Rajasthan High Court: Cheese Exempt from Sales Tax, Interprets Entry SI. No. 3

The High Court of Rajasthan ruled that cheese is exempt from sales tax under entry SI. No. 3 of the Rajasthan Sales Tax Act, 1954, and not taxable under the residuary entry at SI. No. 79 of a specific notification. The court interpreted the exemption entry in conjunction with the notification prescribing tax rates, emphasizing that the absence of cheese indicated a gap rather than an intention to tax all milk products. The court applied the principle that products of exempted goods remain exempt unless there is a clear intention to tax them, ultimately dismissing the revision and affirming cheese's exemption from tax.

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Issues:
1. Interpretation of exemption under entry SI. No. 3 in the Schedule to the Rajasthan Sales Tax Act, 1954.
2. Taxability of cheese under the residuary entry at SI. No. 79 in the Notification No. F. 5(16) FD(CT)/69-2 dated March 8, 1969.

Analysis:
The High Court of Rajasthan dealt with a revision by the department against the Board of Revenue's order regarding the taxability of cheese under the Rajasthan Sales Tax Act, 1954. The question revolved around whether cheese, as a product of milk or curd, is exempt from sales tax under entry SI. No. 3 of the Act. The department contended that cheese is taxable under the residuary entry at SI. No. 79 of a specific notification. The court examined the historical context of the exemption entry, comparing the original entry till March 6, 1964, which included "milk products," with the substituted entry thereafter, which omitted those words. The court emphasized that the exemption entry must be construed in conjunction with the notification prescribing tax rates, which lacked a specific entry for cheese but included "ghee and butter" under a separate category for taxation.

The court reasoned that since ghee and butter, also products of milk or curd, were specifically mentioned for taxation in the notification, the absence of cheese indicated a gap rather than an intention to tax all milk products. The court applied the principle that products of exempted goods remain exempt unless a clear intention to tax them exists. Referring to a Supreme Court decision, the court highlighted the broad interpretation of terms like "rice" to encompass various forms. Similarly, the court concluded that cheese, being a product of milk or curd, should be considered exempt from tax based on the existing entry and lack of contrary intention in the notification.

In light of the analysis, the court dismissed the revision, upholding that cheese is exempt from payment of tax under the relevant entry. The judgment relied on statutory interpretation, historical context, and the absence of explicit provisions for taxing cheese to support the decision.

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