TMI Blog2012 (8) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... ified produce, even if such produce is grown on land cultivated by it personally, such company is deemed to be a dealer in respect of turnover relating to sales of such produce. Therefore, it has to be borne in mind that distinction between agricultural produce and non-agricultural produce is relevant only to a certain extent, for the purpose of understanding whether a person engaged in carrying on business of buying, selling, supplying or distributing goods is a dealer. Petitioners seek to claim deduction of input tax for having purchased agricultural machineries, motor car, fertilizers and chemicals on the ground that they are purchased by them for use in their business which includes growing of and maintaining tea plantation apart from processing and manufacturing tea. This contention cannot be accepted. Fertilizers and chemicals or for that matter agricultural machineries, such as tractors, trailers, transformers, motor car, pump sets and electrical goods, which are used for tea cultivation cannot be regarded as goods falling within the definition of the term "input" for the purpose of the business of the petitioners, which in the instant case is manufacturing and processing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and W.P. Nos. 23815-825 of 2011 are filed by M/s. Badra Estates and Industries Limited, Bangalore. It is a company incorporated under the Indian Companies Act, 1956 and a dealer registered under the Act. The petitioner-company owns plantations and is engaged in growing coffee, curing and processing of goods for sale of cured coffee to its customers in the State. It is challenging the reassessment order dated March 25, 2011 passed by the Assistant Commissioner of Commercial Taxes (Audit-16), VAT Division No. 1, Bangalore, for the tax period April, 2006 to March, 2007 and the consequent demand notice issued. 4. W.P. No. 25518 of 2011 and W.P. Nos. 43584-593 of 2011 are also filed by M/s. Badra Estate and Industries Limited challenging the reassessment order dated May 31, 2011, passed by the Assistant Commissioner of Commercial Taxes (Audit-11), DVO-1, Bangalore, for the tax period May, 2007 to March, 2008 and the consequent demand notice issued. 5. W.P. No. 16162 of 2011 and W.P. Nos. 41091-41101 of 2011 are filed by M/s. Devon Plantation and Industries Limited. It is a company incorporated under the Indian Companies Act, 1956 and a dealer registered under the Act. It is engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance on the order passed by this court in the case of Diwan Bahadur S.L. Mathias and Sons, Chikmagalur v. State of Karnataka [2011] 43 VST 153 (Karn); [2010] 69 Kar LJ 280 to contend that it has been already held by this court that tea growing is not an agricultural activity and the judgment of the apex court in Travancore's case [1977] 39 STC 1 (SC) was rendered in the context of the Central Sales Tax Act, 1956, where no provision has been made to exclude tea cultivation from the purview of agriculture, hence the said decision could not have been made basis for the impugned order passed by the assessing officer. His contention is that despite such an order passed by this court, the Commissioner of Commercial Taxes vide his proceedings dated November 22, 2010 has held that the activity of raising or growing tea plants continued to be agricultural activity as per section 2(1) and the person raising or growing tea plants continued to be an agriculturist as per section 2(2). 8. The Commissioner of Commercial Tax, while giving clarification in the matter, has relied on the judgment of the apex court in Travancore's case [1977] 39 STC 1 (SC). He has given such clarificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has decided. 14. The implications of the petitioner not being an agriculturist and the tea not being agricultural or horticultural produce for the purpose of the said Act are not examined by the second respondent. What is required to be considered by respondent No. 2 is the entitlement or otherwise based on the petitioner's registration as a dealer under the said Act, when the petitioner is not an agriculturist and tea is not an agricultural or horticultural produce. This aspect of the matter has to be examined and thereafter fresh orders are to be passed by respondent No. 2. 15. For all the aforesaid reasons, the impugned order is liable to be quashed and accordingly it is quashed, but the same does not automatically mean that the petitioner is entitled to input-tax credit or set-off on fertilizers, chemicals, manure, etc. The issue has to be re-examined by the second respondent. 10. It is necessary to notice here that in the aforementioned judgment, this court has referred to the definition of the term agricultural produce or horticultural produce as defined under section 2(3) and Explanation 4(a) to section 2(12). Based on the above observations mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the tea not being agricultural produce or horticultural produce , for the purpose of the Act what was required by the Commissioner of Commercial Tax to consider was the entitlement of the petitioner for input-tax credit when the petitioner therein was not an agriculturist and the tea grown was not an agricultural produce or horticultural produce. It is for the consideration of this aspect of the matter and for passing fresh orders, the matter was remitted to the second respondent-Commissioner for Commercial Tax with a direction to re-examine the issue. 15. After re-examination, the Commissioner of Commercial Tax has come to the conclusion that the activity of raising or growing tea plants continues to be an agricultural activity and the person raising or growing tea continues to be an agriculturist . He also further points out that in the light of the definition of the terms input and business as used in the Act, tax paid on goods purchased by the petitioners in the course of their agricultural activities and for use in such agricultural activity does not fall within the ambit of input tax as provided under section 10. 16. It is thus clear that the Commissioner of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, rubber, timber, wood, raw cashew or coffee grown on land cultivated by it personally, directly or otherwise, such company, shall be deemed to be a dealer in respect of turnovers relating to sales of such produce. 20. The term agricultural produce or horticultural produce as defined in section 2(3) introduces a deeming clause stating that agricultural or horticultural produce shall not be deemed to include tea, beedi leaves, raw cashew, timber, wood, tamarind and such produce, except coffee as has been subject to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting or drying. 21. It is contended by the learned counsel for the petitioner that the qualifying phrase- as has been subject to any physical, chemical or other process for being made fit for consumption used in the definition qualifies only the words such produce and not the words preceding the word and . In other words, according to him, tea, beedi leaves, raw cashew, timber, wood, tamarind shall not be deemed to be included in the definition of the term agricultural produce or horticultural produce . But, as regards other such produce are concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased by a dealer in the course of his business for re-sale or for use in the manufacture or processing or packing or storing of other goods or any other use in business. 26. The expression capital goods is defined in section 2(7). It reads as under: 'Capital goods' for the purpose of section 12 means plant, including cold storage and similar plant, machinery, goods vehicles, equipments, moulds, tools and jigs, and used in the course of business other than for sale. 27. The term business is defined in section 2(6). It reads as under: 'Business' includes,- (a) any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on in furtherance of gain or profit and whether or not any gain or profit accrues therefrom; and (b) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. 28. Chapter II of the Act deals with incidence and levy of tax. Section 3 which provides for levy of tax states that tax shall be levied on every sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n extent, for the purpose of understanding whether a person engaged in carrying on business of buying, selling, supplying or distributing goods is a dealer. 32. The real issue is what is the nature of the business the petitioners are carrying on, what is the input that they use for the purpose of their business and whether they are entitled for input-tax credit for the tax paid while purchasing fertilizers, pesticides, chemicals and other capital goods for growing tea and coffee. As is evident from the definition of the term input , input means any goods including capital goods purchased by a dealer in the course of his business for re-sale or for use in the manufacture or processing or packing or storing of other goods or any other use in business. The tax that is sought to be collected from the petitioners is in respect of the taxable sale of goods, namely, tea powder/coffee produced by the dealer in the course of his business. 33. For the purpose of finding out the taxable sale of goods produced by the dealer in the course of his business, in the instant case, the term business has to be regarded as the trade, commerce, manufacture or any adventure in the nature of trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly for use in the business of taxable goods. The taxable goods produced by the petitioner in the instant case is tea and coffee. In the course of manufacture or production of these goods, whatever goods including capital goods are purchased for use in the manufacture or for processing or packing or storing of other goods or any other use in business, which can be described as input as per definition in section 2(19), the petitioners are entitled to claim deduction of input tax. 36. But, in the instant case, the petitioners seek to claim deduction of input tax for having purchased agricultural machineries, motor car, fertilizers and chemicals on the ground that they are purchased by them for use in their business which includes growing of and maintaining tea plantation apart from processing and manufacturing tea. This contention cannot be accepted. Fertilizers and chemicals or for that matter agricultural machineries, such as tractors, trailers, transformers, motor car, pump sets and electrical goods, which are used for tea cultivation cannot be regarded as goods falling within the definition of the term input for the purpose of the business of the petitioners, which in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is yielded in the form of green leaves purely by the cultivation in the land. The second component consists of the income which is the result of subjecting the green leaves which are plucked from the tea plants grown on the land and to a particular manufacturing process in the factory of the tea company. 38. In Travancore's case [1977] 39 STC 1 (SC), the apex court has observed by referring to rule 24 of the Income-tax Rules, 1922 and also rule 8 of the Income-tax Rules, 1962, which prescribed the formula to be adopted for apportioning the income realized as a result of the sale of tea after it is grown and subjected to manufacturing process in the factory. 60 per cent is taken to be the agricultural income which consisted of the first element or component, while 40 per cent represented non-agricultural income which consisted of the second element or component. In this regard, the apex court referred to the judgment in the case of Tea Estate India P. Ltd. v. Commissioner of Income-tax [1976] 103 ITR 785 (SC). Therefore, it is very evident and crystal clear that fertilizers, pesticides, fungicides, chemicals, used in tea cultivation and the agricultural machineries, pum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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