Patna High Court
Commissioner Of Commercial Taxes vs India Sewai Co. on 18 October, 1979
Equivalent citations: [1980]45STC28(PAT)
Author: Nagendra Prasad Singh
Bench: Nagendra Prasad Singh
JUDGMENT
S.P. Sinha with Nagendra Prasad Singh, JJ.
1. On being directed by this Court to state a case on the undermentioned question of law, which is common for all the periods in question, the Commercial Taxes Tribunal has made the statement:
Whether sewai is taxable at the general rate of sales tax prevalent during the period under assessment, i.e., 1st April, 1959, to 30th June, 1959, and not at a special rate of tax applicable to 'cereals' under the relevant notification then in vogue?
2. Same is the question with regard to the other period also, namely, for the period 1st July, 1959, to 31st March, 1961. In substance, the question is, whether or not sewai is a cereal and included in the relevant notification. The relevant notification is STGL-J-2042/68-12568 F.T. dated 27th December, 1968, amended from time to time prescribing the rate of tax, whether general or special, at which the particular goods were taxable. The relevant notification reads:
Cereals and pulses including all forms of rice, gram, peas, moong, arhar, masur, khesari, millet, bajra and jowar, wheat, oats, barley, maize, broken pulses, sago, besan, sattu, and flour including atta, maida, suji and bran.
3. The rate of tax prescribed is special sales tax at 2 per cent.
4. It may be stated that so far as the period 1st April, 1959, to 30th June, 1959, is concerned, it would be governed by the Bihar Sales Tax Act, 1947, and so far as the latter period is concerned by the Bihar Sales Tax Act, 1959. But, this fact does not make any difference, in so far as the question referred for opinion is concerned.
5. The facts relevant are as under: The opposite party (whom I shall hereinafter refer to as the dealer) carried on business of manufacturing and selling sewai, which is a type of thin thread-like article. Since the dealer had not got itself registered under the Act, proceedings under Section 13(5) of the Bihar Sales Tax Act, 1947, equivalent to Section 16(5) of the Bihar Sales Tax Act, 1959, were initiated for the respective periods. The dealer was held liable to pay sales tax with effect from 1st April, 1959, and for all the succeeding periods stated above. The rate at which the taxable turnover on sales of sewai was taxed was the general rate at 4 per cent for the first period ending on 30th June, 1959, and at 3 per cent for the succeeding period ending on 31st March, 1961.
6. On appeal, the Appellate Assistant Commissioner of Commercial Taxes accepted the dealer's plea that sewai was either a form of maida or a wheat product or a cooked food and, as such, it was not assessable at the general rate of sales tax but at the special rate of sales tax, namely, at 2 per cent of the turnover.
7. The department then appealed to the Deputy Commissioner of Commercial Taxes, Patna Division, Patna, who reversed the order of the Assistant Commissioner of Commercial Taxes, on the ground that sewai was not cereal, being entirely distinct from flour and maida. It was also not cooked food. The Deputy Commissioner of Commercial Taxes, therefore, directed that the sales of sewai should be taxed at the general rate of 4 per cent for the period ending 30th June, 1959, and 3 per cent for the period ending 31st March, 1961.
8. The dealer then filed revision applications in respect of the different periods before the Commercial Taxes Tribunal, Bihar, Patna. The Tribunal held that sewai was nothing but slender threads of wheat paste or more correctly of maida paste and retained the character of being maida. It was essentially in the nature of cereals. The Tribunal relied upon the decision of the Assam High Court in the case of Kapildeoram Baijnath Prosad v. J.K. Das [1954] 5 S.T.C. 365. The Tribunal, therefore, in effect upheld the decision of the Assistant Commissioner of Commercial Taxes.
9. The Commissioner of Commercial Taxes then sought for reference to be made to this Court on the aforesaid question, which the Tribunal refused. It was then that this Court, having been moved by the department, directed the Tribunal to make a statement of the case on the question of law, aforesaid. These are the relevant facts.
10. Mr. Jain, appearing for the petitioner, has submitted by reference to the aforesaid notification, by which special rate of sales tax is to be charged on the items described therein, that unless the goods sold fell within the description of the notification, it would not qualify for being taxed at the special rate of sales tax. According to Mr. Jain, although cereals and pulses were to be taxed at the special rate of sales tax, but the said expression "cereals and pulses" has to be understood ejusdem generis the items following "cereals" and "pulses". In other words, according to Mr. Jain, unless the goods sold retain the form and character of the goods described in the said notification, it would not qualify to be taxed at the special rate of sales tax. Sewai, according to Mr. Jain, assumes a form quite distinct and different from maida or flour. It did not also retain the form of either being a cereal or maida or flour. On the contrary, it assumes a different shape altogether and looks to be of a different species. He, therefore, submitted that on a true interpretation of the said notification, the question must be answered in favour of the department and against the dealer. In support of his contention, he cited one of the decisions of the Supreme Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 S.T.C. 319 (S.C.). This was a case in which it was held that even though the commodities concerned belonged to the genus "iron and steel" each such item was a separate taxable commodity for the purpose of sales tax and each of them forms a separate species for each series of sales. I will deal with this case at the appropriate place.
11. The learned counsel appearing for the dealer has reiterated the submissions which found favour with the Tribunal and has supported his argument by a decision of the Bombay High Court in the case of Commissioner of Sales Tax v. Sultan Shev Co; [1977] 40 S.T.C. 583. This was a case in which the question at issue was the same as is before us. The question was whether sewai is a form of cereal. Their Lordships held in the affirmative. While dealing with the question, their Lordships have referred to the decision on which the Tribunal had relied upon, namely, in the case of Kapildeoram Baijnath Prosad v. J.K. Das [1954] 5 S.T.C. 365 and have distinguished the decision of the Supreme Court cited by the learned counsel for the department in the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 S.T.C. 319 (S.C.).
12. According to the learned counsel for the dealer, therefore, the question referred for opinion must be answered in favour of the assessee, namely, that sewai has been rightly held to be assessable at the special rate of sales tax applicable to cereals.
13. The question, as I have analysed even earlier, is whether sewai is a cereal.
14. It may be stated that, admittedly, sewai is prepared out of maida, which is one of the products of wheat. The process which is undergone for turning maida into sewai is very simple: after mixing water in maida in certain proportion, it is made into a paste and then slender thread-like article is manufactured, which is commonly known by the name of "sewai". No doubt, the original form of the cereal, out of which sewai is prepared, is lost, but the question is, merely because in the process of preparing sewai, the cereal has undergone a transformation of its actual form, whether it ceases to be a cereal. One could understand the transformation to be so much as to change the very character and form of the cereal as not qualifying to be called a cereal, but where the cereal has undergone a little process, either for being made tasty or for being made into a thing which can be used differently than as mere grain, we do not think that it can be said with justification that the character of the goods has so changed as to exclude the said goods from the category of cereal. The Assam High Court in the case of Kapildeoram Baijnath Prosad [1954] 5 S.T.C. 365 was seized with somewhat similar question, as to whether chira and muri, which are flattened or fried rice, ceased to be cereals. Under the Assam Sales Tax Act, what was exempted from taxation was all cereals and pulses including all forms of rice. Their Lordships held, to all intents and purposes, chira and muri have not changed their character of cereals by any process of transformation, so as to make them being called by any other name. We are in respectful agreement with the decision of the Assam High Court. If the cereal in question has not undergone such a process of transformation, as to make it wholly unidentifiable as a cereal, the article manufactured out of the cereal cannot lose its basic character of being a cereal. If wheat is transformed into maida and maida into sewai, we find no justification for thinking that the transformation of cereal into sewai has made it unidentifiable as a cereal.
15. Mr. Jain, appearing for the department, stressed on the argument that the "cereals" and "pulses" in the notification must be understood in the context of what follows the said two terms, in other words, ejusdem generis. I have already quoted the notification, but for the sake of understanding the same, once again I will quote the relevant portion of the same:
Cereals and pulses including all forms of...wheat...and flour including atta, maida, suji and bran.
16. According to Mr. Jain, the goods sold must retain the form as has been enumerated in the said notification. If the form is so changed that it does not conform to the description given in the notification, the sale of such goods cannot qualify for taxation at the special rate of sales tax. In this context, he has cited the decision of the Supreme Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 S.T.C. 319 (S.C.), wherein their Lordships have observed that although the various forms may belong to the genus "iron and steel", yet each one of them is a separate taxable commodity by itself.
17. In this case, a list of goods has been given under the main caption "iron and steel". Such of those goods, as had been given under the main caption, "iron and steel", were sought to be taxed to sales tax once again and the argument was that since iron and steel had suffered taxation at one point, the goods enumerated under the caption, "iron and steel", could not be taxed over again. It was in that context that their Lordships considered the list of the goods given under the main caption, "iron and steel", and came to the conclusion that although each one belonged to the same genus, "iron and steel", yet each such item was a separate taxable commodity for the purpose of sales tax.
18. We do not see as to how this decision at all helps the learned counsel for the department. On the contrary, we think this decision lays down the proposition that, although on being processed, "iron and steel" may form into separate species, yet they continued to belong to the same genus. If the ratio is applied to the instant case, the conclusion will be that although sewai may have become a separate specie, but it continued to belong to the same genus, namely, cereal in the form of wheat.
19. Looking to the notification under which the several items of the genus "cereals" and "pulses" have been enumerated, it clearly emerges that the items included therein are merely illustrative and not exhaustive. All the same, the sub-items belong to the main genus, namely, cereals and pulses.
20. Now, the notification reads that "cereals and pulses" including all forms of wheat and flour including atta, maida, etc., shall be taxed at the special rate of sales tax. Necessarily, it visualises that cereals and pulses can take various forms and so also atta and maida. So long as the forms which the cereals and pulses take retain their character of being edible items and identifiable as having been formed out of cereals and pulses, it is immaterial what form the cereals and pulses take, they would continue to be classified as cereal. It would be taxable only at the special rate. As we said earlier, the items given under the genus "cereals" and "pulses" are merely illustrative and not exhaustive. An item, which has not figured in the list, cannot, therefore, be excluded from the category of cereals and pulses. The only test to be applied is whether the particular form which cereals and pulses take is such which can be identified as having formed from cereals and pulses. If such identity is maintained, we do not see any reason why it will not qualify for being taxed at the special rate of sales tax.
21. The learned counsel for the dealer has cited the decision of the Bombay High Court in the case of Commissioner of Sales Tax v. Sultan Shev Co. [1977] 40 S.T.C. 583, which is directly on the point and with which we agree. We will accordingly answer the question by saying that sewai was not taxable at the general rate of sales tax prevailing during the respective periods of assessment, but at the special rate of sales tax applicable to cereals under the aforesaid notification. The question is answered against the department and in favour of the dealer. The dealer will be entitled to costs. Hearing fees Rs. 250.