'No Reason To Interfere With The Levy Of Tax On The Sale Of 'Korai'': Patna High Court

In a recent ruling, the Patna High Court has upheld the imposition of tax on the sale of 'Korai,' a processed by-product used as cattle feed.

The decision came in response to two appeals by M/s Raj Kumar Sao Kishori Lal Sao, a partnership engaged in the purchase, processing, and sale of food-grains, pulses, and related by-products.

The court's observation emphasized that there was no evidence to demonstrate that 'Korai' was sold as cattle feed. The processed nature of 'Korai' rendered it taxable as an unspecified residuary item at the rate of 8%, as it was not equivalent to Wheat Bran. The Appellate Authority had initially taxed it at 4%, a decision not challenged by the State.

The division bench comprising Chief Justice K Vinod Chandran and Justice Rajiv Roy observed, "There is nothing to show that 'Korai' was sold as a cattle feed. As to 'Korai' being not equivalent to Wheat Bran, since it is a processed item which is obtained as a by- product it is taxable as an unspecified residuary item at the rate of 8%. The Appellate Authority equated it with Wheat Bran and taxed it at 4%, against which no appeal is filed by the State."

"We find absolutely no reason to interfere with the levy of tax on the sale of 'Korai' , which was not shown to be sold as cattle feed. In the context of the appellate authority's order modifying the rate of tax to 4% having not been challenged by the State, there is no reason to upset the said modification," the bench added.

The appeals, pertaining to the assessment years 1991-92 and 1992-93, focused on the purchase tax levied on goods acquired from unregistered dealers and the taxation of 'Korai,' claimed to be exempt as cattle feed.

In the appellant's appeal, the argument put forth was that the Supreme Court's decision in Hotel Balaji v. State of A.P.; 1993 Supp (4) SCC 536 was subsequent to the assessment year in question and therefore should not be applicable to the relevant assessment year.

Another issue raised by the assessee pertained to the tax imposed on 'Korai,' asserted to be cattle feed. The appellant's counsel contended that 'Korai' was exempted as cattle feed, and consequently, no tax should be levied on the exempted goods. The counsel further argued that the first Appellate Authority erred in applying a 4% tax rate to 'Korai,' equating it to Wheat Bran. Additionally, it was claimed that the Hotel Balaji decision did not apply to the earlier year.

The Government Advocate countered, stating that Hotel Balaji upheld legislative competence concerning purchase tax universally from the initiation of the levy. Regarding the tax on 'Korai,' it was explained that it was a by-product derived from processing pulses and was classified as unspecified goods taxable at 8%. The first Appellate Authority's decision to equate it to Wheat Bran and impose a lower tax rate of 4% was justified, with the Government Advocate emphasizing that there was no factual evidence indicating that the goods sold by the assessee qualified as cattle feed.

The Court, relying on the precedent set by the case law Hotel Balaji (supra), firmly established that the imposition of purchase tax and its legislative competence was no longer an open question. It emphasized that the appellant could not argue that Hotel Balaji (supra) was a subsequent judgment, as the legislative competence validated the levy from the enactment's effective date.

Highlighting that the Supreme Court did not make Hotel Balaji (supra) prospective, the Court addressed the purchase tax issue.

The Court asserted, “This is the specific context in which Section 4 of the Act comes into play, when purchase of goods are made in circumstances in which no sales tax is payable and the same is disposed of or consumed, otherwise than by a manner in which taxes are not paid. There is hence no subsequent sale, exigible to tax within the State or a levy in the course of inter-State trade or commerce, which gives rise to the liability to pay purchase tax on the purchase price of such goods”.

The Court held that the appellant's transaction which had been taxed under Section 4 of the Act fell squarely within the ambit of the provision since no tax was paid on purchase and the inter-State transaction, admitted by the assessee to be stock- transfer, was also without payment of tax.

The Court said it found no reason to interdict the levy of purchase tax, especially when the purchase of goods from unregistered dealers was without tax payment and the further stock-transfer was also not levied tax in the State.

The Court answered both the questions of law against the assessee and in favour of the revenue and rejected both the appeals.

Case No.: Miscellaneous Appeal No.476 of 2017

Case Title: M/s Raj Kumar Sao Kishori Lal Sao vs The State Of Bihar & Ors

LL Citation: 2024 LiveLaw (Pat) 7

Appearance:

For the Appellant/s: Mrs. Priya Gupta, Advocate

For the Respondent/s: Mr. Vikash Kumar, SC- 11

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