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M/s. Sri Venkata Rama Oil Industries Limited Versus Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad

Classification - Whether RB Acid Oil and RB Fatty Acid can be considered as distinct and different from Rice Bran Oil - Held that:- When un-refined raw rice bran oil is subjected to a process of refining, two distinct and different commodities namely RB Fatty Acid and RB Acid Oil had also emerged. Therefore, the manufacturing process had altered the identity of one commercial commodity and new commercial commodities had emerged. The law of sales tax is also concerned with goods of various descri .....

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erstand it that constitutes the definitive index of the legislative intention when the Statute was enacted. Therefore, the test is how the product is identified by the class or section of people dealing with or using the product. - Rice Bran Oil which is fit for human consumption can only be a different and distinct commodity from the other two commodities viz., RB Fatty Acid and RB Acid Oil as the former is fit for human consumption while the latter two commodities are only used in the pro .....

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rama Murti,JJ. For the Appellant : Sri S. Krishna Murthy For the Respondent : None appeared JUDGMENT (Per Honble Sri Justice M. Seetharama Murti) This special appeal by the appellant/dealer is directed against the orders dated 23.09.2003 of the Commissioner of Commercial Taxes in CCTs.Ref.No.LV(3)/2409/2002-II. 2. We have heard the submissions of the learned counsel for the appellant and the learned Special Standing Counsel for Commercial Taxes. We have perused the material record. 3. The facts, .....

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r (CT) (Intelligence), Kakinada (the AC (CT) for brevity) vide proceedings dated 24.06.1999 in CF.No.75/98-99 had initially assessed the dealers provisionally for the said year under the CST Act and levied tax @ 10% on the sales of rice bran fatty acid and rice bran acid oil (RB fatty acid and RB acid oil for brevity) treating them as general goods falling under the VII schedule of the APGST Act. Aggrieved of the orders of the A C (CT) (Intelligence), the appellant had preferred an appeal before .....

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first schedule of the APGST Act are to be held as falling under the said entry 24(c) and are, therefore, liable to tax at 2% under the APGST Act. Having held so, he had directed the assessing authority (CTO) to take up the final assessment of the dealers and pass fresh orders. Pursuant to the said orders of the said ADC, the CTO, Peddapuram had passed final assessment orders through the reference vide GINO.10087/98-99 dated 30.03.2001 levying tax at 1% on the sales of RB fatty acid and RB acid o .....

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CTO, Peddapuram. Accordingly, the Commissioner had issued a show cause notice. Finally, on merits, the Commissioner had held that RB fatty acid and RB Acid oil are different and distinct from rice bran oil/refined oil and had, therefore, set aside the orders of the ADC (CT) and the consequential orders of the CTO to the extent of the relevant disputed turnovers. Thus, the Commissioner by the orders impugned had revised the rate of tax from 1% to 4% on the interstate sales turnovers of the follo .....

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yproducts in the manufacturing unit. In fact, he had observed that there are no separate units to produce different commodities and that rice bran oil was being produced by a continuous process in a single unit. He had also noted that only the raw unrefined rice bran crude oil becomes refined after the process and that the intermediary byproducts are not separately produced by making use of separate manufacturing units and that the unit is manufacturing refined oil as a finished product and in t .....

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ADC that RB acid oil and RB fatty acid are intermediate products and are not being separately produced in separate manufacturing units and that they are generated in a single unit in a continuous process of manufacturing and that they cannot be treated as different commodities from Rice Bran Oil is a well considered finding. The Commissioner had found fault with such unassailable finding without properly appreciating the facts and without assigning any valid reasons. The ADC had quoted extensiv .....

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f levy and collection of tax under the APGST Act only with effect from 01.11.2000 and not before. The subject assessment year relates to the period prior to the said amendment. The Commissioner, Commercial Taxes in his impugned orders had erroneously relied upon the decisions which are inapplicable to the facts of the case of the appellant. 3. (b) In support of his contentions, the learned counsel for the appellant had placed reliance on the following decisions. 1. Collector of C.Ex v. Jayant Oi .....

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They differ not only in character and nature but also in common parlance understanding. They are also different in economical perspective. The relevant entries in the statute need no interpretation and they have to be assigned the plain meaning they convey on a plain reading. All the three commodities are understood as different commodities by the customers and traders. As soon as a separate commercial commodity comes into existence during the process of manufacture by one unit or several units, .....

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ecial appeal. 5. We have given earnest consideration to the facts and the submissions. We have carefully gone through the relevant provisions and the entries in the schedule of the statute. 6. Now the point for determination is: Whether RB Acid Oil and RB Fatty Acid can be considered as distinct and different from Rice Bran Oil? 7. POINT: The facts are not in dispute. 7. (a) Since the first contention of the appellant/dealer is based upon the amendment introducing entry 24-F with effect from 01. .....

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said entry reads as under: 24-F Sledge Oil, Acid Oil & Fatty Acid At the point of first sale in the State 8 paise 01.11.2000 Entry 24-C of Schedule I of APGST Act reads as under: 24-C Rice bran oil (1206) At the point of first sale in the State 2 16.08.1995 24-B reads as under: 24-B Vegetable oil(refined)(1205) At the point of first sale in the State 2 16.08.1995 By Act 19 of 2000 item 24-B was substituted and the words obtained from non refined oil mentioned in 24-A other than rice bran oil .....

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ehalf of the appellant/dealer that it is clear that RB fatty acid and RB acid oil are considered as distinct and different commodities for the purpose of levy and collection of tax under the APGST Act only with effect from 01.11.2000 and not before and that since the subject assessment year relates to the period prior to the said amendment, the ADCs Order is unassailable. The said contention based on the amendment to the entries of Schedule I cannot be countenanced. Amendment to entries may be m .....

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An amendment may also be made to explain an ambiguity and avoid any confusion. Therefore, the contention of the appellant/dealer that entry 24-F dealing with acid oil and fatty acid was introduced by way of an amendment of schedule I is not going to advance the case of the appellant. 7. (b) The Notification IV issued by the State of A.P. under the CST Act, 1956 and which is relevant reads as follows: In exercise of the powers conferred by sub-section (5) of Section 8 of the Central Sales Tax Ac .....

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(c) It is necessary to now advert to the cited decisions. In the decision in Collector of C. Ex. v. Jayant Oil Mills Pvt. Ltd., (1st cited) the facts are as follows: - The respondent therein manufactured hydrogenated rice bran oil which was sold to industrial consumers. The said hydrogenated rice bran oil is used as raw material in the manufacture of soap. The respondent had classified the same under Tariff Item 12 for approval and claimed exemption under a Notification. However the Assistant Co .....

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f the Appellate Collector was not proper, legal and correct, the Central Government, Ministry of Finance, Department of Revenue had issued a show cause notice requiring to show as to why the order of the Appellate Collector should not be set aside and that of the Assistant Collector be restored. The matter came up before CEGAT. The CEGAT in its impugned order noted that the appeal was concluded by the judgment of the five member Bench of the Tribunal in the case of M/s.Tata Oil Mills Co. Ltd.,[1 .....

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ized that the hardened technical oil is the same thing as the oil from which it is made. It is clearly akin to the oil in homologue, a product of scientific modification but unaltered in its essential character. Therefore, in our opinion, the Tribunal was right in the conclusion it arrived at. The ratio in the decision is to the following effect. Edible rice bran oil falling under Tariff Item 12 CET would even after extra hardening or the process of hydrogenation will not fall under Tariff item .....

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ittedly produced for industrial purposes and not for human consumption. Hence, the ratio in the said decision is not applicable to the facts of the present case. In Tungabhadra Industries Ltd., (2nd cited) the question was as to whether hydrogenated oil was not groundnut oil. One of the questions also considered was whether if beyond the process of refinement of the oil, the oil is hardened, again by the use of chemical processes it is rendered any the less groundnut oil. The Supreme Court held .....

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here vegetable oils assume a semi-solid state even at normal temperatures. Neither these, nor coconut oil which hardens naturally on even a slight fall in temperature, could be denied the name of oils because of their not being liquid. Other fats like ghee are instances where the physical state does not determine the identity of the commodity. Therefore, it is clear from the facts of the reported case that both the commodities namely hydrogenated oil and the groundnut oil serve the same purpose .....

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C.S.T.Act.? The Tribunal held that the said oils are liable to tax under entry 128 at reduced rate. The department contended that such oils are general goods and are liable to tax at higher rates under the CST Act. This Court while dealing with entry 128 held that the said entry relates to vegetable oils and that the various oils mentioned therein are only illustrative and that the entry specifically says vegetable oils including those mentioned therein and that in the circumstances there is no .....

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on that fell for consideration was whether groundnut protein flour is a deoiled cake within entry 29 of Schedule I of the Act? The Supreme Court considered the facts like process of manufacture and the resultant produce and held as follows: It is true that the analyst report in this appeal does indicate that both deoiled cake and groundnut protein flour contain common properties but the use and purpose being different and distinct, they cannot be considered to be the same commodity. The groundnu .....

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mmercial parlance. Accordingly, it is exigible to CST at the relevant time at 4 per cent. The appeals, therefore, are allowed. In the latest decision in Aluva Sugar Agency v. State of Kerala the short question which arose for consideration was Whether sale of margarine is to be taxed at 8% or 4% under the provisions of Kerala General Sales Tax Act, 1963? Under the said question the main issue that was considered was whether margarine can be treated as edible oil and thus falls under entry 17A of .....

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rgarine manufactured by the appellant is concerned, it is made only from vegetable oils as stated by the appellant and as borne out from the record. The margarine manufactured by the appellant is exclusively used as raw- material by bakeries and those who manufacture confectionaries. Looking to the contents of margarine, it is clear that it contains all edible things. Margarine is used exclusively as a raw material for preparing bakery products and is also used in confectionary industry. Like bu .....

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n the aforestated circumstances, one has to consider whether margarine can be considered as an edible oil. We clearly understand that edible oil is that oil which can be used for human consumption. It is not necessary that all edible things should be consumed in the form in which they are available. There are number of ingredients used in cooking for preparation of food articles which we do not consume in the same form but they are used in preparation of food articles which are consumed. So as t .....

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oil. 7. (d) We have gone through the cited decisions carefully. From a careful reading of the decisions and a conspectus of the legal position, it emerges that the following tests have to be applied in a case of this nature. Firstly, it is to be examined as to whether the commodities RB Fatty Acid and RB Acid Oil which emerged in the unit of the dealer, which is manufacturing Rice Bran Oil, are different commodities and entities known differently in commercial parlance and whether such emerged .....

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nt from Rice Bran Oil. Admittedly Rice Bran Oil is an edible oil whereas the other two commodities viz., RB Fatty Acid and RB Acid Oil are useful for manufacturing of soaps and are not edible. How an article or commodity is understood in the trade i.e., by the dealer or customer is also one of the important considerations. Functional utility and predominant usage have also to be taken into account while determining the class of commodity. The law is well settled that in the law dealing with sale .....

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mely RB Fatty Acid and RB Acid Oil had also emerged. Therefore, the manufacturing process had altered the identity of one commercial commodity and new commercial commodities had emerged. The law of sales tax is also concerned with goods of various descriptions. It cannot be disputed that the two commodities namely RB Fatty Acid and RB Acid Oil, which are of commercially different category and description, had emerged during the process of manufacture of Rice Bran Oil. The principle which is fair .....

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