2016 (9) TMI 464 - HC - VAT and Sales Tax

High Court rules 'bagasse' tax-free under Bombay Sales Tax Act, dealer prevails

The High Court concluded that the sale of 'bagasse' is tax-free under section 5 of the Bombay Sales Tax Act, covered under schedule entry A-44. The 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 been consistently held that residue or waste of something like sugarcane does not amount to manufacturing a distinct product or goods known to the commercial world, then, no question of taxability arises – no ambiguity regarding the taxability of bagasse – sale of bagasse is a tax free sale – appeal allowed – decided against Revenue. Issues Involved:1. Whether the sale of 'bagasse' is a tax-free sale under section 5 of the Bombay Sales Tax Act, covered under schedule entry A-44.Issue-wise Detailed Analysis:1. Tribunal's Reference and Common Question:The tribunal referred a common question of law to the High Court, seeking an opinion on whether the sale of 'bagasse' is tax-free under section 5 of the Bombay Sales Tax Act (BST Act), covered under schedule entry A-44. The tribunal had previously ruled in favor of the dealer, considering 'bagasse' as a tax-free commodity.2. Background and Tribunal's Judgment:The tribunal dealt with two appeals and delivered a common judgment, which the Revenue contested, arguing that 'bagasse' is a distinct commercial commodity subject to tax. The tribunal's decision was based on the Allahabad High Court's ruling in Dhampur Sugar Mills Limited vs. Commissioner of Sales Tax, which held that 'bagasse' is a residue of sugarcane and not a different commodity.3. Revenue's Argument:The Revenue contended that 'bagasse' is a different commercial commodity known to the market, distinct from sugarcane, and thus taxable. They referred to Entry 44 of Schedule 'A' of the BST Act, which exempts sugarcane from tax but does not explicitly mention 'bagasse'.4. Tribunal's Interpretation:The tribunal interpreted that 'bagasse', being a residue of sugarcane, should be considered under the description of sugarcane in Entry 44 of Schedule 'A' and thus be tax-free. They referenced the Allahabad High Court's ruling and noted that there was no contrary decision from other High Courts.5. Revenue's Request for Reference to High Court:The Revenue argued for a reference to the High Court, citing differing views from other High Courts, such as the Andhra Pradesh High Court and the Punjab & Haryana High Court, which treated 'bagasse' as a distinct commodity. The tribunal, however, did not find sufficient grounds for this reference based on the assessment and appellate orders.6. High Court's Analysis and Conclusion:The High Court analyzed the arguments and precedents, including the Allahabad High Court's judgment and other cited cases. They noted the consistent judicial opinion that 'bagasse' is a residue of sugarcane and not a distinct commercial commodity. The High Court emphasized the common parlance test, determining that 'bagasse' is not known as a separate commodity in the commercial world.7. Final Judgment:The High Court concluded that the question referred by the tribunal was not a question of law but a mixed question of fact and law. They found no ambiguity or vagueness in the tribunal's decision and ruled in favor of the dealer, affirming that 'bagasse' is tax-free under section 5 of the BST Act, covered under schedule entry A-44. The references were disposed of accordingly.