principal item of the meal, it certainly forms a part of the meal as a subsidiary item. The Supreme Court further took the view that ginger is ordinarily sold by the vegetable vender as a vegetable and is purchased by the house-wife as a vegetable item, therefore, ginger was held to be more appropriately classifiable as a vegetable item. 31.. In Alpine Industries v. Collector of Central Excise, New Delhi [2003] 131 STC 9; (2003) 3 SCC 111, the Supreme Court has observed as below: "It is well-established that in interpreting tariff entries in taxation statute like the Excise Act where the primary object is to raise revenue and for that purpose various products are differently classified, the entries are not to be understood in their scientific and technical meaning. The terms and expressions used in tariff ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed. This certified seed is sold to traders and subsequently to farmers. Foundation seed is the progeny of breeder seed and certified seed the progeny of foundation seed. 4.. Procedure of production. 4.1 Purchase of breeder seeds from universities [rule 14(a)] 4.2 Classification of foundation seed from breeder seed. [rule 14(a)] 4.3 Giving foundation seed to contract farmers [rule 14(c)] 4.4 Registration of the contract farmers with the State Seeds Certification Agency and payment of registration and inspection charges to the agency. [rule 6(d) and form I] 4.5 Sowing the foundation seed by the contract farmer in his field. 4.6 Inspection of the farmer's field by an Inspector of all the State Seeds Certification Agency, at least two times during the growth of the crop. [rule 6(k)] 4.7 Submission of final field report by the State Seeds Certification Agency Inspector stating that the crop meets the standards or rejecting the crop if it does not meet the standards. The final field report also states the estimated quantity of produce of every field and farmer which the company can purchase. [rules 6(k) and 23(e)] 4.8 If the farmer's seed crop has been found satisfacto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er vegetatively propagated materials, of food crops or cattle fodder.' 25.. We have already referred to the essential conditions incorporated in the certificate of registration. One of the essential conditions incorporated in the certificate of registration is that the certificate-holder shall not carry on any business such as dealing in foodgrains, other than the business of sale of certified seeds. Under the terms and conditions of such certificate, the first respondent is not carrying on any other business except the business of certified seeds and it is also not in dispute that the respondent does not hold any other licence for dealing in foodgrains including wheat. 26.. It was also argued by Mr. Dushyant A. Dave that the Market Committee has completely failed to appreciate the declaration of law in the case of State of Rajasthan v. Rajasthan Agricultural Input Dealers Association (1996) 5 SCC 479; AIR 1996 SC 2179 affirmed by this Court on August 21, 1996. In these orders, two reasonings were adopted to hold that the transactions of seeds do not attract market fee, namely: (a) that the definition of agricultural produce includes items specified in the Schedule and that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stages of certification are as per the provisions of the Rules and that right from the inception to the time when the seed is sold in the market, it is done under regulation issued to govern each and every stage of seed production and certificates are only issued after the seed is found to achieve the minimum standards of genetic identity and genetic purity. It was also pointed out that no such certification standards exist for foodgrains sold by farmers to the Mandi Samiti. Thus the production of seeds is an integrated process and needs to be regulated at every stage, right from the inception, in order to maintain genetic identity and genetic purity. ................. 36.. We are, therefore, of the view that the seeds are not specified agricultural produce under the provisions of the Act and, therefore, the business of purchase and sale of seeds under the supervision of the Seeds Certification Agency established under the Act is not a business of sale and purchase of specified agricultural produce and as such the first respondent is not required to pay the market fee or take out a licence. 37.. We are also of the view that the respondents have grossly erred in ignoring the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther registered dealers within State by issuing a form "A" and when the dealer sells the same to the customers he is liable to pay tax)]. The petitioner-corporation is not sure, when it felt that "seeds" are exempted items, it should not have issued form "A" to the seller of seeds, i.e., National Seeds Corporation, Gauhati. The detail analysis was made in Krishi Utpadan Mandi Samiti (2004) 1 SCC 391, to specify whether wheat is different from "wheat seed" before it is chemically treated and converted into certified seed after undergoing multiple processes in seed industries regulated under the Seeds Act, 1996, Rules and Seeds Control Order, 1983. The Government has made the State certification agencies responsible to certify seeds and monitor their production, and sales prescribing minimum seed standards required for each crop which can be certified. Once the seeds meet the "minimum seed standards" the chemical treatment and bagging "of seeds" is made under the supervision of an Inspector of State Seeds Certification Agency. Seeds developed in laboratories are classified as "breeder seeds" and are sold through the Ministry of Agriculture of notified Agriculture Universities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnology and in the method of cultivation, etc., will generally buy seeds for sowing and raising good crops. He will not and is not required to keep apart a portion of the grain he grows, for sowing. He knows that the grain he raises is not the seeds for him and the 'seeds' for sowing is something other than the grain he grows. The seeds are sold, not by the grain merchants but by the 'certified seed dealers'. The seeds are sold in bags or packets sealed, containing a label giving the particulars as to the weight, etc., of the seeds, and that the seeds conform to the minimum limits of germination and purity specified by Government. In fact the learned counsel for the assessees produced before us, one or two sealed bags of seeds when we noticed that in addition to labels referred to above, the word 'poison' in bold letters printed on the bags, which is a clear warning that the seeds are unfit for human consumption. No one will mistake the grain for the seed or the seed for the grain. No one who wants to buy grain will go to a certified seed dealer and purchase seed and no one who wants to buy seed will go and buy grain from a grain merchant. No one will use grain as a seed and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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