Powdered sugar remains exempt sugar when essential character and sucrose threshold are retained, defeating penalty.

Sugar powder containing about 96% sucrose with a small admixture of starch was treated as sugar for sales tax purposes because powdering did not change its essential character and the statutory definition covered sugar above the prescribed sucrose threshold. The commodity therefore remained exempt and was not diverted to the residuary entry. Once the turnover was held to relate to exempt sugar, the penalty based on that assessment also failed. The revision accordingly failed, and both the exemption claim and the challenge to penalty succeeded in favour of the assessee.

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Issues: (i) Whether sugar powder containing about 96% sucrose and a small admixture of starch continued to be sugar for sales tax purposes and was therefore exempt. (ii) Whether the penalty levied on the disputed turnover was sustainable.

Issue (i): Whether sugar powder containing about 96% sucrose and a small admixture of starch continued to be sugar for sales tax purposes and was therefore exempt.

Analysis: The sample was found to contain more than 90% sucrose, and the Court treated the statutory definition of sugar as covering any form of sugar with sucrose content above that threshold. Powdering of sugar did not alter its substantial identity, essential nature, or character. The small presence of starch did not justify treating the commodity as a different taxable article or moving it to the residuary entry.

Conclusion: The commodity was held to be sugar and the exemption claim succeeded, against the Revenue.

Issue (ii): Whether the penalty levied on the disputed turnover was sustainable.

Analysis: Once the commodity was held to be exempt sugar, the basis for the penalty also failed. The concurrent finding that the assessment itself could not be sustained necessarily negatived the penalty.

Conclusion: The penalty was not sustainable, in favour of the assessee.

Final Conclusion: The revision failed, the turnover was held to relate to exempt sugar in powdered form, and the penalty could not survive.

Ratio Decidendi: A commodity does not cease to be sugar merely because it is in powdered form or contains a negligible admixture, if it still answers the statutory description of sugar by retaining its essential character and by satisfying the prescribed sucrose content.

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