1996 (2) TMI 500 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of entry 51(ix) of Schedule I of the M.P. General Sales Tax Act, 1958 regarding the tax exemption eligibility of badi and papad processed from cereals and pulses.

Analysis:
The case involved a reference by the Commissioner of Sales Tax under section 44(1) of the M.P. General Sales Tax Act, 1958 to determine whether the Board of Revenue was justified in holding that the processing of badi and papad from cereals and pulses falls under entry 51(ix) of Schedule I, making them eligible for tax exemption. The respondent-assessee, a registered dealer manufacturing papad and badi, claimed tax exemption based on registration with the Madhya Pradesh Khadi and Village Industries Parishad. However, the assessing officer and the Appellate Deputy Commissioner of Sales Tax rejected this claim, leading to an appeal before the Tribunal.

The Tribunal determined that papad and badi are essentially pulses and observed that they are not consumable without proper cooking. It concluded that these products are processed articles made from cereals and pulses, thus qualifying for tax exemption under entry 51(ix) of Schedule I. The Revenue challenged this decision, arguing that papad and badi should be classified as "cooked food" rather than cereals or pulses, making them ineligible for the exemption.

The Court deliberated on whether the process of preparing badi and papad from cereals and pulses constitutes manufacturing. Drawing a parallel with a Supreme Court decision on wheat products, the Court emphasized that when cereals and pulses are transformed into papad and badi, a new commercial commodity emerges, distinct from the original ingredients. It held that badi and papad are manufactured items, not merely processed, as they become new goods with higher utility in the market. Consequently, the Court ruled in favor of the Revenue, denying the tax exemption to the assessee.

In conclusion, the Court rejected the reference in favor of the Revenue, emphasizing that badi and papad, being manufactured items from cereals and pulses, do not qualify for tax exemption under entry 51(ix) of Schedule I.