1984 (10) TMI 50 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether "sugar-candy" should be considered as "sugar" and thus be exempt from sales tax.
2. The legality of the Sales Tax Officer's imposition of sales tax on "sugar-candy".
3. The applicability of the writ petition under Article 226 of the Constitution given the availability of alternative remedies.

Detailed Analysis:

Issue 1: Whether "sugar-candy" should be considered as "sugar" and thus be exempt from sales tax.

The petitioner argued that "sugar-candy" falls under the definition of "sugar" as per Item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944, which defines "sugar" as any form of sugar with more than ninety percent sucrose content. The petitioner cited several precedents, including the Supreme Court decision in State of Gujarat v. Sakarwala Brothers and the Orissa High Court decision in State of Orissa v. Satyabadi Sahu & Sons, which supported the view that "sugar-candy" is a form of sugar and thus should be exempt from sales tax.

However, the opposite parties contended that the legislature has clearly differentiated between "sugar" and "sugar-candy" by listing them separately in different schedules of the Sales Tax Act, indicating an intention to treat them differently for tax purposes. They cited recent decisions from the Andhra Pradesh High Court in Surana and Company v. State of A.P. and the Madras High Court in Nemichand Parasmal and Company v. Deputy Commercial Tax Officer, which supported the view that "sugar-candy" is distinct from "sugar" and thus taxable.

The court observed that although "sugar-candy" is made from sugar, it undergoes a different manufacturing process, making it a commercially distinct product. The court also noted that the legislature has the competence to classify and tax different commodities separately. The court concluded that the separate listing of "sugar-candy" in List C (taxable goods) indicates the legislative intent to treat it as a taxable commodity distinct from "sugar".

Issue 2: The legality of the Sales Tax Officer's imposition of sales tax on "sugar-candy".

The petitioner challenged the imposition of sales tax by the Sales Tax Officer on "sugar-candy" for the assessment years 1978-79 and 1979-80, arguing that it was illegal based on the earlier court decisions that categorized "sugar-candy" as tax-free sugar. However, the court pointed out that during the relevant period, "sugar-candy" was explicitly included in Entry No. 86 of List C, making it subject to sales tax at the rate of 4 percent.

The court referred to the decision in State of Tamil Nadu v. Pyare Lal Malhotra where the Supreme Court held that each item specified in a tax list is considered a separately taxable commodity, even if it is made from another taxable substance. The court applied this reasoning to conclude that the Sales Tax Officer acted within the law by taxing "sugar-candy" as a separate commodity.

Issue 3: The applicability of the writ petition under Article 226 of the Constitution given the availability of alternative remedies.

The opposite parties argued that the writ petition under Article 226 of the Constitution was not maintainable because the petitioner had alternative remedies available under the statute. The court did not explicitly address this issue in detail but proceeded to examine the merits of the case, implying that it found sufficient grounds to entertain the writ petition.

Conclusion:

After considering the arguments and relevant case law, the court held that "sugar-candy" is liable to sales tax under Entry No. 86 of List C during the relevant period. The writ petition was dismissed, and there was no order as to costs. The court's decision underscores the legislative authority to classify and tax commodities differently based on their commercial identity and manufacturing processes.