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2016 (9) TMI 464 - BOMBAY HIGH COURT

2016 (9) TMI 464 - BOMBAY HIGH COURT - [2016] 95 VST 345 (Bom) - 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 sugarca .....

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C. DHARMADHIKARI & B. P. COLABAWALLA, JJ. Mr. S. K. Nair - A 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 Novem .....

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005. It delivered a common judgment therein on 24th February, 2006. 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 figu .....

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nt dealer contended that it is manufacturing sugar. It is purchasing 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 be .....

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erial No. Description of goods Conditions and exemptions, subject 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 .....

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rchase tax on the purchase of sugarcane out of which bagasse has 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 consideratio .....

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ndnut oil and is taxable at 1 per cent. He has further cited a decision 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 wat .....

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a different commodity, if its juice, sucrose and water contents 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 .....

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able to be set aside. I hold that bagasse being the residue and the 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 take .....

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eezed out of sugarcane. It is also rightly pointed out by Mr. Ghanekar 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 .....

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scertaining whether it is exigible to tax or not. It is needless 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 .....

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per in that behalf, therefore, there exists no ground to refer the 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. Comme .....

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ited (94 STC 98) has held that, 'molasses and bagasse' according 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 a .....

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y referring question No. (1). 10) It is conceded that the above question 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 s .....

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l for manufactue of different types of paper, news print etc. Mr. 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 .....

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present case. In that regard, he relied upon the order of assessment 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 .....

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Officer, 2000 STC (Vol. 20) 608. (vi) M/s. Indo International Industries 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 Cour .....

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or the reasons indicated hereinbelow. 15) Motipur Zamindary Co. (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 vegetable .....

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r item 62 in the First Schedule to the Madras General Sales Tax Act, 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 .....

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t and if not, the absence of the jurisdictional fact is apparent. 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 su .....

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specie. But yet it would be commercial and etymological perversity 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 mercantil .....

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t sense which people conversant with the subject-matter with which 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 ta .....

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etts and sugarcane have a striking and phonetic resemblance, they 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 impugn .....

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al before us. Rather, ours is a case as close as could be found to 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 ordinari .....

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he goods specified in column 3 of the Schedule 'A' are satisfied, 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 ot .....

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