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2011 DIGILAW 652 (KAR)

STATE OF KARNATAKA v. N. K. AGRO OILS (P) LTD.

2011-06-29

RAVI MALIMATH, V.G.SABHAHIT

body2011
ORDER Ravi Malimath :- This appeal is by the Revenue being aggrieved by the order dated May 15, 2008 passed by the Karnataka Appellate Tribunal in STA No. 335 of 2007. The assessee is a private limited company, engaged in the manufacture of refined edible oil and also trading in edible oils. For the assessment year 2002-03 he had filed annual return of turnover in Form No. 4 declaring the gross taxable turnover at Rs. 17,24,18,484 and Rs. 3,86,20,244, respectively. On verification of the books of accounts by the Revenue it was observed that the assessee had effected purchases of palmolin oil, crude RB oil, RB oil, soya refined oil, etc. The assessee had also effected the inter-State purchase of sunflower de-oiled cake and sunflower solvent oil and sunflower solvent refined oil, and soya oil, etc. By going through the books of accounts the assessing, authority held that the consignment sales of sunflower oil worth Rs. 34,17,352 which was claimed as exemption by filing F form was treated as inter-State sales not covered by C form and subjected to tax. That the assessee had also failed to file C forms in support of the inter-State sales of SF DOC and hence the same was treated as inter-State sale and assessment was concluded. Thereafter the assessee preferred an appeal before the Joint Commissioner who by the order dated March 24, 2005 set aside the assessment and remanded the matter back to the assessing authority to accord proper findings. After remand the assessing authority passed fresh orders of assessment and raised a demand of Rs. 13,02,511 and Rs. 13,35,307 under CST Act. The assessee being aggrieved by the fresh assessment orders preferred an appeal before the first appellate authority who by the order dated November 30, 2006 dismissed the appeal. Aggrieved by the same, an appeal was preferred before the Karnataka Appellate Tribunal. The Appellate Tribunal allowed the appeal and held that the respondent's turnover of de-oiled cakes covered by C forms had to be subjected to tax at the rate two per cent and not four per cent. Accordingly, the assessment order under the CST Act was also modified. Aggrieved by the same, the State has preferred the present appeal. The Appellate Tribunal allowed the appeal and held that the respondent's turnover of de-oiled cakes covered by C forms had to be subjected to tax at the rate two per cent and not four per cent. Accordingly, the assessment order under the CST Act was also modified. Aggrieved by the same, the State has preferred the present appeal. This appeal was admitted to consider the substantial question of law : (a) Whether, on the facts and in circumstances of the case, can it be held that the order dated May 15, 2008 passed by the Karnataka Appellate Tribunal in STA No. 534 of 2006 partly allowing the appeal is correct and in accordance with law ? (b) Whether, on the facts and in circumstances of the case, can it be held that the Appellate Tribunal was right in law in holding that no reference could be made to the schedule entries under the KST Act while interpreting any commodity in respect of which a Government notification is issued under section 8A of the said Act reducing the rate of tax or exempting the tax thereon ? (c) Whether, on the facts 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 difference commodities ? Heard the learned counsel for the petitioner and the learned counsel appearing for the respondent. In terms of Second Schedule, item No. 1, the rate of tax for oiled cake was declared to be four per cent with effect from January 1, 2000 and for de-oiled cake at the rate of four per cent from January 1, 2000. However, by virtue of the powers under section 8(5) of the CST Act, the State Government issued a notification dated May 31, 2002, by reducing the rate of tax for oiled cake from four per cent to two per cent. The learned Government Advocate appearing for the State contends that the exemption granted is only for oiled cake and not for de-oiled cake. That they are two different commodities. The learned Government Advocate appearing for the State contends that the exemption granted is only for oiled cake and not for de-oiled cake. That they are two different commodities. The State has by virtue of the notification dated May 31, 2002 reduced the rate of tax from four per cent to two per cent, only so far as oiled cake is concerned. Accordingly, the benefit for the oiled cake has been granted to the assessee. The claim of the assessee that the oiled cake and the de-oiled cake are one and the same is unsustainable. The Tribunal committed an error in holding that the notifications have to be interpreted strictly without referring to the Schedules. Hence, it is contended that the order of the Tribunal requires to be set aside by confirming the orders of the assessing authority. Sri Keshava Murthy, the learned counsel appearing for the respondent, contends that oiled cake and the de-oiled cake are one and the same. That both are final products and are used for the very same purpose. Therefore, the State cannot draw a distinction between the oiled and the de-oiled cake. That the notification of 2002 has to be read as a notification inclusive of de-oiled cake. He further contended that the Tribunal has rightly appreciated the facts of the case and has considered the entries in the Schedule. On hearing the counsels we are of the considered view that the submission of the counsel for the appellant requires to be accepted. The State while issuing the notification in 2002 has restricted the reduction of duty from four per cent to two per cent, only so far as oiled cake is concerned as mentioned in item No. 1. The Tribunal has therefore interpreted the notification by wrongly applying the judgment in the case of B.H. Vasudeva Pai and Sons v. State of Karnataka in STA 1/87, STA 37 and STA 38/87 dated January 1, 1996 [2006] 146 STC 241 (Kar) [App.]. Accordingly, we are of the considered view that the notification issued by the State Government is very clear and unambiguous. Noting the difference between these two commodities the State has deliberately granted relief only so far as oiled cake is concerned. The court cannot give relief beyond the notification. On an interpretation also we find that the two commodities have been treated differently by the State. Noting the difference between these two commodities the State has deliberately granted relief only so far as oiled cake is concerned. The court cannot give relief beyond the notification. On an interpretation also we find that the two commodities have been treated differently by the State. There are no grounds to differ from the same. The contention of the learned counsel appearing for the respondent that oiled and de-oiled cake are one and the same for various reasons as contended is wholly unsustainable. It cannot be contended that both the items oiled and de-oiled cake are one and the same especially in view of the fact that both the commodities are different and hence we are unable to accept the contention of the assessee. For the aforesaid reasons, the petition is allowed. The order dated May 15, 2008 passed by the Karnataka Appellate Tribunal in STA No. 335 of 2007 is hereby set aside and the order passed by the first appellate authority dated November 30, 2006 in No. CST. AP. 1/2006-07 is hereby restored.