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Friday, May 13, 2016

oil-cake and de-oiled cake being different products as per the notification dated 31st May, 2002 is correct.= the assessing authority had expressed the opinion with regard to the rate of tax on the de-oiled cake while scrutinizing ‘C’ Forms which is an expression of opinion on the available materials brought on record and, therefore, the first appellate authority as well as the tribunal was justified in concurring with the said order. It is worthy to note that the revenue had not challenged the order passed by the Joint Commissioner. The High Court has not expressed any opinion on this score. Considering the cumulative effect of the facts and law we have stated, we have not an iota of doubt in our mind that there should not have been reopening of assessment. However, the finding recorded by the High Court overturning the view of the tribunal that oil-cake and de-oiled cake are the same product and, therefore, both are liable to reduced rate of tax despite the notification only mentions oil-cake, is not defensible. Consequently, the appeal filed by the assessee is allowed in part. The finding of the High Court as regards oil-cake and de-oiled cake being different products as per the notification dated 31st May, 2002 is correct. However, the assessee shall reap the benefit of initial assessment as the same could not have been reopened.

                                                                  REPORTABLE

                       IN THE  SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.4760 OF 2016
                (Arising out of S.L.P.(C) No. 21015 of 2012)



|                                            |                       |
|M/S RAVI PRAKASH REFINERIES (P) LTD.        |.. APPELLANT(S)        |



                                       VERSUS

|STATE OF KARNATAKA                             |.. RESPONDENT(S)            |






                               J U D G M E N T



DIPAK MISRA, J.


        Delay condoned.
2.      Leave granted.
3.      The assessee-appellant is engaged in the  manufacturing  of  refined
edible oil by solvent extraction process and refining along with trading  in
edible oil and oil-cake.  For  the  assessment  year  ending  31-3-2003  the
assessee had filed Revised Annual Return in  Form  4,  declaring  the  Gross
Taxable Turnovers at Rs.19,76,37,615-00 and Rs.1,60,93,055-00 respectively.
4.      As the factual narration would show the appellant sold Sunflower De-
oiled Cake (SF DOC) and several other goods in  the  course  of  inter-State
trade and commerce and in the course of the said transaction  the  appellant
produced 'C' Forms obtained from the  dealers  in  inter-State  sales.   The
assessee had admitted the liability of tax at 2 per cent on the sale  of  SF
DOC  in  the  course  of  inter-State  trade  and   commerce.   The   Deputy
Commissioner of Commercial Taxes  (Assessment)  Chitradurga,  the  assessing
authority, had passed an order of  assessment  under  Section  9(2)  of  the
Central Sales Tax Act, 1956 (for brevity, 'the CST Act')  on  29th  January,
2005, whereby it had expressed the view that a sum of  Rs.4,75,68,764/-  was
subjected to tax              at 2 per  cent.   The  assessing  officer  had
granted the benefit on production of 'C' Form in terms of  the  Notification
No.FD 119 CSL 2002 (2) dated 31st May, 2002.
5.      After the order of assessment was passed, the  succeeding  assessing
officer formed an opinion that there was an escapement of  tax  due  to  the
reason that the inter-State sales of SF DOC was actually liable to tax at  4
per cent and not at 2 per cent, which had been erroneously  adopted  by  the
earlier assessing authority.  Following the principles of  natural  justice,
he levied the tax at 4 per cent on the inter-State sales of SF DOC.
6.      The aforesaid order was called in question in an appeal  before  the
Joint Commissioner  of   Commercial  Taxes  (Appeals),  Davansere  Division,
Davangere under Section 20(5) read with Section 9 (2) of the CST  Act.   The
Appellate  Authority  noted  the  submissions  advanced  on  behalf  of  the
assessee as well as the revenue and thereafter referred to Section  12-A  of
the Karnataka Sales Tax Act, 1957 (for short, 'KST Act')  and   referred  to
the decisions in the cases of Nagaraja Overseals Traders vs.  The  State  of
Mysore,[1] Mahaveer Drug House vs. ACCT Gandhinagar,  Bangalore,[2]    State
of Andhra Pradesh vs. Ampro Food Products,[3] Giridharial Co. vs.  State  of
Andhra Pradesh,[4] C. Sathiragu and Sons vs.  State  of  Andhra  Pradesh,[5]
Somani Brothers vs. State of Bihar,[6] Eureka Forbes vs. State  of  Bihar[7]
and came to hold that the change of opinion could not  have  been  a  ground
for reopening of assessment in exercise of power under Section 12-A  of  the
KST Act and, accordingly, set aside the order of re-assessment.
7.      Though the assessee succeeded, yet it  preferred  an  appeal,  being
STA No.425 of 2006 before the Karnataka Appellate Tribunal,  Bangalore  (for
short, 'the tribunal'), as the first Appellate Authority had  not  expressed
any opinion with regard to rate of tax on oil-cake and  de-oiled  cake.   It
was contended before the Tribunal  that   the oil cake and de-oiled cake  as
per the commercial parlance are one and the same and,  therefore,  the  rate
of tax has to be at 2 per cent and not  4  per  cent.   The  tribunal  after
noting the submissions referred to the schedule in the notification and  the
decision in  M/s  Sterling  Foods  vs.  State  of  Karnataka,[8]   State  of
Karnataka vs. M/s  Goa Granites[9], M/s Habeeb Protiens and  Fats  Extracts,
Hiriyur,  Chitradurga  District  vs.  Commissioner  of   Commercial   Taxes,
Bangalore and Anr.[10] and came to hold  as under :
“Thus, we hold that the expression 'oil  cake  in  sl.  No.  6  of  the  CST
Notification No. FD 119 CSL 2002(2) dated 31.5.2002 would include  also  de-
oiled cake and that therefore the reassessment order passed by the AA  under
CST Act, 1956 for the year 2002-03 in so far as it concerned levy of CST  at
4% on inter-State Sales of sunflower de-oiled cake covered  by  C  Forms  by
denying the benefit of reduction in  the rate of CST to 2%  granted  in  the
Notification dated 31.05.2002 is liable to be  held  unsustainable  and  set
aside.
                                     ….

Consequential to the decision taken by us as above, the appellate  order  of
the learned FAA is liable for  modification  accordingly.   As  regards  the
reassessment order set aside by the learned FAA on the  basis  of  lay  that
reassessment is not permissible by change of pinion, which is  supported  by
the several case laws cited in the appellate order itself,  it  need  to  be
placed on record that Hon’ble Supreme Court  of  India  has  reiterated  the
said legal position that reopening of an assessment by change of opinion  is
not permissible in the recent judgment rendered in the case  of  M/s  Binani
Industries Ltd. Vs. Assistant Commissioner of Commercial Taxes,  VI  Circle,
Bangalore and others (2007) 6 VST 783.”

8.      On  the  aforesaid  analysis,  the  tribunal  issued  the  following
directions:
“(i) Reassessment order passed by the DCCT (Transition),  Chitradurga  under
CST Act, 1956 for the year 2002-03 in respect of rate of CST  levied  at  4%
on  the  turnover  of  Rs.4,75,68,764  relating  to  inter-State  sales   of
sunflower de-oiled cake covered by C Forms is modified to  2%  allowing  the
benefit of reduction in the rate of CST to 2% granted  in  the  Notification
No.FD 119 CSL 2002 (2) dated 31-5-2002.

(ii) The appellate order passed by the FAA in CST AP 27/2005-06 dated  20-4-
2006 shall stand modified accordingly.

(iii) Directions are issued that the  AA  shall  accordingly  issue  revised
demand notice.”

9.      The aforesaid order of tribunal was assailed before the  High  Court
in Revision Petition being STRP No. 32 of  2009.   Be  it  noted,  the  High
Court had formulated the following two substantial questions of law:-
(i)     Whether, on the facts and in circumstances of the case,  can  it  be
held that the order  dated  12.7.2007  passed  by  the  Karnataka  Appellate
Tribunal in STA 425/2006 allowing the appeal is correct  and  in  accordance
with law?

(ii)    Whether on the fact and in circumstances of  the  case,  can  it  be
held that the Appellate Tribunal was right in law  in  ignoring  that  under
the KST Act in the Second Schedule in serial No.1 of Part O,  oil  cake  and
de-oiled cake are listed under two separate sub-headings  as  two  different
commodities?

10.     After deliberating on the aforesaid two questions,  the  High  Court
referred to the provisions of the KST Act and the Notification issued  under
Section 8(5) of the CST Act, distinguished  the  decisions  placed  reliance
upon by the first Appellate Authority  and  the  tribunal  as  well  as  the
decision rendered by this Court in M/s Sterling Foods (supra)  and  came  to
hold that there is distinction between oil cake and de-oiled cake  and  they
are two different commodities and not one and  the  same.   Elaborating  the
discussion, the Division Bench held thus:-
“The contention that the commodities will have to be  understood  in  common
parlance as understood by a common man is even harder  to  accept.   What  a
common man understands need not  necessarily  mean  what  is  understood  in
accordance with law.  In the instant case, the framers of the schedule  were
aware of the distinction between oil cake and de-oiled  case.   Accordingly,
they have treated it as two different commodities.  Therefore, to hold  that
the view of a common man has to  necessarily  over  ride  the  view  of  the
Legislature is difficult to accept.  The Distinction in law  has  been  made
which requires to be followed.  Oil cake  and  de-oiled  case  cannot  stand
extended to de-oiled cake.  The impact of the notification reducing the  tax
impact was every well known when the benefit  was  granted.  A  notification
has to be strictly construed.  The Court cannot read into  the  notification
what is not there. The notification is clear and unambiguous.   Any  attempt
to read  it  otherwise  is  not  only  uncalled  for  but  would  amount  to
redrafting the notification.”


        Being of this view, it answered the two questions that  were  framed
by it in favour of the Revenue and against the Assessee.  The said  judgment
 and order is the subject matter of  challenge in  this  appeal  by  special
leave.
11.     We have heard Shri Dhruv Mehta, learned senior  counsel  along  with
Ms. Anupama, learned counsel for the appellant and  Shri  Basava  Prabhu  S.
Patil, learned senior counsel  along  with  Shri  V.N.  Raghupathy,  learned
counsel for the State.
12.       First,   we   shall   take   up   the    issue    pertaining    to
Section 12-A of the KST Act.  Section 12-A(1)  which  is  relevant  for  the
present purpose is extracted below:
“12-A. Assessment of escaped turnover-(1) If  the  assessing  authority  has
reason to believe that the whole or any part of the turnover of a dealer  in
respect of any period has escaped assessment  to  tax  or  has  been  under-
assessed or has been assessed at a rate lower than the rate at which  it  is
assessable under this Act or any deductions or exemptions have been  wrongly
allowed in respect thereof, the  assessing  authority  may,  notwithstanding
the fact that the whole or part of such escaped turnover was already  before
the said authority at the time of the original assessment  or  re-assessment
but subject to the provisions of  subsection  (2),  at  any  time  within  a
period of [eight years] from the  expiry  of  the  year  to  which  the  tax
relates, proceed to assess or re-assess to the best of its judgment the  tax
payable by the dealer in respect of such turnover after issuing a notice  to
the dealer and after making such enquiry as it may consider necessary.”


13.     On a perusal of the  aforesaid  provision,  it  is  limpid  that  it
permits re-opening of an assessment on the ground that if the  assessee  has
been assessed at a rate lower than the rate at which it is assessable  under
Act.  The rate of tax is four per cent.  The assessee had filed  the  return
and the 'C' Forms claiming the benefit of the Notification dated  31.05.2002
in respect of inter-State sale  of  oil-cakes.  The  assessing  officer  had
accepted the 'C'  Forms  on  verification  and  granted  the  benefit.   The
assessing officer on a proper security has  accept  the  ‘C’  Forms  on  the
basis of which  reduced  rate  of  tax  was  claimed.   The  assessment  was
reopened as there was no escapement of tax due  in  respect  of  inter-State
sale in respect of SF DOC.
14.     Mr. Dhruv Mehta, learned senior counsel  for  the  appellant,  would
submit that once  an  assessment  order  was  framed  on  all  the  material
available on record and the rate of tax was accepted, the view expressed  by
the 1st appellate authority which had got the stamp  of  affirmance  by  the
tribunal should be accepted to be correct more for the  reason  the  revenue
had not challenged the order of assessment and that  apart  the  High  Court
has not appositely dealt with it. He  would  place  heavy  reliance  on  the
pronouncement in M/s. Binani Industries Limited  v.  Assistant  Commissioner
of Commercial Taxes, VI Circle, Bangalore[11].
15.     It is submitted by  Mr.  Basava  Prabhu  S.  Patil,  learned  senior
counsel, that claiming of benefit on production of 'C' Forms had nothing  to
do with the nature of product that was sold.  Learned senior  counsel  would
contend that the first Appellate Authority, as well  as  the  tribunal,  has
been erroneously guided that there has  been  change  of  opinion.   Learned
senior counsel has submitted that the words “reason to believe” have  to  be
expansively understood to import a meaning to the provision,  for  when  the
assessment has taken place at a rate  lower  than  the  rate  at  which  the
turnover of a dealer is assessable, there can be reopening of assessment.
16.     First, we  shall  proceed  to  consider  the  acceptability  of  the
opinion expressed by  the  High  Court.   The  Government  of  Karnataka  in
exercise of its powers conferred by Section 8 (5) of  the  CST  Act,  issued
Notification No.119 FD 119 CSL 2002(2) dated 31.05.2002  granting  reduction
in the rate of central sales tax  payable  on  inter-State  sales  of  goods
specified in Serial  Nos.1  to  11  of  the  notification,  subject  to  the
condition that the Dealer  produces declarations in Forms 'C' obtained  from
the registered Dealers/Government to whom the goods are sold.  Be  it  noted
oil cake is one of the goods specified in serial No. 6 of the  notification.
 Submission of Mr. Mehta, learned senior counsel is that the High Court  has
clearly erred in law by distinguishing the  facts and by  opining  that  the
judgment in the case of M/s Habeeb Protiens  (supra) is not  a  decision  in
issue and an obiter.  In  the  case  of  M/s  Sterling  Foods  (supra),  the
question that arose  for  consideration  was  whether  shrimps,  prawns  and
lobsters subjected to processing like cutting of heads and  tails,  peeling,
deveining, cleaning and freezing ceased to be the same commodity and  became
a different commodity for the purpose of the Central  Sales  Tax  Act.   The
Court posed the question whether they still go  under  the   description  of
shrims, prawns and lobsters or in other words, shrimps, prawns and  lobsters
would mean only raw shrimps, prawns and lobsters as caught from the  sea  or
they also include process and frozen shrimps, prawns  and  lobsters.   After
referring to the various provisions and placing reliance on the decision  in
Dy. CST vs. Pio Food Packers[12] the Court held as under:-
“…..when the State Legislature excluded processed or frozen shrimps,  prawns
and lobsters from the ambit and coverage of Entry 13a, its object  obviously
was that the last purchases of  processed  or  frozen  shrimps,  prawns  and
lobsters in the State should not be exigible to State Sales Tax under  Entry
13a. The State Legislature was not at all concerned with the question as  to
whether processed or frozen shrimps, prawns and  lobsters  are  commercially
the same commodity as raw shrimps, prawns and lobsters or  are  a  different
commodity and merely  because  the  State  Legislature  made  a  distinction
between the two for the purpose of determining exigibility  to  State  Sales
Tax, it cannot be said that in commercial parlance or according  to  popular
sense, processed or frozen shrimps, prawns and lobsters  are  recognised  as
different commodity distinct from raw  shrimps,  prawns  and  lobsters.  The
question  whether  raw  shrimps,  prawns  and   lobsters   after   suffering
processing retain their original character  or  identity  or  become  a  new
commodity has to be determined not on the basis of  a  distinction  made  by
the State Legislature for the purpose of  exigibility  to  State  Sales  Tax
because even where the commodity is the same in  the  eyes  of  the  persons
dealing  in  it  the  State  Legislature  may  make  a  classification   for
determining liability to sales tax. This question, for the  purpose  of  the
Central Sales Tax Act, has  to  be  determined  on  the  basis  of  what  is
commonly known or  recognised  in  commercial  parlance.  If  in  commercial
parlance and according to what is understood in the trade by the dealer  and
the consumer, processed or frozen shrimps, prawns and lobsters retain  their
original character and identity as shrimps, prawns and lobsters and  do  not
become a new distinct  commodity  and  are  as  much  'shrimps,  prawns  and
lobsters', as raw shrimps, prawns and lobsters, sub-section (3)  of  section
5 of the Central Sales Tax Act would be attracted and  if  with  a  view  to
fulfilling the existing contracts for export,  the  assessee  purchases  raw
shrimps, prawns and lobsters and processes and freezes them, such  purchases
of raw shrimps, prawns and lobsters would be  deemed  to  be  in  course  of
export so as to be exempt from liability to State Sales Tax.”

17.     Relying  on the said passage, it is  contended  by  Mr.  Mehta  that
when identity of the goods on the basis of commercial parlance  is  similar,
the High Court would have been well advised to  follow  the  principles  set
out in the aforesaid decision  and  should  not  have  been  guided  by  the
concept of enumeration in the Notification. In essence,  the  submission  is
that there is no distinction between the oil cake and the de-oiled cake  and
both should be perceived as one in commercial parlance.  Thus, the  emphasis
is on the commercial parlance test.  To bolster  the  said  stand,  reliance
has been placed on M/s Habeeb Protiens case, wherein the Division  Bench  of
the High Court of Karnataka has drawn a distinction  between  sunflower  oil
cake and groundnut oil cake on the one hand and de-oiled sunflower cake  and
groundnut oil cake on the other.  The aforesaid analysis made  in  the  said
judgment should not detain us long, for Mr.  Patil  learned  senior  counsel
for the State has brought to our notice a recent decision of this  Court  in
the case of Agricultural Produce  Market  Committee  vs.  Biotor  Industries
Limited and Anr.[13] .  In the said case,  the  two-Judge  Bench  had  posed
five questions and the question pertinent for our purpose reads thus:-
“13.4   Whether the Division Bench is justified in recording the finding  on
the second issue (see para 7, above at p.737 c-d)  in  connection  with  LPA
NO. 195 of 2006 that the respondent concern is not liable to pay any  market
fee on the de-oiled cakes sold by it which are stated to be  the  by-product
in the course of manufacturing castor oil which is  not  one  of  the  items
enumerated in the Schedule to the Act and the  notification  issued  by  the
Directorate?”


18.     Dealing with the distinction between the oil-cake and  the  de-oiled
cake, the Court referred  to  the  process  and  quoted  from  the  findings
referred by  the  learned  Single  Judge.   Though  the  said  decision  was
rendered in the backdrop of Gujarat Agricultural Produce Markets  Act,  1963
to levy of market fee, it is  absolutely  distinctly  perceptible  from  the
judgment that the Court has arrived at a definite conclusion that  there  is
a distinction between the oil-cake  and  de-oiled  cake  and  they  are  two
different commercial products. Thus, when the difference has been  drawn  by
this Court, the assessee herein cannot be allowed to  advance  a  plea  that
the said test should not  be  applied,  but  the  commercial  parlance  test
should be adopted to determine the said goods for the  purposes  of  Central
Sales Tax Act. To have a complete picture, we may refer to the  Notification
dated 31.05.2002.  The relevant part of it reads as follows :
“In exercise of the powers conferred by sub-Section (5) of Section 8 of  the
Central Sales Tax,  1956  (Central  Act  74  of  1956),  the  Government  of
Karnataka, being satisfied that it is necessary  so  to  do  in  the  public
interest, hereby directs that which effect  from  the  First  day  of  June,
2002, the tax payable by a dealer under Section 8 of the  said  Act  on  the
sale of goods specified below, made in the course of  inter-State  trade  or
commerce, to a registered dealer or the Government shall  be  calculated  at
the rate of two per cent subject to production of declaration  in  Form  'C'
or certificate in Form 'D' duly filed and signed by  the  registered  dealer
or the Government to whom the said goods are sold:-

1.      Cotton Yarn

2.      Bicycles

3.      Chemical fertilizers and chemical fertilizer mixtures

4.      Edible oil-refined and non-refined

5.      Khandasari Sugar

6.      Liquid Glucose, Dextrine, Maixe Starch, gluten, grits, maize,  husk,
oil cake, corn steep liquor, dextrose, corn  oil,  maixe  hydrol  and  maize
germs.”

19.     From the  said  Notification,  it  is  evident  that  the  competent
authority while exercising power under sub-section (5) of Section 8  of  the
CST Act, has kept the reduction of tax qua de-oiled cake  from  the  purview
of Notification and has only provided oil cake to be taxed  at  the  reduced
rate of tax.  In  view  of  the  fact  that  the  goods  have  distinct  and
different identity which also get recognition from the Notification, we  are
obliged to  hold  that  the  High  Court  has  correctly  distinguished  the
authority in M/s Sterling Foods (supra) and  we  unhesitatingly  agree  with
the same.
20.     Though we have agreed with the said conclusion of  the  High  Court,
yet the fact remains that the assessing authority had expressed the  opinion
with regard to the rate of tax on the de-oiled cake while  scrutinizing  ‘C’
Forms which is an expression of opinion on the available  materials  brought
on record and, therefore, the first  appellate  authority  as  well  as  the
tribunal was justified in concurring with the said order. It  is  worthy  to
note that the revenue had not challenged  the  order  passed  by  the  Joint
Commissioner.  The High Court has not expressed any opinion on  this  score.
Considering the cumulative effect of the facts and law we  have  stated,  we
have not an iota of doubt in our  mind  that  there  should  not  have  been
reopening of assessment. However, the finding recorded  by  the  High  Court
overturning the view of the tribunal that oil-cake  and  de-oiled  cake  are
the same product and, therefore, both are liable  to  reduced  rate  of  tax
despite the notification only mentions oil-cake, is not defensible.
21.     Consequently, the appeal filed by the assessee is allowed  in  part.
The finding of the High Court as regards oil-cake and  de-oiled  cake  being
different products as per the notification dated 31st May, 2002 is  correct.
However, the assessee shall reap the benefit of initial  assessment  as  the
same could not have been reopened.   In the facts of the case,  there  shall
be no order as to costs.


                                            ….............................J.
                                                          [DIPAK MISRA]




                                            ….............................J.
NEW DELHI,                                         [SHIVA KIRTI SINGH]

MAY 03, 2016.
-----------------------
[1]     JJ STC 315
[2]     [1994] 93 STC 51 (Kar)
[3]     96 STC 618
[4]     97 STC 442
[5]     111 STC 703
[6]     99 STC 47
[7]     119 STC 460
[8]     (1986) 63 STC 239
[9]         2007 (5) VST 434 (Kar)
[10]    2005 (58) Kar.L.J. 155
[11]      (2007) 6 VST 783
[12]     1980 Supp. SCC 174
[13]    (2014)  3 SCC 732

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