Mega Enterprises (M/S) vs State of M.P. and Others

Shantanu Kemkar, J.—With consent heard finally.

The petitioner who is engaged in the business of sale and purchase of grocery items has challenged the order dated 18.08.2011 passed u/s 70 of the M.P. VAT Act, 2002 (for short VAT Act) by the Commissioner of Commercial Tax, Indore (for short the Commissioner) in Revision No. 20/11/70/11. Shortly stated, the petitioner in its return submitted before the Commercial Tax Officer (for short CTO) declared ''salt cake'' as a type of salt and claimed exemption from tax on the basis of Entry No. 35 of the Schedule I of VAT Act providing salt to be under tax free goods. The petitioner''s claim for treating ''salt cake'' as type of ''salt'' was rejected by the CTO vide order dated 24.06.2011 (Annexure P-1).

After the said order being passed by the CTO the petitioner submitted an application u/s 70 of the VAT Act before the Commissioner raising a question for determination in respect of rate of tax on ''salt cake''. The said application has been decided by the learned Commissioner vide impugned order dated 18.08.2011 (Annexure P-3) holding that the salt cake is not a type of salt and is not covered under the entry ''salt''. Having held so the Commissioner has ordered to treat salt cake in residuary Entry under Part-IV of Schedule II provided under VAT Act.

Feeling aggrieved by the order by which the Commissioner has ordered to treat salt cake under residuary entry providing tax @ 13% (substituted for the figure 12.5 by VAT (Amendment) Act, 2010), the petitioner has filed this petition under Article 226 of the Constitution of India.

Shri Sumit Nema, learned counsel for the petitioner argued that u/s 70 of the VAT Act, the Commissioner was required to make an order determining the rate of tax. The Commissioner while determining the rate of tax has resorted to the residuary entry without making an attempt to find out as to whether the entry answers the description of the contents of the basic entry. He argued that the Commissioner has only taken into consideration the entry ''salt'' without taking into consideration the other entries in which the ''salt cake'' would be covered. Taking us to the impugned order of the Commissioner he pointed out that salt cake would certainly come under the Entries No. 28, 36 and 175 of Serial No. 55 of Schedule-II of VAT Act which pertains to ''industrial inputs and packing materials'' providing for tax @ 4% upto 31.07.2009 and @ 5% w.e.f. 01.08.2009.

Ms. Mini Ravindran, learned Dy. Govt. Advocate on the other hand supported the impugned order passed by the Commissioner and has argued that the learned Commissioner has rightly held that, having regard to the use of ''salt cake'', its contents and how it is understood in common parlance, salt cake cannot be said to be a type of salt and in the circumstances has committed no error in treating it to be in the residuary entry.

We have considered the submissions made by learned counsel for the parties and we have gone through the relevant entries under the VAT Act.

Section 70 of the VAT Act provides for determination of disputed questions, it empowers the Commissioner either on his own motion on any question in respect of the rate of tax on any goods may, at any time, or if any question is raised by a dealer in respect of the rate of tax on any goods, to make an order determining the rate of tax on such goods in accordance with the procedure prescribed for the said purpose.

In the present case, the Commissioner while deciding the question raised by the petitioner in respect of rate of tax on salt cake has considered the singular entry salt and held that salt cake is not covered under the entry salt an entry under tax free goods. The Commissioner did not examine as to whether the salt cake is covered under any other entry provided under the Schedule of VAT Act. Instead he has taken recourse to the residuary entry and held that salt cake would be taxable @ 13% under the residuary entry.

In the case of Mauri Yeast India Pvt. Ltd Vs. State of U.P. and Another. (2008) 13 STJ 127 (SC), the Supreme Court has held that in interpreting different entries, attempts should be made to find out as to whether the same answers the description of the contents of the basic entry. Only in the event if it is not possible to do so, recourse to the residuary entry should be made as a last resort. If there is a conflict between two entries one leading to an opinion that it comes within the purview of a specific entry and another the residuary entry the former should be preferred. In the present case, the learned Commissioner has not made any efforts to find out whether the salt cake would be covered under the various other entries more particularly Entry No. 28, 36 and 175. Instead of making such efforts the Commissioner on recording the finding that it is not covered under the entry ''salt'' has straightaway ordered that the salt cake is liable to be taxed @ 13% under residuary entry.

In the circumstances in our considered view the order passed by the learned Commissioner is not in consonance with the requirement of Section 70 of the VAT Act and is also contrary to the law laid down by the Supreme Court in the case of Mauri Yeast India Pvt. Ltd. Vs. State of U.P. and another (supra). Having regard to the aforesaid the impugned order passed by the learned Commissioner deserves to be and is hereby quashed. The matter is remitted to the Commissioner for deciding it afresh keeping in view the observations made hereinabove. The petition is allowed to the extent indicated above. No orders as to costs.