TMI Blog1984 (3) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... . 60,000 but allowed exemption treating the seeds as falling under item No. 9 in Fourth Schedule to the Act. 3.. The Commissioner of Commercial Taxes, Karnataka, Bangalore, respondent 1, by a circular No. 39 of 1981-82 (annexure A) dated 9th December, 1981, gave a clarification that the term "cereals" in item No. 9 means "edible grains, a grain used as food, restricted its applicability only to such of the grains which are edible and are fit for human consumption" and "seeds of grains which are non-edible being coated with poisonous preservatives" during the different periods as under: (i) at 1 per cent multi-point under the provision to sub-section (1) of section 5 during the period up to 7th September, 1976; (ii) at 4 per cent multi-point under sub-section (1) of section 5 from 8th September, 1976, to 14th November, 1981; (iii) at 2 per cent multi-point under sub-section (1) of section 5 from 15th November, 1981, onwards by virtue of Government Notification No. FD 165 CSL 80 dated 10th November, 1981. 4.. Thereafter the Assistant Commissioner of Commercial Taxes (Assessment), Bellary, respondent 2, served a notice dated 17th March, 1982, under section 21(4) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing him to tax under section 5(1) of the Act at 4 per cent on the total turnover of Rs. 36,000. The petitioner's case is that the seeds are cereals and tax is leviable at single point under section 5(4) of the Act and he, being a second dealer, is not liable to be taxed again. The petitioner has challenged both annexures A and B. 7.. "Certified seeds" (hereinafter referred to as "seeds"), it was contended on behalf of the assessees, are "cereals" and are, therefore, not subject to multipoint tax and the assessees being purchasers from other dealers, they are not liable to be taxed again. According to the learned counsel for the Revenue, it is only "cereals" that are subject to single point tax and the certified seeds which are not "cereals" are subject to multi-point tax under section 5(1) of the Act and not single point tax. 8.. The question that arises for our consideration in these writ petitions, therefore, is "Whether the term 'cereals' in the Second and Fourth Schedules to the Act takes within its meaning 'seeds'?" If seeds of paddy, ragi, jowar, maize, etc., are "cereals" then they are goods in respect of which a single point tax is leviable and if they are not "cereals" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atars) and hessian cloth, the tax shall be calculated at the rate of two per cent of such turnover." Second Schedule was amended substituting serial Nos. 137 and 138 by the following entries, namely: "137. Cereals (whether with or without husk) other than Four per cent those mentioned in SI. No. 9 of the Fourth Schedule. *Words in Kannada script are transliterated here. 138.. Flour and husks of pulses, atta, maida, soji and bran Four per cent. of wheat, parched rice, beaten rice and rice bran, soji, maida, atta flakes and bran of maize. and the Fourth Schedule was also amended substituting for the entries relating to serial Nos. 8, 9 and 10 the following entries: "8 Crude oil as specified in Sale by the first or earliest Four per cent clause (iic) of section 14 of successive dealers in the of the Central Sales Tax State liable to tax under Act, 1956. this Act. 9 Cereals, that is to say, Sale by the first or earliest Four per cent rice, wheat, jowar or of successive dealers in the milo, bajra, maize, ragi, State liable to tax under kodan, kutki and barley. this Act. 10 Pulses. ............ ............." By the Karnataka Sales Tax (Amendment) Act, 1978 (Act No. 18 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Sales Tax Act, 1956, declared cereals as one of the goods of special importance in inter-State trade or commerce. To give effect to section 15 of the Central Sales Tax Act, the State legislature with effect from 7th September, 1976, shifted cereals and pulses to Schedules II and IV. What is shifted, therefore, is not all the goods specified in section 5(1) of the Act, but only goods that are cereals. We do not, therefore, accept the submission made on behalf of the assessees that the very goods in respect of which sales tax was leviable under section 5(1) are shifted to Schedules II and IV with effect from 7th September, 1976, and single point tax is, therefore, leviable on all those goods. 17.. As the term "cereals" is not defined in the Central Sales Tax Act, 1956, or the Act, the learned counsel for the assessees invited our attention to the definition of the term "cereals" in the dictionaries. 18.. In the Mysore University English-Kannada Dictionary, "cereal" means "Dhanyadha aharada khalugalu manushyara aharahkagi upagogisuva dhanyakhalu ghodi jola athava ithara dhanya dinda madida thindi."* 19.. Shorter Oxford English Dictionary defines the term as: "cereals" pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing to preserve it and to improve its genetic qualities and by this process, the cereal does not become a separate commercial commodity but continues technically, scientifically and botanically the same commodity. It was further argued that the use to which the cereal is put to is a determining factor in interpreting the term "cereal". 22.. At this stage, we may with advantage, refer to the meaning of the word "seed " in the dictionaries. In the Mysore University English-Kannada Dictionary "seed" is "Bithane bija (bithane) kalu." In the Shorter Oxford English Dictionary "seed" is that which is or may be sown, the ripe (ovules) of a plant or plants as collected for the purpose of being sown. In Webster's Third New International Dictionary "seed" is something that is sown or to be sown. 23.. Parliament has enacted the Seeds Act (54 of 1966) for regulating the quality of certain seeds for sale and for matters connected therewith. Under this Act "seed" means any of the following classes of seeds used for sowing or planting: (i) seeds of food crops including edible oil seeds and seeds of fruits and vegetables; (ii) cotton seeds; (iii) seeds of cattle fodder; (iv) jute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, "seed" means: "Bithane bija bithane kalu".* 25.. Wheat, paddy, ragi, jowar and other cereals are known as food crops and are mainly grown for human consumption. They are known as foodgrains. No doubt, if wheat, paddy, ragi, jowar and other cereals are sown, seedlings sprout from them. The predominant or the general use of purpose of growing these cereals is to use them as human food. They are not grown to use them as seed to grow fresh crop. The test is not whether by sowing cereals, seedlings can be raised but whether they are primarily or predominantly grown for purpose of raising a new crop or for sowing. 26.. We can take judicial note of the fact that a common man in a village who grows paddy, ragi and other cereals raises the crop for human consumption and does not use the crop grown as seeds. He selects and collects the best from out of the wheat, paddy, ragi, etc., he has grown for the purposes of sowing and raising a new crop. He does not use them as food. He makes a distinction and treats each as a distinct commodity. He does not identify one with the other. He calls those collected by him for raising the fresh crop as "seed-paddy", "seed-ragi", "seed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cially also "grains" and "seeds" are understood as two distinct commercial commodities. 28.. On the foregoing discussion, we cannot accept the contention urged on behalf of the assessees that the dry fruits after processing have only improved in their quality without any change in their identity. What is made more acceptable to the customer is not the cereal, the human food but a "seed" to be sown to raise a fresh crop. 29.. Learned counsel for the assessees argued that botanical names used against the cereals give an indication that so long as the goods or commodities belong to the same "families" from the botanists view, they should not be treated as different commodities. According to them seed of a cereal and the cereal belong to the same family and are not different commodities. We cannot accept this submission. The legislature itself has specified paddy and rice as separate commodities in entry 9 of the Fourth Schedule. Paddy is rice with husk. But still the legislature has treated them as two distinct and separate commodities for levying tax because as understood commercially and in common paralance, they are not one and the same but different commodities. This clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for human consumption. It may be, the cereals, if sown produce sapplings but they are not used as seeds to raise a new crop. In the same way "seeds" are to be interpreted as is understood in common parlance and given its popular sense meaning and if so understood, it only means seeds of a cereal grown or used for raising a new crop. 33.. Articles and goods are to be construed not in any technical sense, not from a botanical point of view but as understood in common paralance by those who deal with them like dealers, purchasers and consumers. In the words of Story, J., in 200 Chests of Tea (1824) 9 Wheaton (US) 430 the particular words used by the legislature in the denomination of articles are to be understood according to the common commercial understandings of the terms used, and not in their scientific or technical sense, for the legislature does not suppose our merchants to be naturalists or geologists or botanists. It is further observed "that the legislature does not suppose our merchants to be naturalists or geologists or botanists". 34.. Whether sale of peanuts and cashwnuts was exempt from levy of excise tax came up for consideration before the Supreme Court of Cana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was subjected to a process, i.e., removal of stems and dust, was converted into a commercially different commodity "bidipatti", held that raw tobacco was converted into bidipatties, a commercially different commodity, and there was therefore "consumption" of tobacco. It is true, as argued on behalf of the assessees, the provision of Sales Tax Act was not considered or interpreted by the Supreme Court in this case. But still, the Supreme Court has considered that when an article is subjected to a process, it is converted into a commercially different article. 38.. In Sakthi Sugars Ltd. v. Deputy Commercial Tax Officer [1969] 23 STC 232, the Madras High Court had to consider whether "sugarcane setts" are sugarcane. Sugarcane sett is a portion of cane stalk (cutting) such as is used for planting. Sugarcane is the genus of which the sugarcane sett is the specie. But the Court held that sugarcane setts are not sugarcane as is understood in commerce and trade and in common parlance. In Kampli Co-operative Sugar Factory Ltd. v. State of Mysore [1975] 35 STC 332, this Court, following the Sakthi Sugars case [1969] 23 STC 232 has held that sugarcane setts are not sugarcane. 39.. In Sounda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus be seen that the two items are distinct and separate entities in the commercial world and further these two items have distinct and separate user although the cotton sewing thread basically emanates from cotton yarn after going through a process and held that "cotton sewing thread on cops and cones" does not come within the meaning of the words "cotton yarn on cops and cones" and was therefore not entitled to the exemption. 41.. In Jeewajee Co. v. State of Tamil Nadu [1974] 34 STC 4, the assessee had processed canvas cloth, stitched the edges with eyelets and sold the finished product as tarpaulins. On the question whether "tarpaulins" would fall within the term "textiles" and would be exempt from payment of sales tax under section 8 of the Tamil Nadu General Sales Tax Act, 1959, read with item 4 of the Third Schedule it was held by the Madras High Court that even assuming that processed canvas cloth out of which tarpaulin is made is taxable, as the processed canvas cloth was not sold as such but the tarpaulin was sold as a separate finished product it could not be treated as "textile" falling under item 4 of the Third Schedule to the Act. 42.. It was argued on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC 365, the Assam High Court, interpreting entry 1 of the Third Schedule to the Assam Sales Tax Act, 1947, which exempted from taxation "all cereals and pulses including all forms of rice" had to consider whether chira, which is beaten rice, and muri, which is parched rice could be classified as rice "in all forms" and held that the word "forms" could not be confined to mere varieties of rice, as that would be putting a construction upon the language of the entry which unwarrantably narrowed its meaning and the idea behind that entry was to exclude all cereals from taxation and that chira and muri, to all intents and purposes, were cereals and had not lost their character of cereals by any process of transformation so as to be called by any other name and are therefore exempt from sales tax. 45.. In Ghasi Ram Hari Ram v. Commissioner of Sales Tax [1972] 30 STC 88, the Delhi High Court construing entry 1 of the Second Schedule to the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, which exempted from taxes all cereals including all forms of rice (except when sold in sealed containers), held that the expression "all forms of rice" would..................... embrace wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he broken dal cannot be considered as a commodity essentially different from the grain, i.e., arhar dal purchased by the dal mills and is therefore not a new and different article and therefore not liable to be taxed under section 3-D(1). 49.. Whether hydrogenated oil called vanaspati was still groundnut oil or a product of groundnut oil came up for consideration before the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool [1960] 11 STC 827 (SC). There, the Supreme Court adopted the "common sense" rule of interpretation and held inter alia: To be groundnut oil two conditions have to be satisfied: it must be from groundnut and it must be oil. That the hydrogenated oil sold by the appellants was out of groundnuts not being in dispute, the only point is whether it continues to be oil even after hydrogenation. Oil is a chemical compound of glycerine with fatty acids, or rather a glyceride of a mixture of fatty acidsprincipally oleic, linoleic, stearic and palmitic-the proportion of the particular fat varying in the case of the oil from different oil seeds and it remains a glyceride of fatty acids even after the hardening process, though the relative pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The articles in question retained their essential or basic character and identity as articles fit for human consumption. So long as the form or shape or the size or the state the goods take retain their character of being edibel items, i.e., so long as they could be used as food and identifiable as having been formed from the cereals and pulses, it is of no materiality which form, shape, size or state they take. The dryer felt is basically a textile, a woven fabric. The use it would be put to may be different from the other textiles but it is not the use which determines its character as textiles. Dryer felts satisfy the description of textiles. Strong reliance was placed on behalf of the assessees on another decision of the Supreme Court in Commissioner of Sales Tax, Lucknow v. Bist [1979] 44 STC 392 (SC). In this case the assessee was an agriculturist and the tea leaves grown by him in the lands were agricultural produce. He made them marketable and fit for human consumption by the consumers and then sold them. The question that came up for consideration before the Supreme Court was whether the tea leaves which were subjected to some process before they were packed and sold l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A dated 9th December, 1981, issued by the Commissioner of Commercial Taxes-respondent 1. This circular, according to the assessees, is without competence and inconsistent and contrary to the provisions of the Act. The Commissioner has, in effect, drawn the attention of the officers of his department that the word "cereals" means only edible foodgrains and not seeds that are meant for sowing. This Circular cannot be understood as interfering with the judicial discretion of the departmental officers. Suffice it to say, the circular annexure A, can only be considered as clarifying to the officers of the department the meaning of the term "cereals". We are also of the opinion that the circular correctly sets out the legal position from time to time. 53.. In the result and for the foregoing reasons, all the writ petitions fail and are liable to be dismissed. We accordingly discharge the rule and dismiss these writ petitions. But in the circumstances of the cases, we direct the parties to bear their own costs. After we pronounced our order in these cases, oral applications were made by the learned counsel for the assessees for grant of a certificate of fitness to appeal to the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
