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Kuchi Rajeswara Sastry & Sons v. Assistant Commissioner Of Commercial Taxes
Factual and Procedural Background
The three writ petitions raise a common question about whether copra was liable to sales tax for the relevant assessment years at the point of last purchase in the State under item 5 of Schedule III of the Andhra Pradesh General Sales Tax Act (the Act) read with Section 6 of the Act. Although the petitioners and assessment years differ, the decision in W.P. No. 3447 of 1973 was treated as determinative for the others, and the facts of that petition were set out for consideration.
The petitioner in W.P. No. 3447 of 1973 is a dealer in copra and coconut oil at Ambajipet, East Godavari District. He purchased copra from registered dealers and converted it into oil. For the assessment years 1964-65 to 1967-68, tax had been levied on his purchases of copra on the ground that the purchases constituted the last purchases within the State and thus were taxable under item 5 of Schedule III read with Section 6. Those assessments were confirmed on appeal by the Assistant Commissioner of Commercial Taxes. The petitioner filed writ petitions seeking a writ of mandamus (or other appropriate relief) declaring the Assistant Commissioner’s orders illegal, ultra vires, without jurisdiction and opposed to the Act.
Legal Issues Presented
- Whether copra was liable to sales tax during the relevant assessment year at the point of last purchase in the State under item 5 of Schedule III of the Andhra Pradesh General Sales Tax Act read with Section 6 of the Act.
- Whether copra qualifies as a "declared good" within the meaning of Section 2(f) of the Act by virtue of Section 14(vi) of the Central Sales Tax Act—that is, whether copra is an "oil-seed" within Section 14(vi).
- Whether the amendment effected by Act 12 of 1971 (substituting "Coconuts of all varieties" in item 5 and inserting item 5-A for watery coconuts) operated retrospectively so as to affect the taxability of copra for the periods in question.
Arguments of the Parties
Petitioner's Arguments (as advanced by learned Counsel Sri M. Suryanarayana Murty)
- Section 6 deals only with "declared goods" as defined in Section 2(f) of the Act (which refers to Section 14 of the Central Sales Tax Act). Therefore goods in Schedule III must be declared goods; copra must satisfy the definition of an "oil-seed" under Section 14(vi) to be included.
- Copra is not an oil-seed because, as prepared (dried kernel), it cannot be sown or germinate; a "seed" in strict sense must be capable of sowing and germination. Therefore copra does not fall within Section 14(vi).
- Relied on Madras High Court decisions (City Oil Mill v. Joint Commercial Tax Officer and Kannappa Mudaliar v. State of Madras) which held copra/dried kernel had lost properties of a seed and that coconuts were not oil-seeds.
- Even if copra were an oil-seed, the petitioner argued that Act 12 of 1971 amended the Third Schedule with retrospective effect from 1 August 1963; the petitioner contended that the substitution "coconuts of all varieties" did not include copra and thus copra could not be taxed at the point of last purchase under that schedule for the periods in dispute.
Respondent's Arguments (as advanced by the learned Government Pleader Sri Venkatappaiah Sastry)
- Even if copra were not a declared good, the State Legislature had power under Entry 54, List II of the Constitution to legislate as to tax on sale or purchase of goods and could provide for levy of tax at any point; thus the State could levy tax at the last purchase point even for goods other than declared goods.
- Noted that under the Central Sales Tax Act declared goods are subject to restrictions (single-stage tax not exceeding 3%) but submitted that these restrictions do not prevent a State from legislating taxation at a single point for goods other than declared goods.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| City Oil Mill v. Joint Commercial Tax Officer [1970] 25 S.T.C. 33 (Madras High Court) | Held that copra, being a kernel that had lost the property of a seed, could not be considered an oil-seed under Section 14(vi) of the Central Sales Tax Act. | The petitioner relied on this decision to argue copra is not an oil-seed; the court noted the decision but preferred conflicting authorities and commercial construction over Madras High Court's narrow approach. |
| Kannappa Mudaliar v. State of Madras [1968] 21 S.T.C. 41 (Madras High Court) | Held that coconuts were not oil-seeds. | Referenced as part of the Madras line of authority; the court observed other decisions took a contrary view and did not follow this narrow construction. |
| Commissioner of Sales Tax v. Ram Kumar Nand Kumar [1973] 31 S.T.C. 321 | Held that coconuts are oil-seeds as defined under a provision in the U.P. Sales Tax Act (Section 3-AA(1)(vi) of U.P. Act). | Referred to as part of the line of authorities that regard coconut/copra commercially as oil-seeds; the court preferred this commercial approach. |
| Kasturi Seshagiri Pai & Co. v. Deputy Commissioner of South Kanara [1961] 12 S.T.C. 629 (Mysore High Court) | Held that in commercial practice coconut and copra are commodities from which oil can be extracted and are regarded as oil-seeds. | Cited and followed in other High Court decisions; the court relied on this commercial understanding in preferring the view that copra is an oil-seed. |
| Sales Tax Officer, Kozhikode v. K.V. Moosa Koya [1966] 18 S.T.C. 464 (Kerala High Court) | Followed the Mysore High Court view that coconut/copra are oil-seeds in commercial parlance. | Referenced as supporting authority for the commercial meaning approach which the court adopted. |
| Commissioner of Sales Tax, M.P., Indore v. Bakhat Rai and Co. [1966] 18 S.T.C. 285 (Madhya Pradesh High Court) | Held (contrary to the Mysore/Kerala line) that coconut was not an oil-seed. | Noted by the court as one of the decisions whose view it did not accept in preference to the commercial construction and Supreme Court guidance. |
| Tagoob Mohammad v. Commercial Tax Officer [1971] 28 S.T.C. 110 (High Court) | Held that "watery coconuts" are oil-seeds; contains observations about dried coconut yielding oil and being regarded as an oil-seed. | The petitioner relied on an observation in this case suggesting a seed is required before a commodity can be an oil-seed; the court found that the decision actually treated dried coconuts/copra as oil-seeds and thus supported the view adopted by the court. |
| Ramavatar Budhaiprasad v. Assistant Sales Tax Officer [1961] 12 S.T.C. 286 (Supreme Court) | Principle: expressions in schedules to tax enactments should be construed with reference to their ordinary commercial meaning and not strict scientific meaning (illustrated with betel leaves example). | The court relied on this Supreme Court principle to construe "coconut" and "oil-seed" in ordinary commercial parlance and to hold copra is an oil-seed. |
| Commissioner Of Sales Tax, U.P. v. S.R Brothers, Kanpur [1973] 31 S.T.C. 302 (Supreme Court) | Affirmed the approach that schedule expressions are to be understood in ordinary commercial parlance rather than strict scientific meaning. | Used by the court as primary authority supporting the commercial construction that copra is an oil-seed within Section 14(vi). |
Court's Reasoning and Analysis
The court began by identifying the statutory framework: Section 6 of the Andhra Pradesh General Sales Tax Act (headinged "Tax in respect of declared goods") provides that sales or purchases of declared goods shall be liable to tax only at the point specified in Schedule III. "Declared goods" are defined by reference to Section 14 of the Central Sales Tax Act; item (vi) of Section 14 lists "oil-seeds" (both non-volatile and volatile) as declared goods. Item 5 of Schedule III included "coconut" and an explanation stated that "coconuts" meant dried coconuts, shelled or unshelled including copra.
The court addressed the petitioner's principal contention that copra is not an "oil-seed" because it cannot germinate and thus is not a "seed" in the strict scientific sense. The petitioner relied on Madras decisions that treated dried copra as having lost the property of a seed. The court examined other High Court decisions (Mysore, Kerala, and others) which treated coconut and copra, in commercial practice, as oil-seeds, noting that coconut/copra are traded under the category of "oils and oil-seeds" in commercial publications such as the Economic Times.
Critically, the court applied the Supreme Court’s guidance that expressions in schedules to tax enactments must be construed with reference to ordinary commercial parlance and not with strict scientific meaning. Relying on two Supreme Court authorities that endorse this approach, the court concluded that in ordinary commercial usage "coconut" includes several forms (tender/watery, dried coconut, copra), and except for tender coconut (which does not yield oil), the forms yield oil and are regarded in ordinary commercial parlance as oil-seeds.
The court rejected the narrow germination-based definition of "seed" for purposes of Section 14(vi). It reasoned that adopting such a strict dictionary meaning would produce anomalous results (for instance, excluding many forms of coconut that commercially yield oil merely because they could not be sown in a particular processed state). The court therefore held that copra is an oil-seed within the meaning of Section 14(vi) and that the explanation including copra within "coconuts" in Schedule III is not inconsistent with Section 6 of the Andhra Pradesh Act or Section 14(vi) of the Central Sales Tax Act.
The court also dealt with the Government Pleader’s submission that the State Legislature could tax non-declared goods at a single point; the court observed that Section 6 on its face and by its heading contemplates taxation only in respect of "declared goods" and thus items in Schedule III should satisfy the definition of declared goods. On the issue of Act 12 of 1971 (amending the Third Schedule), the court analyzed the amending provisions and observed that only the specific insertion of item 5-A (watery coconuts) carried an express retrospective period (1 August 1963 to 31 March 1965). The substitution in item 5 by the phrase "coconuts of all varieties" under Section 6(a) of the amending Act carried no such retrospective provision and therefore was prospective. Independently, the court found "coconuts of all varieties" to be broad enough to include copra.
Holding and Implications
Holding: The writ petitions were dismissed with costs.
Implications: As a direct consequence of the court's decision, the assessments confirming tax levied on the petitioner's purchases of copra (on the ground that such purchases constituted the point of last purchase within the State under item 5 of Schedule III read with Section 6) were upheld and the writ relief sought by the petitioner was refused. The opinion reasons that copra falls within the expression "coconut" as intended in Schedule III and is an "oil-seed" within the commercial meaning of Section 14(vi) of the Central Sales Tax Act; it also concludes that the amending Act's substitution of "coconuts of all varieties" in item 5 is not retrospective in the relevant respect relied upon by the petitioner.
The opinion does not discuss broader legal implications beyond the direct effect on the parties or expressly state whether a new binding precedent was intended to be set.
1. The common question that arises for consideration in these writ petitions is whether copra was liable to sales tax during the relevant assessment year at the point of last purchase in the State under item 5 of Schedule III of the Andhra Pradesh General Sales Tax Act (referred to in this judgment as the Act) read with Section 6 of the Act. Though the petitioners and the assessment years are different in the three writ petitions, it is admitted that the decision in one of them will govern the other writ petitions. Hence, it is sufficient to set out the facts and contentions in W.P. No. 3447 of 1973.
2. The petitioner is a dealer in copra and coconut oil at Ambajipet, East Godavari District. He purchases copra from registered dealers and converts it into oil. During the assessment years 1964-65 to 1967-68, tax was levied on the purchases made by him on copra on the ground that the purchase was the last purchase within the State and tax was leviable at that point on copra under item 5 of Schedule III of the Act read with Section 6 of the Act. These assessments were confirmed on appeal by the Assistant Commissioner of Commercial Taxes. The petitioner has filed this writ petition praying for the issue of a writ of mandamus or any other appropriate writ declaring that the orders of the Assistant Commissioner are illegal, ultra vires and without jurisdiction and opposed to the provisions of the Act.
3. The relevant provisions of the Act as they were in force during the periods of assessment are set out hereunder:
Section 6: Notwithstanding anything contained in Section 5, the sales or purchases of declared goods by a dealer shall be liable to tax at the rate, and only at the point of sale or purchase specified against each in the Third Schedule on his turnover of such sales or purchases for each year irrespective of the quantum of his turnover in such goods....
4. Schedule III consists of several items. The relevant item is item 5, which is in the following terms:
6. Tax was levied on copra on the footing that coconut is mentioned as item 5 in Schedule III and under the explanation, "coconuts" means dried coconuts, shelled or unshelled including copra. It was, however, argued by Sri M. Suryanarayana Murty, the learned Counsel for the petitioner, that Section 6 deals only with declared goods and says that the sales or purchases of such of the declared goods mentioned in Schedule III shall be liable to tax at the rate and at the point of sale or purchase specified against each of them in the Third Schedule. It is, therefore, necessary that the goods mentioned in Schedule III should be declared goods. Section 2(f) of the Act defines "declared goods" as goods declared under Section 14 of the Central Sales Tax Act, 1956, to be of special importance in inter-State trade or commerce. At the relevant period under Section 14(vi) of the Central Sales Tax Act certain goods were declared as of special importance. Item (vi) among those goods is as follows:
Oil-seeds, that is to say, seeds yielding non-volatile oils used for human consumption, or in industries, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like.
7. It is, therefore, submitted that it is only oil-seeds referred to in Section 14(vi) that are declared goods and unless copra comes within the definition of oil-seed it will not be a declared goods and it cannot therefore be included in Schedule III of the act as section 6 deals only with declared goods. It cannot be disputed that if Section 6 deals with declared goods, goods which do not properly come within the definition of declared goods cannot be included in Schedule III. Therefore, it has to be considered whether copra which by the explanation is included in the expression satisfies the definition of "declared goods". Among the declared goods the relevant item is item (vi) "oil seeds...." It is argued that two conditions have to be satisfied, namely, that the particular commodity must be an oil-seed and it must be used for human consumption. In this case it is contended that though copra is used for human consumption, it is not an oil-seed. The argument is that a seed is one which can be sown which will on sowing germinate. Copra, which is normally prepared by taking out the water in the coconut and drying it, is incapable of germinating and hence it is not a seed. In this connection, the decision of the Madras High Court in City Oil Mill v. Joint Commercial Tax Officer [1970] 25 S.T.C. 33 was relied on. It was held that though copra was a kernel it had lost the property of a seed and, therefore, could not be considered to be an oil-seed within the meaning of Section 14(vi) of the Central Sales Tax Act. The decision of the Madras High Court in Kannappa Mudaliar v. State of Madras [1968] 21 S.T.C. 41, where it was held that coconuts were not oil-seeds was followed. On the other hand, in Commissioner of Sales Tax v. Ram Kumar Nand Kumar [1973] 31 S.T.C. 321, it was held that coconuts are oil-seeds as defined in Section 3-AA(1)(vi) of the U.P. Sales Tax Act, 1948. The decision of the Mysore High Court in Kasturi Seshagiri Pai & Co. v. Deputy Commissioner of South Kanara [1961] 12 S.T.C. 629 and the Kerala High Court in Sales Tax Officer, Kozhikode v. K.V. Moosa Koya [1966] 18 S.T.C. 464 were referred to and followed. It was held that in the commercial world coconut is known as an "oil-seed" and reference was made to the "Economic Times", which set out the prices of the various commodities in the market and under the head "oils and oil-seeds" coconut had been mentioned. In the same publication, there was a separate heading for dry fruits and under that heading, coconut or copra was not mentioned. The learned Judges stated that they were unable to agree with the decision of the Madras High Court in S. Kannappa Mudaliar v. State of Madras [1968] 21 S.T.C. 41 and a similar decision of the Madhya Pradesh High Court in Commissioner of Sales Tax, M.P., Indore v. Bakhat Rai and Co. [1966] 18 S.T.C. 285.
8. The question whether "watery coconuts" are oil-seeds came to be considered by this High Court in Tagoob Mohammad v. Commercial Tax Officer [1971] 28 S.T.C. 110. It was held "watery coconuts" are oil-seeds as they are admittedly seeds and also yield oil. The learned Counsel for the appellant relied on the following sentence in the said judgment, at page 119, in support of his contention:
Hence, for bringing goods within the definition of an oil-seed it should not only be a seed, but also one yielding volatile or non-volatile oil.
9. On the strength of this observation he contended that it is necessary that a commodity should be a seed before it is included within the definition of oil-seed and as copra is not a seed as it is not capable of germinating, it cannot be an oil-seed. The learned Judges were not directly concerned in the above case with the question whether copra can be considered to be a seed. They were only concerned with the taxability of watery coconuts and it seems to have been assumed that it was a seed. It is stated in the judgment "that watery coconut is a seed is, in fact, not seriously disputed". The only question for consideration was whether it was an oil-seed as it does not directly yield oil. Apart from this, far from being of any assistance to the petitioner, there are certain other observations in that decision which are against the petitioner's contention. For instance, they observed: "Here again, there is not much dispute about the fact that a 'dried coconut' yields substantial quantity of oil and such oil is extensively used for human consumption in industry and in the manufacture of soaps, hair-oils and cosmetics. So if coconut is taken to mean only 'dried coconut' there can be no dispute that it is an 'oil-seed' within the meaning of Section 14(vi) of the Central Act." At page 120, they referred to the observation of the Mysore High Court in Kasturi Seshagiri Pai & Co. v. Deputy Commissioner of South Kanara [1961] 12 S.T.C. 629, that both coconut and copra are commodities from which oil can be extracted. Coconut oil is extracted both from coconut and copra although coconut oil is generally extracted from dried copra. Again, at another part of the judgment, they say "admittedly dry cocounts yield oil and it is not disputed that it is an oil-seed". It appears, therefore, from these observations that the learned Judges proceeded on the footing that dried coconuts or copra are oilseeds and proceeded to consider whether watery coconuts are also oil-seeds.
10. The view expressed in some decisions that copra is an oil-seed within the meaning of Section 14(vi) of the Central Sales Tax Act commends itself to us in preference to the view expressed in other decisions that it is not an oil-seed. As pointed out by the Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer [1961] 12 S.T.C. 286 (S.C.) and Commissioner Of Sales Tax, U.P v. S.R Brothers, Kanpur. [1973] 31 S.T.C. 302 (S.C.), the expressions occurring in schedules to these enactments have to be considered with reference to their meaning in ordinary commercial parlance and should not be construed according to the strict scientific meaning. In the former case, the Supreme Court held that betel leaves cannot be considered as vegetables though in the strict scientific sense they would also be vegetables. They observed that in ordinary commercial language or in common parlance betel leaves were not considered as vegetables. In this case also, in the ordinary commercial sense, copra is considered to be an oil-seed and is included in the expression "coconut". Coconut is understood in several forms, namely, tender coconut, watery coconut, dried coconut and copra, and all these come under the expression "coconut". Except in the case of tender coconut from which oil cannot be extracted, in all other cases, oil can be extracted and all of them are regarded in common parlance as oil-seeds.
11. We are not impressed with the argument that as copra cannot be sown and it does not germinate, it is not a seed within the strict dictionary meaning of the expression and, therefore, copra is not an oil-seed. If such a strict construction is to be given, it would follow that the entire coconut with the outer shell which ripens and falls off from the tree alone can be considered to be a seed. It is well-known that once the outer shell is broken, the coconut which consists of the inner shell cannot be sown and will not germinate. Further, even the entire coconut with the outer shell, we understand, will not be useful for sowing, if it is plucked before it completely ripens, though in such a stage it may still be capable of producing oil after drying out the water inside. If, therefore, such a narrow construction is given, a large category of coconuts, except those which contain the entire shell and are fit for being sown and germinating into a plant, will not be seeds and, therefore, they will not be oil-seeds within the meaning of Section 14(vi). We are not prepared to adopt such a construction to the expression "oil-seed". We, therefore, hold that copra is an oil-seed within the meaning of Section 14(vi) of the Central Sales Tax Act and hence the explanation to Schedule III by which copra is included in the expression "coconut" which forms item 5 of Schedule III is not inconsistent with Section 6 of the Andhra Pradesh General Sales Tax Act or Section 14(vi) of the Central Sales Tax Act.
12. Sri Venkatappaiah Sastry, the learned Government Pleader, contended that even assuming that copra is not an oil-seed, there is nothing preventing the State Legislature from providing that tax may be levied on this commodity at any point of its sale or purchase. He submitted that no doubt under Section 14 read with Section 15 of the Central Sales Tax Act, in the case of declared goods, tax shall not be levied at more than one stage of sale or purchase and shall not exceed 3 per cent of the sale or purchase thereof. But this does not prevent the State from providing for levy of tax at a single point in respect of goods other than declared goods. The legislature is entitled to pass a legislation with respect to tax on sale or purchase of goods under entry 54, List II, Schedule VII, of the Constitution. In making such a legislation it is open to the State Legislature to provide that tax may be levied at more than one point or at any particular point of sale or purchase in respect of any goods. It was, therefore, open to the State Legislature to provide for levy of tax at a single point, namely, point of last purchase with respect to goods other than declared goods. Hence, it is not necessary that Schedule III should constitute only of declared goods. It is strictly unnecessary to go into this question in view of our conclusion that copra is not (sic) an oil-seed and therefore comes within the definition of declared goods and was properly included in Schedule III, but we see no substance in that contention in view of the clear terms of Section 6. It is no doubt true that the State Legislature can provide for taxation at a single point of purchase even in respect of goods other than declared goods. But a reading of Section 6 shows that it has not done so. The heading of Section 6 is "Tax in respect of declared goods". Section 6 says that the sale or purchase of declared goods by a dealer shall be liable to tax at the rate, and only at the point of sale or purchase specified against each in the Third Schedule on his turnover of such sales or purchases. Thus, Section 6 expressly deals only with the sale or purchase of declared goods, declared goods being goods which satisfy the definition of Section 2(f) of the Act which in turn refers to the provisions of Section 14 of the Central Sales Tax Act. Thus, it is clear that the legislature by enacting Section 6 sought to deal only with "declared goods", which are set out in detail in the Third Schedule. It, therefore, follows that the items mentioned in Schedule III should satisfy the definition of "declared goods".
13. It was further contended by the learned Counsel for the petitioner that even assuming that copra is an oil-seed and was properly included in Schedule III by reason of the explanation, still no tax could be levied on the purchase in question by reason of act 12 of 1971. Under that Act, the Andhra Pradesh General Sales Tax Act was amended. Section 6 deals with the amendment of the Third Schedule and the relevant portion of Section 6 is as follows:
"In the Third Schedule to the principal Act,
(a) in item 5, for the entry in column (1), the entry 'Coconuts of all varieties' shall be substituted;
(b) after item 5, the following items and the entries relating thereto shall be inserted, namely:--
14. It was, therefore, submitted that the Third Schedule was amended with retrospective effect from 1st August, 1963. Hence, item 5, namely, coconuts of all varieties, should be substituted as from 1st August, 1963. It was then argued that copra is not included in the expression "coconuts of all varieties" and hence copra cannot be taxed at the point of last purchase under this schedule. We see no substance in this contention. It is seen that it is only with regard to Section 6(b) of the amending Act, which introduces a new item 5-A, namely, watery coconuts, that it is specifically stated that tax is leviable at the point of last purchase during the period commencing from 1st August, 1963, and ending with 31st March, 1965. As far as Section 6(a) of the amending Act, which deals with substitution of "coconuts of all varieties" in item 5 is concerned, there is no such provision making it retrospective in operation. As far as the substitution of item 5 is concerned by the expression "coconuts of all varieties" it is only prospective. It is not permissible to read column 2--5-A into item 5. Apart from this we do not see any reason why "copra" cannot be considered to be included in the expression "coconuts of all varieties". In our view, the expression "coconuts of all varieties" is wide enough to include "copra".
15. We, therefore, see no force in any of the contentions raised. The writ petitions are dismissed with costs.
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