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P. Govinda Setty Son and Co. and anr. Vs. Deputy Commissioner of Commercial Taxes, Bangalore Division, Gandhinagar, Bangalore - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 13712 to 13715 of 1982
Judge
Reported in[1986]61STC64(Kar)
ActsKarnataka Sales Tax Act - Sections 6 and 25-A; Punjab General Sales Tax Act, 1948
AppellantP. Govinda Setty Son and Co. and anr.
RespondentDeputy Commissioner of Commercial Taxes, Bangalore Division, Gandhinagar, Bangalore
Appellant AdvocateE.R. Indra kumar, Adv.
Respondent AdvocateS. Rajendra Babu, Government Adv.
Excerpt:
.....that in view of the ratio laid down the supreme court in jagdish kumar's case [1979]3scr952 ,the deputy commissioner was well within his jurisdiction to initiate proceedings to revise the orders passed by the deputy commissioner earlier, relying upon the said decision since that was the law laid down by the supreme court and applicable to every like assessee throughout the country on the day the impugned notices were issued and has also pointed out that the supreme court has reversed the decision of this court in state of karnataka v. raghurama shetty [1981]3scr280 .his further contention is that the decision of this court in raghurama shetty [1975] 35 stc 360 is no longer good law and cannot be relied upon by the petitioners for any purpose. it may be relevant to notice that the..........case was, whether the assessee was liable to pay tax under section 6 on the purchase turnover to paddy purchased by it and milled in their mills either on the ground that they had consumed paddy in the manufacture of other goods for sale or otherwise or disposed of such goods in a manner other than by way of sale in the state. the assessee had purchased the paddy and after milling it, sold the rice. 6. this court, in raghurama shetty's case [1975] 35 stc 360, held that the assessees were not liable to tax on their purchase turnover of paddy milled in their milled in their mills since, according to the high court, the paddy and rice are one and the same commodity and no new substance is brought into being by merely dehusking the paddy. 7. under the impugned notices, the deputy.....
Judgment:
ORDER

Rajasekhara Murthy, J.

1. In these four writ petitions, the two petitioners who are registered dealers under the Karnataka Sales Tax Act have challenged the notices dated 7th June, 1980, issued by the Deputy Commissioner of Commercial Taxes, Bangalore Division, Bangalore, proposing to revise the orders of assessment for the periods from 1st April, 1970, to 31st March, 1971, and 1st April, 1971, to 31st March 1972, in relation to the two petitioners for the common periods as per annexures E and F.

2. The Deputy Commissioner on a perusal of the revision orders dated 10th June, 1975, in the two assessees' cases, passed by his predecessor, has sough to revise the same and to bring their purchase turnover in paddy to tax under section 6 of the Act, for the two periods in question.

3. By order dated 10th June, 1975, the Deputy Commissioner had set aside and cancelled the orders passed by the assessing authority in so far as the levy of tax on purchase turnover in paddy was concerned, for the two periods. The Deputy Commissioner, in the said order, while exempting the purchase turnover of paddy, had observed as follows :

'I am convinced that converting of paddy into rice is not a process of manufacture. The paddy and rice are one and the same article and there cannot be two different commodities. When skin of a plantain fruit is peeled before eating, can it be said that the peeled plantain fruit is a manufactured article No new substance which was not existing has been brought into existence. Similarly, if an orange is peeled and the fruit taken out, no new article is brought into existence and the fruit taken out cannot be said to be manufactured product. Rice is fashioned by nature in the form of paddy and obtaining of rice is a mere liberation of the natural product. In getting the rice imbedded in paddy, no transformation takes place and no manufactured article is got. As paddy does not suffer any transformation and a new and different article does not emerge when it is milled or hulled, the process of milling or hulling cannot be called process of manufacture and rice cannot be called as a manufactured article.'

4. In allowing exemption to the assessee as per the order of the Deputy Commissioner, it is not disputed that the Deputy Commissioner had followed the decision of this Court in State v. B. Raghurama Shetty [1975] 35 STC 360, wherein, it was held by the High Court as follows :

'(1) that as paddy does not suffer any transformation and a new and different article does not emerge when it is milled or hulled, the process of milling or hulling cannot be called a process of manufacture and rice cannot be called as manufactured article. There is therefore no consumption of paddy in the manufacture of other goods for sale or otherwise;

(2) that the word 'dispose' involves an element of transfer of title in goods. Dehusking of paddy by itself cannot amount to disposal as there is no transfer of the paddy as such to anyone else and, therefore, it cannot be said that there has been disposal of the goods in any manner other than by way of sale;

(3) that in regard to the rice got out of the paddy milled the assessees had been subjected to sales tax on the sales turnover of rice and the levy in regard to paddy or rice was at a single point. Therefore, the same, transaction could not be subjected to tax both at the purchase point as well as the sale point;

(4) that, therefore, the assessees were not liable to pay tax on the purchase turnover of paddy milled in their mills.'

5. The question for consideration in the said case was, whether the assessee was liable to pay tax under section 6 on the purchase turnover to paddy purchased by it and milled in their mills either on the ground that they had consumed paddy in the manufacture of other goods for sale or otherwise or disposed of such goods in a manner other than by way of sale in the State. The assessee had purchased the paddy and after milling it, sold the rice.

6. This Court, in Raghurama Shetty's case [1975] 35 STC 360, held that the assessees were not liable to tax on their purchase turnover of paddy milled in their milled in their mills since, according to the High Court, the paddy and rice are one and the same commodity and no new substance is brought into being by merely dehusking the paddy.

7. Under the impugned notices, the Deputy Commissioner sought to rely upon the decision of the Supreme Court in the case of Babu Ram Jagdish Kumar and Co. v. State of Punjab : [1979]3SCR952 , wherein, the Supreme Court held that rice and paddy are two different commodities in the ordinary parlance and, therefore, the paddy when dehusked loses its identity as paddy and what emerges is rice which is not the same thing as paddy and rice is a different commodity.

8. The question is whether the notices issued by the Deputy Commissioner and impugned in these writ petitions are sustainable, in law, and the proceedings initiated by the Deputy Commissioner to withdraw the exemption granted earlier by his predecessor following the case of Raghurama Shetty [1975] 35 STC 360, are valid in law and the Deputy Commissioner had jurisdiction to revise the same for the reasons stated by him in the said notices.

9. Shri Indra kumar appearing for the assessees has strenuously contended that notwithstanding the decision of the Supreme Court in Babu Ram Jagdish Kumar's case : [1979]3SCR952 , the Deputy Commissioner had no jurisdiction to issue notices proposing to revise the assessments for the reasons stated in the said notices. His contention is that the ruling that rice and paddy are different things in the ordinary parlance, was not laid down by the Supreme Court for the first time, but the same view had already been expressed by the Supreme Court in Ganesh Trading Co., Karnal v. State of Haryana : AIR1974SC1362 . According to the learned counsel, the Deputy Commissioner when he granted the exemption to the purchase turnover in paddy by his orders dated 10th June, 1975, had acted legally and in conformity with the decision of this Court in Raghurama Shetty's case [1975] 35 STC 360. He also distinguished that the Supreme Court was not dealing with the question of manufacture in Babu Ram Jagdish Kumar's case : [1979]3SCR952 and that, therefore, that decision cannot form a valid basis for withdrawing the exemption and revise the earlier order.

10. The Supreme Court in the case of Babu Ram Jagdish Kumar : [1979]3SCR952 was dealing with the purchase turnover of paddy under the General Sales Tax Act of Punjab and Haryana and taken the view that although rice is produced out of paddy, the two are distinct commodities and the levy of tax on one at an earlier stage does not amount to imposition of double taxation, if rice is subjected to levy after paddy is dehusked.

11. Two questions arose before the Supreme Court in the said case. The first question related to the delegation of power to the State Government to amend Schedule C to the Act by which the State Government included paddy and rice in the Schedule, the result of which was that the turnover relating to the purchase of paddy and rice became exigible to payment of purchase tax under the Act with effect from 15th January, 1968. The Supreme Court rejected the contention of the assessee and upheld the power of the State Government in amending Schedule C to the Act, as stated above.

12. The second question related to the claim of the assessee for deduction from the gross turnover relating to the sale of paddy effected in his favour notwithstanding the inclusion of paddy in Schedule C to the Act.

13. On the first question, however, the Supreme Court upheld the delegation in favour of the State Government to include both paddy and rice in Schedule C to the Act.

14. So far as the second question was concerned, it was contended before the Supreme Court that paddy and rice were not different kinds of goods but one and the same and that therefore the inclusion of both paddy and rice in Schedule C to the Act would amount to imposition of double taxation under the Act. Repelling this contention, the Supreme Court observed that there was a fallacy in the argument which proceeded on the assumption that paddy and rice are one and the same. While doing so the Supreme Court relied upon its decision rendered in Ganesh Trading Co., Karnal v. State of Haryana : AIR1974SC1362 , wherein the Court had held that, 'although rice is produced out of paddy, it is not true to say that paddy continued to be paddy even after dehusking. Rice and paddy are two different things in ordinary parlance. Therefore, when paddy is dehusked and rice produced, there has been a change in the identity of the goods'.

15. At this Stage, I may usefully deal with the controversy which came up for decision in Ganesh Trading Co.'s case : AIR1974SC1362 .

16. The appellants therein were traders in buying paddy and after getting it dehusked either in their own mills and other mills sold the rice to the Government and other registered dealers. On the purchase of paddy they paid the purchase tax as provided in the Punjab general Sales Tax Act, 1948. The question for decision was, when they sold the rice produced out of the paddy purchased whether they were entitled to include the turnover relating to the paddy purchased. The only question that arose for decision in those appeals was whether paddy and rice could be considered as identical goods for the purpose of imposition of sales tax. It was urged by the appellants that merely because paddy was dehusked and rice produced, there was no change in the identity of goods.

Hegde, J.

17. speaking for the Bench and rejecting the contention of the appellants observed, 'that the meanings of the word 'paddy' and 'rice' should be understood in common parlance, specially in commercial circles and held that the two are different things'.

18. It was, however, contended by Shri Indra kumar that the Supreme Court decision in Babu Ram Jagdish Kumar's case : [1979]3SCR952 cannot be relied upon for initiating proceedings to revise the orders of the Deputy Commissioner for the two years in question.

19. It is contended on behalf of the State by Shri Rajendra Babu, the learned Government Advocate, that in view of the ratio laid down the Supreme Court in Jagdish Kumar's case : [1979]3SCR952 , the Deputy Commissioner was well within his jurisdiction to initiate proceedings to revise the orders passed by the Deputy Commissioner earlier, relying upon the said decision since that was the law laid down by the Supreme Court and applicable to every like assessee throughout the country on the day the impugned notices were issued and has also pointed out that the Supreme Court has reversed the decision of this Court in State of Karnataka v. B. Raghurama Shetty : [1981]3SCR280 . His further contention is that the decision of this Court in Raghurama Shetty [1975] 35 STC 360 is no longer good law and cannot be relied upon by the petitioners for any purpose.

20. The point that arises for my consideration, is whether the Deputy Commissioner was justified in law, in relying upon the decision of the Supreme Court in Babu Ram Jagdish Kumar's case : [1979]3SCR952 in issuing the notices dated 7the June, 1980 (annexures E and F) impugned in the writ petitions.

21. As already mentioned, this Court's decision in Raghurama Shetty's case [1975] 35 STC 360 has been reversed by the Supreme Court by its judgment dated 24th March, 1981, in State of Karnataka v. Raghurama Shetty's case : [1981]3SCR280 . This decision was rendered by Venkataramiah, J., who was also the learned Judge who rendered the decision in Babu Ram Jagdish Kumar's case : [1979]3SCR952 .

22. The Supreme Court held, in reversing the decision of the karnataka High Court, that the assessee (Raghurama Shetty) consumed the paddy purchased by him when he converted the paddy into rice and was therefore, liable to pay tax on his purchase turnover in paddy from agriculturists, which otherwise would be exempt under the Act. It was also held by the Supreme Court that the assessee would not be exposed to double taxation both as buyer of paddy and as seller of rice since paddy and rice are to be treated as different commodities liable to tax at single point. It may be relevant to notice that the Supreme Court while reversing the decision of this Court observed that 'it is unfortunate that the High Court as well as the Tribunal have tried to distinguish the decision of this Court in Ganesh Trading Co.'s case : AIR1974SC1362 on insubstantial grounds, a detailed reference to which is unnecessary. We reiterate the view expressed in the above two cases and hold that paddy and rice are two distinct commodities and that the milling of paddy involves a manufacturing process'.

23. Shri Indra kumar's valiant effort to distinguish the decision in Ganesh Trading Co.'s case : AIR1974SC1362 from the case of Raghurama Shetty : [1981]3SCR280 on the sole basis that the Supreme Court did not deal with the manufacturing aspect in the earlier case, should therefore fail. What we are concerned in these writ petitions is the validity of the notices issued under section 25-A of the Act. Whether there is sufficient legal basis for the authority to revise the order is the only question that arises in these writ petitions. It is, therefore, unnecessary to deal elaborately with the other contentions of Shri Indra kumar, he has put forward. It is suffice to say that the principles laid down by the Supreme Court in Babu Ram Jagdish Kumar's case : [1979]3SCR952 could from a legal basis to initiate proceedings to revise the earlier orders.

24. The Deputy Commissioner need not have waited till the decision of this Court in Raghurama Shetty's case [1975] 35 STC 360 was reversed later on, in the year 1981. It is also not the case of the petitioners that the impugned notices suffer from any other vice, including limitation.

25. The writ petitions, therefore, fail and are dismissed with no order as to costs.


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