1972 (11) TMI 66 - SC - VAT and Sales Tax

Supreme Court rules on tax classification of food colors & essences

Commissioner of Sales Tax, UP. Versus SN. Brothers  

Commissioner of Sales Tax, UP. Versus SN. Brothers   - [1973] 31 STC 302 (SC), 1973 AIR 78, 1973 (2) SCR 852, 1973 (3) SCC 496   Issues Involved:1. Taxability of food colours and syrup essences under Section 3-A of the U.P. Sales Tax Act, 1948.2. Interpretation of entries 10 and 37 in the Notification No. ST-905/X dated March 31, 1956.3. Applicability of single point taxation versus general taxation under the Act.Detailed Analysis:1. Taxability of Food Colours and Syrup Essences:The primary issue was whether food colours and syrup essences should be taxed under Section 3-A of the U.P. Sales Tax Act, 1948, as per Notification No. ST-905/X dated March 31, 1956. The dealer argued that these items should be classified as unclassified goods under Section 3, taxed at 2 nP. per rupee. The Commissioner of Sales Tax contended that they should be taxed at 6 nP. per rupee under Section 3-A.2. Interpretation of Entries 10 and 37 in the Notification:The court had to interpret whether food colours and syrup essences fell under 'dyes and colours and compositions thereof' (entry 10) and 'scents and perfumes' (entry 37) of the notification. The High Court had previously ruled that food colours and essences did not fall within these entries, disagreeing with the Sales Tax Officer, Assistant Commissioner (judicial), and the Judge (Revisions), Sales Tax.The High Court stated, 'The expression 'dyes and colours and compositions thereof' does not relate to item of food but only to colouring and dyeing material... Similarly, the entry at item No. 37 relates to articles which cater to the smelling sense... Essence is a flavouring material and its function is to add flavour to the food.' The court concluded that food colours and essences are not included in entries 10 and 37 and should be taxed under Section 3.3. Applicability of Single Point Taxation:Section 3-A provides for single point taxation, allowing the State Government to specify that certain goods are taxed at a single point in the sales chain. The notification issued under this section listed goods, including 'dyes and colours' and 'scents and perfumes,' to be taxed at one anna per rupee at the point of sale by the importer or manufacturer.The court emphasized that the words in the notification must be construed in their ordinary sense as understood by those dealing in such goods. The court referenced several precedents, including Sarin Chemical Laboratory v. Commissioner of Sales Tax and Commissioner of Sales Tax, M.P., Indore v. Jaswant Singh Charan Singh, which supported the principle that terms in sales tax statutes should be understood in their popular, commercial sense.The court reasoned that 'food colours' and 'syrup essences' are edible goods, whereas 'dyes and colours' and 'scents and perfumes' do not connote edibility. The court stated, 'It would indeed be straining the meanings of the words and expressions in those entries as understood in popular commercial sense to include edible colours and essences.'Conclusion:The Supreme Court upheld the High Court's decision, dismissing the appeal. The court concluded that food colours and syrup essences do not fall within entries 10 and 37 of the notification and should be taxed under Section 3 of the Act, not Section 3-A. The court stated, 'For the reasons foregoing this appeal fails and is dismissed with costs.'Summary:The Supreme Court ruled that food colours and syrup essences are not covered under 'dyes and colours' and 'scents and perfumes' in the Notification No. ST-905/X dated March 31, 1956, and thus should be taxed under Section 3 of the U.P. Sales Tax Act, 1948, as unclassified goods. The court emphasized the importance of interpreting tax statutes in their ordinary, commercial sense, supporting the High Court's decision and dismissing the appeal with costs.