TaxTMI 
TaxTMI 
TaxTMI 
2007 (5) TMI 582
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....ng VAT on sale of coconut oil at four per cent in place of 12.5 per cent. In RN-98 of 2006, the petitioner has challenged Notification No. 172 FT dated February 1, 2006 effecting amendment of entry 88 of Schedule C to the VAT Act. Since in both the cases identical issues have been raised, these are taken up analogously for facility of disposal. In both the cases, same set of counsels appeared both for the petitioner and for the respondents. The question involved in these petitions is whether coconut oil manufactured by the petitioner-company (Shalimar Chemical Works Limited) is vegetable oil and is covered by pre-amended entry No. 88 of Schedule C to the VAT Act and is also covered by entry No. 26 of Schedule C to the VAT Act. Entry 88 of Schedule C to the VAT Act was "vegetable oil including gingili oil and bran oil". The said entry was amended by Notification No. 172 FT dated February 1, 2006 with effect from February 1, 2006 and after the amendment, the entry reads as "vegetable oil including gingili oil and bran oil but excluding coconut oil". By this amendment, the Legislatures have expressly excluded coconut oil from vegetable oil. Entry 26 of Schedul....
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....in oil includes all vegetable oils. Rate Schedules under the Value Added Tax Acts of different States, namely, Andhra Pradesh, Assam and Maharashtra showing that vegetable oils/edible oils are exigible to tax at four per cent under the VAT Acts of the respective States mentioned as above. Discrimination with regard to the rate of tax on coconut oil was made without any rational basis. In support of the plea of discrimination, learned Advocate for the petitioner-company has relied on the decision of the honourable Supreme Court in the case of Arya Vaidya Pharmacy v. State of Tamil Nadu reported in [1989] 73 STC 346. In brief, the facts of the said case are that arishtams and asavas, ayurvedic medicinal preparations, were subjected to tax at 30 per cent whereas other medicinal preparations were subjected to tax at seven per cent (later increased to eight per cent). Higher rate of sales tax on arishtams and asavas was challenged before the High Court. The petition was disposed of by the High Court. On appeal, the honourable apex court held as below (at page 350): It is open to the Legislature, or the State Government if it is authorised in that behalf by the Legislature, to select....
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....sure, insomnia, etc. The dosages required are also set out on the label. The product is registered with the Drug Controller and is manufactured under the drug licence." It was also contended by the learned Advocate for the petitioner that vegetable oil remains vegetable oil even if it is not edible. In support of his submission, he relied on the decision of the Andhra Pradesh High Court in the case of State of A.P. v. Coromandel Agro Products and Oils Limited reported in [1990] 79 STC 320 where the question was whether the cotton seed sludge oil and cotton seed acid oil would be treated as vegetable oil or not. Entry 128 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 reads as below: "Vegetable oils (other than those specifically mentioned elsewhere) including gingili oil, sunflower oil, safflower oil, soyabin oil, mustard oil, kusum oil, tobacco seed oil, castor oil, washed cotton seed oil, coconut oil." While holding that cotton seed sludge oil and cotton seed acid oil would fall within the meaning of vegetable oil, the honourable judges of the Andhra Pradesh High Court observed: ". . . The entry specifically says 'vegetable oils....
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.... in [2003] 132 STC 185. In that case, the petitioner [Iris Electronics India (Private) Limited] set up its industrial unit for the manufacture of television sets pursuant to the 1993 Industrial Policy Resolution of the State Government of Bihar and obtained a certificate entitling it to exemption for eight years from 1997 in terms of Notification No. 96 dated April 4, 1994 on all sales of its finished products. By Notification No. 85 dated July 17, 2002 issued under section 11(3) of the Bihar Finance Act, 1981, certain goods including television sets were notified for multi-point tax. On a writ petition, the honourable Patna High Court held ". . . If sales tax was charged on any subsequent sale by a dealer who had purchased the exempted goods from the manufacturer, it would nullify the exemption granted and would be contrary to the industrial policy. Therefore, to the extent of the first price, no tax could be imposed till the goods passed to the consumer. If the purchasing dealer added profit to the goods, then to the extent of the value added by the purchasing dealer, sales tax could be charged under the notification. The multi-point levy could not be attracted on the full ....
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....g incentives and alluring the petitioner into investing huge sum on manufacture and establishment of the factories. The honourable High Court held that the petitioner could not be denied the sales tax holiday referred to in the notification dated May 22, 1974 and be called upon to pay sales tax in terms of the subsequent notifications. Learned Advocate also relied on the decision of Magulu Sahu Ramahari Sahu v. Sales Tax Officer reported in [1973] 32 STC 494 (SC) and State of West Bengal v. Washi Ahmed reported in [1977] 39 STC 378 (SC) wherein the apex court considered the definition of "vegetable " and held that the word "vegetable" should be understood as denoting the class of vegetable which is grown in kitchen garden or in farm and is used for the table and must be construed as understood in common parlance. The expression must be given its popular sense meaning "that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it". In those cases, the honourable apex court held that chillies, lemons, gingers are vegetable. The learned Advocate contended that in view of the decisions discussed above, c....
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....sumed at the tables in different parts of the country also vary." Our attention was also drawn to the decision of the Punjab and Haryana High Court in the case of Express Dairy Company Limited, Calcutta v. Assessing Authority, Hissar reported in [1971] 28 STC 37. The question before the honourable court was whether "guar giri " and "guar meal" would be treated as fodder and hence exempted from sales tax as per entry against item 54 of Schedule B to the Punjab General Sales Tax Act, 1948. While holding the item as fodder, honourable judges relying on a decision of the honourable Supreme Court in the case of Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola reported in [1961] 12 STC 286 held that the words ". . . must be construed not in any technical sense nor from the botanical point of view, but as understood in common parlance. If a word is not defined in the Act but is a word of everyday use, it must be construed in its popular sense which the subject-matter, with which the statute is dealing would attribute to it". It was accordingly argued by Mrs. Roy that pre-dominant use of coconut oil in West Bengal should be taken into consider....
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..... In 1990, by a notification hair oil was brought out from the WBST Act, 1954. It was, however, brought again within the WBST Act, 1954 in the year 1992 and remained under that Act till the WBST Act, 1954 was repealed with effect from April 30, 1995. Under the WBST Act, 1994, coconut oil was shown to be included in hair oil. Similarly, under 1994 Act hair oil was defined as "any oil which is sold in packed container to be used as hair oil or any kind of oil which has been subjected to processing for being used as hair oil and includes coconut oil whether perfumed or not" (explanation to item No. 38 in Schedule IV to 1994 Act). Mrs. Roy also argued that all along the petitioner by its conduct treated its product "coconut oil" as falling within hair oil. Moreover, specific inclusion of coconut oil within hair oil in the earlier Acts prior to VAT Act makes it abundantly clear that coconut oil was being treated as hair oil. Even item 37 of Schedule IV to the 1994 Act, wherein several vegetable oils had been specifically spelt out, does not include coconut oil. It was argued by Mrs. Roy that even under the VAT Act "coconut oil" has not been included eithe....
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....e of use of daily cooking. Therefore, keeping the various judicial decisions in mind and the consumption pattern of this particular item, we are of the view that it cannot be treated as edible oil in West Bengal and does not fall within entry 26 of Schedule C to the VAT Act. Next question is whether coconut oil would fall within the meaning of vegetable oil as per entry 88 of Schedule C to the VAT Act. It has already been discussed that prior to February 1, 2006 entry 88 of Schedule C to the VAT Act related to vegetable oil including gingili oil and bran oil. There was no exclusion of any oil from vegetable oil. Alternatively, the definition of "vegetable oil" was extended by specific inclusion of gingili oil and bran oil. Subsequently, with effect from February 1, 2006 coconut oil was specifically excluded from vegetable oil. The views expressed by Mrs. Roy, learned Advocate appearing on behalf of the respondents, that Notification No. 172 FT dated February 1, 2006 was purely clarificatory in nature and it aimed at making it clear that coconut oil was not included in vegetable oil at any stage does not make the position clear at least for the period from April 1, 2005 to....
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....l from vegetable oil with effect from February 1, 2006 in terms of Notification No. 172 FT dated February 1, 2006 was discriminatory. As has already been observed by the apex court that it is open to the Legislature or the State Government if it is so authorised to select different rates of tax for different commodities but there must be a rational basis for making such selection for the purpose of levy of tax at different rates. All along, since hair oil was notified under Notification No. 3123 FT dated July 15, 1975, Legislature used to treat coconut oil as a specific commodity not being classified as vegetable oil. Even prior to notification in 1975, coconut oil was treated separately and was notified under section 4A of the BF (ST) Act, 1941 under Notification No. 5482 FT dated August 7, 1972. Vegetable oils such as groundnut oil, soyabean oil, sunflower oil, sesamum oil, rice bran oil were brought under the WBST Act, 1954 with effect from April 11, 1994 specifying them as edible oil but it excluded mustard oil, rape oil or mixture of mustard oil or rape oil, coconut oil or palm oil. Coconut oil was included as hair oil and it remained so till April 30, 1994, that is, till the ....