Tax Exemptions Given With Benevolent Object, Approach For 'Exempting' & 'Including' Subject Matters Under Tax Purview Can't Be Same: Orissa HC

"It is one thing to say that a certain product was exempted for the purposes of taxation by virtue of interpretation of an exemption notification, it is another to say that it is amenable to tax by bringing it within the ambit of another product shown in the Schedule to the OET Act and, therefore, bringing it within the fold of taxation. The approach to both cannot be the same."

Brief Facts:

The first of the batch of revision petitions arose from an order dated 5^th February, 2011 of a Single Judicial Member of the Orissa Sales Tax Tribunal, Cuttack ('Tribunal') dismissing the appeal of the State of Odisha, thereby upholding the order dated 7^th March, 2009 of the Deputy Commissioner of Sales Tax, Puri (DCST) holding that 'Chuni' does not come within the scope of the entry 'cattle feed' as it is only one of the raw materials for preparation of the cattle feed and, therefore, not amenable to entry tax. The other petitions also involved similar disputes and conclusions. Hence, revision petitions were filed in the High Court challenging the conclusions reached by the Tribunal.

Issue for Consideration:

Whether 'Chuni', which is a by-product of 'Dal' i.e. pulses including broken pulses, its husk, chilka and dust can itself be considered 'cattle feed', which is 'schedule goods' within the meaning of Sl. No.66 of Para-I of the Schedule attached to the OET Act?

Contentions:

Mr. Sunil Mishra, Additional Standing Counsel for the Department, highlighted that another Single Member of the Tribunal had taken a contrary view by an order dated 19^th August, 2010 while allowing the Department's appeals in the case of State of Orissa v. M/s. Madanlal Agarwalla, which included the very same Opposite Party as in the present case (M/s. Geetashree Industries), which was for a different year and, therefore, either the matter should have been referred by the Single Member Bench to a Larger Bench or the said order should have been followed.

Court's Observations:

At the outset, the Court noted that barring the Single Member order dated 19^th August, 2010 in M/s. Madanlal Agarwalla (supra), all of the other orders of the Tribunal against which the present revision petitions have been filed by the State and which are subsequent orders (one of them by a Two-Member Bench) have consistently held that 'chuni' is by itself not 'cattle feed'.

Again, the order of the Single Member Chairman of the Tribunal dated 19^th August, 2010 holding the contrary view, the Court pointed out that it has relied on decision pertaining to 'cattle fodder' which was in the context of 'exemption' from tax granted to such product. It relied on Garg Cattle Feed Industry v. Food Corporation of India, (2009) 23 VST 99 (P&H), the question therein was whether 'cattle fodder' or 'cattle feed' would be exempted within the contemplation of exempt notification.

The Court held that the approach/principle which is followed to exempt certain goods from the ambit of taxation is not the same which is used when question as to bringing something under the purview of taxation is involved.

The Court observed that the product, which is sought to be subject to entry tax, is admittedly 'Chuni', which is nothing but husk of pulses. It is a by-product, which comes into existence during the process of manufacturing 'Dal' i.e. pulses. Also, what is not in dispute is that 'Chuni' is not independently sold as 'cattle feed'. It is used to make cattle feed. There are 17 other ingredients which go to make cattle feed apart from 'Chuni'.

The Court further referred to the list of exempted goods under Schedule-A of the Orissa Value Added Tax Act (OVAT Act). 'Chokad', which is nothing but husk of 'Dal', is shown at Serial No. 3 of Schedule-A of the OVAT Act pertaining to exempt goods. Cattle feed has been separately mentioned with Chokad. In other words, both are not one and the same although Chokad could be an ingredient of cattle feed.

Then, the Court referred to Section 26 of the OET Act, which clearly states that it is only a finished product which would be amenable to entry tax. 'Chuni' or 'chokad' is only a by-product and not a complete finished product in itself. The finished product as far as the present case is concerned, the Court opined, is 'cattle feed' which is what is mentioned in Entry 66 of the Schedule to the OET Act. Thus, it held that in the context of the aforesaid Section read with Entry 66 of the Schedule, 'chuni' cannot itself be considered to be a finished product and therefore, different from 'cattle feed'. 'Chuni' is one of the ingredients used in the making of 'cattle feed' and it is not the same thing as 'cattle feed' as occurring in Entry 66 of the Schedule to the OET Act.

While viewing it from another perspective, which is the trade parlance perspective, the Court asked,

"…if one were to seek to buy 'cattle feed' in the market for such product, would one be given plain 'chuni'? Again, the answer has to be in the negative. Clearly the traders in such products would understand the distinction between the two."

Accordingly, it was concluded that 'Chuni' is a by-product of 'Dal', which is not in itself a 'cattle feed' and thus, not amenable to entry tax under the OET Act. Consequently, the petitions were dismissed.

Case Title: State of Odisha represented by Commissioner of Sales Tax, Cuttack v. M/s. Geetashree Industries & Ors.

Case No.: STREV No. 31 of 2011

Judgment Dated: 2^nd August 2022

Coram: Dr. S. Muralidhar, CJ. & Dr. S.K. Panigrahi, J.

Judgment Authored By: Dr. S. Muralidhar, CJ.

Counsel for the Petitioner: Mr. Sunil Mishra, Additional Standing Counsel

Counsel for the Respondents: None

Citation: 2022 LiveLaw (Ori) 119