VASANTHA AND COMPANY Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE petitioner is a dealer in sugar and arecanut. It returned a net turnover of Rs. 52, 094 for the assessment year 1958-59. Exemption under the head of "inter-State sales" to the extent of Rs. 21, 616 was refused by the Joint Commercial Tax Officer. In respect of sales of sugar candy, it was taxed on a turnover of Rs. 83, 901 which was the estimated sale value of the total quantity of sugar purchased by it inclusive of the quantity, also estimated as having been omitted from the accounts. Its appeal to the Appellate Assistant Commissioner failed. On further appeal to the Tribunal, the contention was advanced that the sale of sugar was totally exempt from tax during the year of assessment and that this exemption accorded to sugar must necessarily extend to sugar candy in which the assessee dealt. In support of this contention, reliance was placed upon a notification issued by the Government and it was claimed that sugar candy is essentially nothing more than sugar, the only difference between the two being that one was of the crystalline structure and the other was practically in powder from. THE Tribunal took the view that while the sale of sugar was liable to be exempted from tax during the year in question, it was not established, nor could it be accepted, that sugar candy would come within the description of sugar.

(2.) THIS is the only contention that has been urged in this revision petition. Before dealing with the question, we may set out the steps in the argument advanced by the learned counsel, Mr. Ramagopal, for the assessee. The Central Government enacted Act 58 of 1957, the Additional Duties of Excise (Goods of Special Importance) Act. THIS Act was intended to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds of such duties among the States and to declare those goods to be of special importance in inter-State trade and commerce. By section 2(c) of the Act, the expression 'sugar" was declared to have the same meaning assigned to it in the relevant item of the First Schedule to the Central Excises and Salt Act, 1944. Section 4 of the Act made provision for the distribution to the State of a part of the net proceeds of the additional duties, in accordance with the provisions of the Schedule to the Act. Section 7 of the Act declared sugar among others to be goods of special importance in inter-State trade and commerce. It further stated that the sales tax law of a State shall, in so far as it imposes, or authorities the imposition of, a tax on the sale or purchase of the declared goods, be subject as from the 1st day of April, 1958, to the restrictions and conditions specified in section 15 of the Central Sales Tax Act, 1956. In the Second Schedule, the mode of distribution of the net proceeds of the excise duty was set out. The payment to any State was however made dependent upon the following condition :

(3.) IN view of the prohibition enacted in the Second Schedule of the last-mentioned Act against the levy of any sales tax on the purchase or sale of sugar, if the State was to qualify for a part of the net proceeds of the additional duties of excise, the State of Madras issued two notifications in the exercise of the powers conferred upon it by section 6 of the Madras General Sales Tax Act. Section 6 of this Act confers power upon the State Government to notify exemptions and reductions of tax. By G.O. 4585, Revenue, dated 12th December, 1957, the State of Madras passed two orders, one of which exempted sugar from the tax payable under section 3(1) of the Madras General Sales Tax Act and the other whereunder sugar was exempted from the tax payable under section 3(2) of the Act. Section 3(2) of the Act provided for a tax on the first sale of certain goods, one of which is sugar. This exemption was however to be granted only if in respect of such goods