1979 (10) TMI 206 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether sewai is taxable at the general rate of sales tax or at a special rate applicable to cereals under the relevant notification.
2. Whether sewai can be considered a cereal for taxation purposes.

Analysis:
1. The case involved a dispute regarding the tax rate applicable to sewai, a thin thread-like article. The Commercial Taxes Tribunal was tasked with determining if sewai should be taxed at the general rate or the special rate for cereals as per a relevant notification. The Tribunal initially ruled in favor of the dealer, considering sewai to be akin to maida and thus subject to the special rate. However, the Deputy Commissioner of Commercial Taxes disagreed, asserting that sewai was distinct from cereals and directed taxation at the general rate. Subsequently, the Tribunal upheld the dealer's position, emphasizing that sewai, made from maida paste, retained the character of being a cereal, citing a similar case from the Assam High Court.

2. The central issue revolved around whether sewai could be classified as a cereal for taxation purposes. The Court examined the process of making sewai from maida, a wheat product, noting that the transformation did not alter its fundamental cereal nature. Drawing parallels with a case involving flattened rice, the Court emphasized that unless a product undergoes a significant transformation, it should not lose its identity as a cereal. The Court rejected the department's argument that sewai's form must match the notification's description, highlighting that the list was illustrative, and as long as the product remained identifiable as derived from cereals, it qualified for the special tax rate. Relying on a Bombay High Court decision, the Court concluded that sewai should be taxed at the special rate applicable to cereals, ruling in favor of the dealer and awarding costs.