TaxTMI 
TaxTMI 
2012 (8) TMI 864
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal tax along with interest and penalties for the tax period 2005-06 and the consequent demand notice issued. 2. W.P. Nos. 5740-742 of 2011 and W.P. Nos. 18286-318 of 2011 are also filed by M/s. Balanoor Plantation and Industries Limited challenging the reassessment orders dated January 14, 2011 passed by the Assistant Commissioner of Commercial Taxes (Audit)-13, DVO-1, Bangalore, for the tax periods 2006-07, 2007-08 and 2008-09 and consequent demand notices issued. 3. W.P. No. 16015 of 2011 and W.P. Nos. 23815-825 of 2011 are filed by M/s. Badra Estates and Industries Limited, Bangalore. It is a company incorporated under the Indian Companies Act, 1956 and a dealer registered under the Act. The petitioner-company owns plantations and is engaged in growing coffee, curing and processing of goods for sale of cured coffee to its customers in the State. It is challenging the reassessment order dated March 25, 2011 passed by the Assistant Commissioner of Commercial Taxes (Audit-16), VAT Division No. 1, Bangalore, for the tax period April, 2006 to March, 2007 and the consequent demand notice issued. 4. W.P. No. 25518 of 2011 and W.P. Nos. 43584-593 of 2011 are also filed by M/s.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivation of tea plants and the growth of tea leaves is distinct and separate from sale of tea, consequently, the liabilities imposed and facilities extended in respect of sale of tea could not be applicable to cultivation of tea plants, hence, while calculating the net tax payable on sale of tea under section 10(3), no deduction can be given in respect of tax paid on goods purchased for use in the course of growing tea leaves. 7. The learned counsel for the petitioners Sri Rabinathan has placed reliance on the order passed by this court in the case of Diwan Bahadur S.L. Mathias and Sons, Chikmagalur v. State of Karnataka [2011] 43 VST 153 (Karn); [2010] 69 Kar LJ 280 to contend that it has been already held by this court that tea growing is not an agricultural activity and the judgment of the apex court in Travancore's case [1977] 39 STC 1 (SC) was rendered in the context of the Central Sales Tax Act, 1956, where no provision has been made to exclude tea cultivation from the purview of agriculture, hence the said decision could not have been made basis for the impugned order passed by the assessing officer. His contention is that despite such an order passed by this court, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial tea. 13. Further, the decision of the apex court in the case of Travancore [1977] 39 STC 1 (SC) has served as the foundation for rejecting the claim of the petitioner. But what cannot be lost sight of is that the said judgment was passed in a case falling for consideration under the Central Sales Tax Act, 1956. As contended by Sri Venkatesh, the learned counsel for the petitioner, there are no provisions in the CST Act excluding the tea cultivation/plantation from the purview of agriculture. A judgment is a good law for what it has decided. 14. The implications of the petitioner not being an agriculturist and the tea not being agricultural or horticultural produce for the purpose of the said Act are not examined by the second respondent. What is required to be considered by respondent No. 2 is the entitlement or otherwise based on the petitioner's registration as a dealer under the said Act, when the petitioner is not an agriculturist and tea is not an agricultural or horticultural produce. This aspect of the matter has to be examined and thereafter fresh orders are to be passed by respondent No. 2. &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the petitioner Diwan Bahadur S.L. Mathias & Sons was carrying on an agricultural activity by growing tea. 13. Even assuming that this court has not analysed the definition clause used in section 2(3) of the Act, while characterizing the conclusion reached by the second respondent-Commissioner of Commercial Tax as fallacious in stating that growing of tea was an agricultural activity, it is clear that this court has opined that growing of tea is not an agricultural activity. 14. Paragraph 15 of the judgment further makes it clear that as the growing of tea was not an agricultural activity and the tea not being "agricultural produce or horticultural produce", for the purpose of the Act what was required by the Commissioner of Commercial Tax to consider was the entitlement of the petitioner for input-tax credit when the petitioner therein was not an agriculturist and the tea grown was not an agricultural produce or horticultural produce. It is for the consideration of this aspect of the matter and for passing fresh orders, the matter was remitted to the second respondent-Commissioner for Commercial Tax with a direction to re-examine the issue. 15. After re-examination, the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration, and includes,- (a) to (i) . . . Explanations-(1) to (3) . . . (4)(a) An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally or a person who is exclusively engaged in poultry farming and sells the products of such poultry farm shall not be deemed to be a dealer within the meaning of this clause; (b) Where the agriculturist is a company and is selling pepper, arecanut, cardamom, rubber, timber, wood, raw cashew or coffee grown on land cultivated by it personally, directly or otherwise, such company, shall be deemed to be a dealer in respect of turnovers relating to sales of such produce." 20. The term "agricultural produce or horticultural produce" as defined in section 2(3) introduces a deeming clause stating that agricultural or horticultural produce shall not be deemed to include tea, beedi leaves, raw cashew, timber, wood, tamarind and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the definition of "agricultural produce or horticultural produce". 24. If this is so, then, the next important question that requires to be addressed is, in the light of the term "input" and the definition of the term "business" coupled with the definition of the term "dealer" whether the petitioners are entitled to claim input-tax credit for the purchase of fertilizers, chemicals, pesticides, fungicides, etc., and other capital goods purchased for growing tea. 25. The definition of the term "dealer" is already extracted insofar as it is relevant for the purpose of this case. The term "input" is defined in section 2(19). It reads as under: "'Input' means any goods including capital goods purchased by a dealer in the course of his business for re-sale or for use in the manufacture or processing or packing or storing of other goods or any other use in business." 26. The expression "capital goods" is defined in section 2(7). It reads as under: "'Capital goods' for the purpose of section 12 means plant, including cold storage and similar plant, machinery, goods vehicles, equipments, moulds, tools and jigs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll be deemed to be a dealer in respect of turnovers relating to sales of such produce. It is therefore clear that all agriculturists and all agricultural produce are not kept out of the purview of tax as only those agriculturists who sell exclusively agricultural produce grown on land cultivated by them personally are not required to be registered as dealer as they are not deemed to be a dealer within the meaning of the term "dealer". Similarly, if the agriculturist is a company selling certain specified produce, even if such produce is grown on land cultivated by it personally, such company is deemed to be a dealer in respect of turnover relating to sales of such produce. Therefore, it has to be borne in mind that distinction between agricultural produce and non-agricultural produce is relevant only to a certain extent, for the purpose of understanding whether a person engaged in carrying on business of buying, selling, supplying or distributing goods is a dealer. 32. The real issue is what is the nature of the business the petitioners are carrying on, what is the input that they use for the purpose of their business and whether they are entitled for input-tax credit for the ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are also cultivating tea plantation and are growing tea leaves, it cannot be said that both the activities of growing tea leaves and manufacturing of tea powder has to be taken as an integral part of their business for the purpose of understanding the definition of the term "input", to claim input-tax credit. 35. As adverted to above, the definition of the term "capital goods" encompasses machinery, goods vehicles, equipment used in the course of business other than for sale. As per section 12, deduction of input tax shall be allowed to the registered dealer in respect of capital goods for purchase of such capital goods for use in the business of sale of any goods in the course of export out of the territory of India and in the case of any other dealer in respect of the purchase of capital goods wholly or partly for use in the business of taxable goods. The taxable goods produced by the petitioner in the instant case is tea and coffee. In the course of manufacture or production of these goods, whatever goods including capital goods are purchased for use in the manufacture or for processing or packing or storing of other goods or any other use in business, which can be described ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and the growing of tea leaves, though not something entirely distinct from the manufacturing process to which tea leaves are subjected in the factories and although the time-lag between the plucking of tea leaves and their being subjected to manufacturing process in the factories is very little, the same would not detract from the conclusion that the cultivation and growth of tea plants and leaves is something distinct and separate from the manufacturing process to which those leaves are subjected in the factories for turning them into tea meant for sale. Income which is realized by sale of tea by tea company, which grows tea on its land and thereafter subjects it to manufacturing process in its factory consists of two elements or components, one is the component consisting of income from growth of tea leaves which is yielded in the form of green leaves purely by the cultivation in the land. The second component consists of the income which is the result of subjecting the green leaves which are plucked from the tea plants grown on the land and to a particular manufacturing process in the factory of the tea company. 38. In Travancore's case [1977] 39 STC 1 (SC), the apex co....