WATERY COCONUT – OIL SEED?

[Mr. M. GOVINDARAJAN]

The coconut is divided into three distinct and well recognized sub classes being watery coconut, tender coconut and dry coconut.  Many a interpretation is there in respect of the coconut at various stages. 

Coconut – a fruit or vegetable?

In ‘P.A. Thillai Chidambara Nadar V. Additional Appellate Assistant Commissioner, Madurai and another’ – 1985 (7) TMI 331 - SUPREME COURT OF INDIA the Supreme Court held that coconut is a fruit and it is a distinct variety from dry coconut.  If regard be had to this rule of construction, the question raised will have to be answered against the appellant.  On the first aspect of the question it cannot be disputed that a coconut would be a ‘fruit’ in the botanical sense but unless it can be said to be a ‘fresh fruit’ it will not fall within the exemption notification.  Similarly a coconut may be available in a vegetable market but because of that it does not become a ‘vegetable’.   It is well known that the kernel of the coconut is used as  an ingredient in the culinary preparations for adding taste to the food but it is hardly used a substantial article of good on the table.  The concerned articles, namely ‘fresh fruits’ and ‘vegetables’ being household articles of everyday use for the table these will have to construe in their popular sense meaning the sense in which every householder will understand them.  Viewed from this angle the most apposite test would be the one adopted in the case of His Majesty the King V. Planters Nut and Chocolate Company Limited’ – (1951) CLR (Ex) 122 [which decision was approved by the Supreme Court in ‘Commissioner of Sales Tax V. Jaswant Singh Charan Singh’ – 1967 (2) TMI 65 - SUPREME COURT OF INDIA.  Would a householder when asked to bring home ‘fresh fruit’ and some ‘vegetable’ for the evening meal bring coconut?  Obviously the answer is in the negative.

Same commodity at different stages

In ‘Sri Siddhi Vinayaka Coconut & Co., State of Andhra Pradesh’ – 1974 (5) TMI 93 - SUPREME COURT OF INDIA the Revenue contended that ‘watery coconuts’ and ‘dried coconuts’ are two distinct commodities.  The Supreme Court accepted the contentions of the Revenue.  The Supreme Court held that watery coconuts are put to a variety of uses such as for cooking purposes, for religious and social functions whereas dried coconuts are used mainly for extracting oil.  The same commodity at different stages could be treated and taxed as commercially different articles.  The fact that certain articles are mentioned under the same heading in a statute or the Constitution does not mean that they all constitute on commodity.

In ‘Ganpatlal Lakhotia V. State of Rajasthan’ – 1996 (9) TMI 522 - SUPREME COURT OF INDIA, it was held that in a tender coconut, the kernel is hardly formed or is only in the initial stages of formation.  In a dried coconut the kernel has formed and fully developed and further the water inside the coconut has dried up leading to the drying of the kernel also.  But a fully grown coconut with a well developed kernel which contains water cannot be called either a tender or a dried coconut.  This is the well known variety of coconuts used for culinary purposes and on auspicious occasions and as part of the offerings in the temple.  It is not correct or reasonable to describe this class of coconuts as either dried or tender.

In ‘Commissioner of Sales tax V. Popular Trading Company’ – 2000 (4) TMI 39 - SUPREME COURT OF INDIA, it has been held that watery coconut is an oil seed within the meaning of Schedule II, Entry 5 of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniaym, 1976 and watery coconut in due course becomes dried coconut or copra and therefore it cannot be held that watery coconuts are outside the scope of the entry. 

Coconut – oil seed

In ‘Shiva Traders V. Divisional Dy. Commissioner of Commercial Tax, Durg’ – 2017 (5) TMI 1540 - CHHATTISGARH HIGH COURT, the petitioners are carrying on the business of dealing in dry coconut as well as in watery coconut.  The petitioners claim exemption from sale of watery coconut as tax free failing in Schedule I of Entry 54 of the Chhattisgarh Commercial Tax Act, 1994.  The claim of the petitioners was rejected by the Adjudicating Authority.   The Adjudicating Authority held that the water coconut is not a fruit and it is an oil seed and taxable at 4%  as included in the Commercial Tax Act under Entry 4 of Schedule II of Part IV.  Penalty was also imposed.  The petitioner filed a revision petition under Section 62 of the Act which was also dismissed.  Against the order Divisional Dy. Commissioner, the petitioner filed the writ petition before the High Court.

The petitioners submitted the following before the High Court-

• The watery coconut is a distinct commercial entity exempted from payment of tax under Entry 54 of Schedule I.
• The tender coconut is taxed separately under Entry 7 of Schedule II of Part V.
• Entry 54 being fruits other than dry fruits including pind khajur and coconut gives exemption to watery coconuts.
• Entry 54 of Schedule I is ambiguous and therefore the benefit of ambiguity should be given to the assessee.
• As such the orders passed by the two authorities below assessing the watery coconut as oil seed and charging tax @ 4% deserve to be set aside, as coconut is a fruity falling within the meaning of Entry 54 of Schedule I of the Chhattisgarh Commercial Tax Act.

The  Revenue contended the following-

• The watery coconut has been treated to be an oil seed and it is not fruit and therefore it is chargeable, as an oil seed as per the Entry.
• The primary object of taxation statute is to raise revenue and resort would not have been to the scientific and technical meaning of the terms or expressions used but their popular meaning has to be considered.
• Watery coconut is after all a coconut and therefore it has rightly been charged as an oils seed.
• Coconut never be treated and has never been treated the member of fruit family and therefore it has been rightly charged as an oil seed and 4% tax has been levied which is strictly in accordance with law.

The High Court held that the petitioners have made an attempt to persuade this Court  to hold that watery coconut is not to be taxed as oil seed specified in clause (vi) of section 14 of the Central Sales Tax Act, 1956, but is a fruit within the meaning of Schedule I, Entry 54 of the Chhattisgarh Commercial Tax Act, 1994.  The Legislature in Schedule I only included the fruits other than dry fruits including pind khajur and coconut.  Coconut includes dry coconut as well as watery coconut as it has been held by the Supreme Court that water coconut becomes dried coconut after some point of time.  Therefore the petitioners’ contention, that watery coconut is a separate class and distinct commodity from coconut in absence of any specific classification by the legislature, cannot be accepted.  It is quite vivid that watery coconut is not a fruit but is an oil seed within the meaning of Section 14(iv) of the Central Sales Tax Act, 1956 taxable at 4% as specified in item no. (viii) therein.  The High Court held that the State authorities have acted absolutely within their jurisdiction in holding the coconut to be an oil seed and charging accordingly.