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The Commissioner of Sales Tax Maharashtra Mazgaon, Mumbai Versus M/s. Bhima Sahakari Sakhar Karkhana Ltd.

2016 (9) TMI 464 - BOMBAY HIGH COURT

Taxability - bagasse – tax free commodity – is the sale of 'bagasse' is a tax free sale under section 5 of the Bombay Act covered under schedule entry A-44? - whether bagasse is sugarcane or not? – Held that: - It was held that so long as these are not identifiable and distinctly known goods to the commercial world, they cannot be brought to tax or if they are part and parcel of sugarcane or are a waste or a by-product when sugarcane is crushed, then, that cannot be brought to tax. Once it has b .....

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Panel Counsel for the applicant in STR/6/2009. Ms. Uma Palsuledesai - AGP for the appellant in STR/68/2009. Mr. C. B. Thakar for the respondent in both appeals. ORAL JUDGMENT:- (S. C. Dharmadhikari, J.) 1) This reference by the tribunal vide its order dated 24th November, 2006 seeks, according to the tribunal, opinion and answer by this court on a question of law. That question, as framed in the order of reference dated 24th November, 2006 in Reference Application Nos. 105 and 106 of 2006 reads .....

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6. 4) The Revenue sought a reference of the above question because, according to it, the respondent dealer is a co-operative society manufacturing sugar. It is duly registered under the Bombay Sales Tax Act, 1959 (for short the BST Act ). The respondent has maintained books of accounts, which are duly audited. These books were produced in the assessment proceedings. No discrepancies were noticed. The assessing officer took the figures from the books of accounts and passed the assessment order. T .....

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ing sugarcane for the purpose of manufacturing sugar. The sugarcane is crushed and juice is taken out. Even after the juice extracted and taken out, some of it still remains in the residuary of the sugarcane. The Allahabad High Court in the case of Dhampur Sugar Mills Limited vs. Commissioner of Sales Tax, U. P. Lucknow 1996 STC (Vol. 100) 434 has held that bagasee is a residue of sugarcane left after its processing and does not become a different commodity. The SLP against this judgment was rej .....

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to which exemption is granted Period 44 Sugarcane, Khandsari sugar and Palmara sugar Except when sold under a brand name in sealed, capsuled or corked containers. 01/10/1995 6) The argument was whether the word sugarcane can also include bagasse . Schedule 'A' is titled as Goods, the sale or purchase of which is free from all taxes . 7) As far as the U. P. Sugarcane (Purchase Tax) Act, 1961 is concerned, there, a specific exemption from tax on sugarcane was provided. While dealing with .....

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been left out in the manufacturing process and no tax on sale of bagasse can be levied under the U. P. Sales Tax Act in view of the bar created by section 13 of the U. P. Sugarcane (Purchase Tax) Act, 1961. The learned Standing Counsel has however submitted that the bagasse is a commodity different from sugarcane and as such it attracts sales tax on its sale under the Act. Therefore the substantial question arising for consideration is whether the bagasse will be treated as a different commodity .....

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cision of a division Bench of this Court in the case of Kisan Sahkari Chini Mills Limited, Gadarpur, Nainital v. State of Uttar Pradesh STI 1989 All. 294. In this case the specific question regarding nature of bagasse was considered and this Court has held that so far as bagasse is concerned, it is the residue from the milling process of the sugarcane. It consists of body, fibre, some unextracted juice and 40-50 per cent of the water. The learned Tribunal while holding that bagasse is a differen .....

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are squeezed out of sugarcane. Section 13 of the U. P. Sugarcane (Purchase Tax) Act, 1961 reads as follows: 13. No sale or purchase tax under any other Uttar Pradesh Act shall be payable in respect of any transaction of sale or purchase of sugarcane in respect of which a tax is payable under this Act, anything contained in the U. P. Sales Tax Act, 1948 to the contrary notwithstanding. It is clear from bare provisions of section 13 that the U. P. Sales Tax Act does not apply to sugarcane and no t .....

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he result of the sugarcane after its processing is not exigible to sales tax under the Act even on its sale. ….. 8) The tribunal, while passing the order on the second appeals, held as under:- ..... 9. It further appears that the department has filed SLP against that judgment, which was also rejected by the Supreme Court. There is no other decision of our High Court or any other High Court wherein contrary view has been taken than the view taken by the Allahabad High Court. Mr. Akhade was .....

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nekar that in the case of M/s. Kisan Sahakari Chini Mills Ltd. (STI 1989 All. 294), the Allahabad High Court held that so far as Baggasee is concerned, it is the residue from the milling process of the sugarcane. It consists of body fibre, some un-extracted juice and 40:50 percent of water. We have no hesitation to hold that this reasoning is quite applicable to our case. It does not appeal that the said reasoning is to be ignored only on the ground that it is under a different Act. In fact, the .....

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to say that once it is held as residue of the sugarcane, then it is certainly goes under the description of the sugarcane mentioned in entry 44 of schedule A appended to the Bombay Act, and will have to be held as tax free. The levy on the same will have to be set aside. Once the levy of tax on the Baggasee is set aside, the appellant will be entitled for refund. On the basis of out of pocket theory, the appellant will be entitled for grant of remission in interest under section 36(3)(a) of the .....

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e matter to this court for consideration. However, strangely, para 12 of the order on the reference applications at pages 8 and 9 of the paper book reads as under:- 12. However, the views expressed by various high courts on similar issues are required to be taken into consideration. It has been pointed out on behalf of the revenue that in the case of M/s. Etikoppakka Cooperative Agricultural and Industrial Society Limited vs. Commercial Tax Officer (120 STC 608), it is held that sugarcane seedli .....

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cording to the dictionary meaning are in the nature of 'by-product residue' in the process of manufacture of 'sugar'. According to him, a by-product cannot be termed as the same commodity from which or in the process of which the by-product is generated. It also appears that in the case of M/s. Madurantakam Co-op. Sugar Mills (38 STC 238), the Madras High Court, on the tax enhancement petition filed by the revenue against the Tribunal order held the sale of 'bagasse' of & .....

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uestion has been referred in these circumstances. Mr. Nair learned special counsel appearing for the revenue would submit that whether section 5 of the BST Act is covered under Schedule Entry A-44, means that bagasse is tax free or not and that is the question. He would submit that from the order passed by the tribunal, both on the second appeals and the reference applications, it would be apparent that the bagasse is leftover of sugarcane after crushing and cannot be called as sugarcane. Mr.Nai .....

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Nair has relied upon the definition of the word sugarcane as appearing in Oxford Dictionary to submit that it is a tall perennial grass cultivated in tropical and sub-tropical countries and forming the chief source of un-manufactured sugar. Mr. Nair would submit that the Allahabad High Court judgment can have no application for it is under a different enactment. Similarly, the observations of the Hon'ble Supreme Court of India in the latest judgment in the case of Union of India vs. DSCL Su .....

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ent dated 24th January, 2001 and particularly the portions of it where it refers to the sale of molasses and bagasse. Sales of molasses were disallowed, whereas the sales of bagasse were partially allowed. It is in these circumstances Mr. Nair would submit that it is not appropriate to hold that there is no material or evidence in this case. Therefore, all the judgments relied upon are distinguishable. 12) Mr. Nair has relied upon the following judgments:- (i) Union of India vs. DSCL Sugar Ltd., .....

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ustries vs. Commissioner of Sales Tax, Uttar Pradesh, AIR 1981 SC 1079. (vii) Dhampur Sugar Mills Limited vs. Commissioner of Sales Tax, U. P. Lucknow, 1996 STC (Vol. 100) 434. 13) On the other hand, Mr. Thakar appearing for the dealer would submit that the tribunal has seriously erred in referring this matter for it is not a question of law. It was a mixed question and was clearly covered by the judgment of the Allahabad High Court. There is no justification for reference of this question as th .....

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Private) Ltd. (supra) was a decision on the point whether sugarcane falls within the green vegetable and is, therefore, exempted from sales tax under the exemption given by notification dated 28th August, 1947 issued under section 6 of the Bihar Sales Tax Act, 1947. The Hon'ble Supreme Court of India found that the meaning of the word vegetable in taxing statute is to be understood in common parlance denoting class of vegetables which are grown in a kitchen garden or in a farm and are used f .....

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ct, 1959. The sugar mill before the Madras High Court contended that it was not assessed to tax, but the revisional powers were invoked to revise the completed assessment. The revisional exercise attempted to include in the taxable turnover a particular sum representing the turnover in sugarcane setts, which according to the Revenue was wrongly exempted from being brought to tax in the earlier order. 17) The Madras High Court held that the main point urged is one on facts. However, for the exerc .....

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This leads us to enquire as to what is a sugar-cane sett. Sugar-cane sett is a portion of cane stalk (cutting) such as is used for planting. It is a seedling which could be propagated and multiplied idefinitely from cuttings - See Encyclopaedia Britannica. Sugar-cane seed is very small, rather silky and rarely viable - See Van Nostrand's Scientific Encyclopaedia. It is said that sugar-cane seeds are so small that nearly 100 sugar-cane seeds would be required to equal the weight of a single .....

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y if sugar-cane setts are to be equated and understood as sugar-cane itself. Sugar-cane setts are botanical seeds from which spring sugar-cane. The physical and chemical properties of sugar-cane setts are entirely different from sugar-cane. The sucrose content in both varies. The physical appearance is different. The use to which one can be put is totally different from the use to which the other can be put. Even more, in mercantile contracts it cannot be said that sugar-cane sett is a substitut .....

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h the statute is dealing would attribute to it . See Ramavatar Budhiprasad v. Assistant Sales Tax Officer ((1961) 12 S.T.C. 286 at 288). We are therefore of the opinion that sugar-cane setts are not sugar-cane as is understood in commerce and trade. Fiscal enactments resulting in the imposition of sales tax or purchase tax on the sale or purchase of goods have to satisfy the cardinal test that the goods enumerated as subjects of taxation are those which are commercially and popularly understood .....

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are not the same articles or similar commodities. But that by itself does not tantamount to saying that one is equivalent to the other. Their properties are different; their user is different and they are understood by the common man and the commercial community in different and distinct ways. Thus, we find that sugar-cane setts are not classifiable as sugar-cane and therefore the respondent had no jurisdiction to issue the impugned notices and pass the impugned assessment orders. Even so the o .....

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o the facts and circumstances in the Allahabad High Court judgment. 19) Even the judgment in the case of Ramavatar Dudhaiprasad (supra) was clear. The word vegetable in Item 6 of Schedule II of the C. P. and Berar Sales Tax Act, 1947 requires consideration not in any technical sense nor from the botanical point of view but as understood in common parlance. Having not been defined, it must be assigned the same meaning as is ordinarily understood, namely, class of vegetables which are grown in a k .....

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tisfied, no tax shall be payable on the sales or purchases of the goods specified in that Schedule. What we have before us is the BST Act and we have definition of the term goods appearing in section 2(13). Goods means every kind of movable property (not being newspapers, or actionable claim or money, or stocks, shares or securities), and includes growing crops, grass, and trees and plants (including the produce thereof) and all other things attached to or forming part of the land which are agre .....

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