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Attorney(S)
  • S.C.Sibal
  • R.K.Handa
  • D.S.Brar
Judges
  • J.M Tandon, J.
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  • S.C.Sibal
  • R.K.Handa
  • D.S.Brar
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  • J.M Tandon, J.
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Smart Summary

Judicial Opinion Summary — J.M. Tandon, J.

Factual and Procedural Background

The petitioner operates a business extracting oil from rice bran (the outer covering removed during rice polishing), using a chemical called hexene in the extraction process. The State Government issued a notification dated January 11, 1979 (referred to as P.5) directing that tax payable on sales of edible oils in the course of inter-State trade to registered dealers on production of Form 'C' be calculated at 1% of turnover.

During the assessment year 1980–1981 the petitioner sold rice bran oil in inter-State sales valued at Rs. 4,590,357/-, produced Form 'C' declarations and voluntarily deposited tax at the 1% rate. The Assessing Authority, by an assessment order dated February 1, 1983 (P.12), held that the rice bran oil sold by the petitioner was not "edible" and therefore not covered by the notification P.5; accordingly the Assessing Authority assessed tax at the general rate (4%) and raised the petitioner's tax liability. The petitioner challenged that assessment order by filing the present writ petition and also sought to quash a departmental communication dated February 4, 1982 (P.11) issued by the Excise and Taxation Commissioner concerning taxability of rice bran oil in inter-State trade.

Communication P.11 informed subordinate officers that rice bran oil produced in Punjab was largely not of edible grade (on the basis of state-level technical information showing higher free fatty acids), suggested that most rice bran oil manufactured in Punjab be taxed at the general rate, and advised scrutiny of such cases. The petitioner sought judicial relief attacking the assessment order and praying that P.11 be quashed.

The writ petition was heard and, for the reasons set out by the court, the petition was dismissed with no order as to costs. The order records "Petition dismissed."

Legal Issues Presented

  1. Whether the rice bran oil sold by the petitioner in inter-State sales qualified as "edible oil" within the scope of the State Government notification dated January 11, 1979 (P.5) thereby attracting tax at 1% (on production of Form 'C'), or whether it was non-edible/crude and therefore taxable at the general rate (4%).
  2. Whether the departmental communication dated February 4, 1982 (P.11) had legal force, was liable to be quashed, or rendered an appeal ineffective such that writ relief was justified.
  3. Whether the writ petition was maintainable in view of the availability of an alternative statutory remedy by way of appeal under section 20 of the Punjab General Sales Tax Act (and a further appeal to the Sales Tax Tribunal).

Arguments of the Parties

Petitioner's Arguments

  • Rice bran oil is edible. The petitioner relied on Government of India orders (dated August 29, 1979 — P.1; December 26, 1980 — P.2; October 27, 1977 — P.3) under the Vegetable Oils Products Control Order, 1947, which permit specified percentages of rice bran oil to be used (mixed with refined sesame oil) in the manufacture of edible vegetable oil products. From this the petitioner argued that rice bran oil should be treated as edible for the purposes of the notification P.5 and thus eligible for 1% tax in inter-State sales against Form 'C'.
  • The Assessing Authority did not record a firm finding that the rice bran oil sold by the petitioner was unrefined; therefore the assessment should be set aside.
  • The departmental communication P.11 would influence the appellate authority (Deputy Excise & Taxation Commissioner) and render an appeal ineffective; thus the writ petition was necessary because the alternative remedy of appeal was not meaningful.
  • The petitioner implicitly contended entitlement to the benefit of the notification and that the onus to treat the oil as non-edible was not discharged by the department.

Respondent / Assistant Advocate General's Arguments

  • Crude rice bran oil, in its unrefined form, is not edible. It becomes edible only after refinement (removal of impurities and free fatty acids). The petitioner did not sell refined rice bran oil nor had the means to produce refined oil; therefore the sales were not of edible oil.
  • Reliance was placed on the Prevention of Food Adulteration Rules, 1955 — specifically item A.17.23 of Appendix B and Rule 5 — which prescribe that rice bran oil shall be sold for human consumption only after refining and set standards (including limits on free fatty acids / acid value), supporting the position that crude oil is not edible.
  • The assessment order is appealable under section 20 of the Punjab General Sales Tax Act, with a further appeal to the Sales Tax Tribunal; availability of this alternative statutory appellate route renders the writ petition inappropriate.
  • The communication P.11 has no force of law, is not binding on the Assessing Authority or the Deputy Excise & Taxation Commissioner, and was not referred to or relied upon in the impugned assessment order; thus it cannot support the petitioner's grievance or justify quashing.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Chandausi Oil Mills, Chandausi, Moradabad v. Sales Tax Commissioner, U.P., 1961 12 S.T.C. 310 The word "edible" should be interpreted to mean "fit to be eaten as food." The court relied on this definition to determine that oil not fit for human consumption (i.e., unrefined rice bran oil) cannot be regarded as "edible" for the purposes of the tax notification, supporting the conclusion that unrefined rice bran oil is not covered by the 1% rate.

Court's Reasoning and Analysis

The court proceeded by examining statutory standards and the factual record before it and applied the legal meaning of "edible" as established by earlier authority. Key points of the analysis were:

  1. Statutory and regulatory standards: The Prevention of Food Adulteration Rules, 1955 (item A.17.23 of Appendix B and Rule 5) expressly state that "Rice bran oil shall be sold for human consumption only after refining" and define "Refined Rice Bran Oil" by reference to solvent extraction, neutralisation, bleaching, deodorisation (or equivalent physical processes) and by specifying acceptable limits for free fatty acids and acid value. The court treated these provisions as prescribing that crude/unrefined rice bran oil is not fit for human consumption.
  2. Meaning of "edible": The court relied on Chandausi Oil Mills (1961) which held that "edible" means fit to be eaten as food. Combining that legal meaning with the regulatory standard that rice bran oil is to be sold for human consumption only after refining, the court concluded that unrefined rice bran oil is not "edible".
  3. Government permissions to use rice bran oil in edible products: The court accepted that the Government of India had permitted specified percentages of rice bran oil to be used in the manufacture of edible vegetable oil products (by mixing with refined sesame oil) but held that permission to use raw constituents in manufacturing edible products does not itself render the crude constituent edible. The court emphasized that crude rice bran oil becomes edible after refinement or after processing in the manufacture of edible products, and thus the mere fact of permitted use in blends does not transform all rice bran oil into edible oil for the purposes of notification P.5.
  4. Burden of proof and factual record: The court observed that the petitioner had produced Form 'C' declarations for the disputed sales but had not, either before the Assessing Authority or in the writ petition, asserted or proven that the oil sold was refined rice bran oil. The court placed the onus on the petitioner to establish that the product sold was refined (and so edible); in the absence of such proof, the Assessing Authority's conclusion that the oil was not edible was not shown to be in error.
  5. Nature and effect of departmental communication P.11: The court noted that communication P.11 expressed departmental views that rice bran oil manufactured in Punjab was largely not of edible grade and advised scrutiny; however, the court accepted the Assistant Advocate General's concession that the communication had no force of law, was not binding on the Assessing Authority or appellate officers, and was not referred to in the impugned assessment. Consequently, the petitioner could not successfully complain simply because the communication existed.
  6. Alternative remedy: The court accepted that the assessment order was appealable under section 20 of the Punjab General Sales Tax Act and that a further appeal lay to the Sales Tax Tribunal. The court concluded that these available statutory remedies were effective and meaningful (the Sales Tax Tribunal being an independent authority), so the writ petition was not the appropriate forum to substitute for the statutory appeals.

Holding and Implications

Holding: The court dismissed the writ petition. The order records that the petition is dismissed with no order as to costs and states "Petition dismissed."

Implications:

  • The Assessing Authority's determination that the rice bran oil sold by the petitioner was not edible and therefore not covered by the 1% notification stands (subject to the petitioner's right to pursue statutory appeals). The petitioner bears the onus of proving that the oil sold was refined and fit for human consumption in order to claim the 1% rate.
  • The departmental communication dated February 4, 1982 (P.11) was held to have no force of law, was not binding on assessing or appellate authorities, and was not the basis of the impugned assessment; accordingly, the court found no ground to quash that communication on the record before it.
  • The court identified and preserved the statutory appellate route (appeal under section 20 of the Punjab General Sales Tax Act and to the Sales Tax Tribunal) as the proper means to challenge the assessment, indicating that no new precedent altering appealability or substantive tax law was established by this decision. The decision's direct effect is limited to the parties and the assessment in question; the court did not purport to lay down a novel legal principle beyond applying existing rules and precedent on the meaning of "edible."

Final dispositive line in the opinion: "Petition dismissed." (Order: petition fails and is dismissed with no order as to costs.)

Show full summary ...

    M/S Chhatar Extractions Pvt. Limited v. The Excise And Taxation Commissioner And Another

    J.M Tandon, J.:— The petitioner is engaged in the business of extracting oil from rice bran. The rice bran is the outer covering of the rice grain which stands peeled off during rice polishing. The rice bran is mixed with a chemical known as hexene for the purpose of extracting oil. The State Government issued notification dated January 11, 1979, (P 5) regarding sales-tax payable in respect of the sale of edible oils and it reads:—

    “No. S.O 1.C.A. 74/55.S. 4.E/79—whereas the Government of Punjab is satisfied that it is necessary in the public interest so to do;

    Now, therefore, in exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956, (Central Act 74 of 1956) and all other powers enabling him in this behalf the Government of Punjab is pleased to direct that the tax payable by any dealer having his place of business in the State of Punjab in respect of the sales made by him, of edible oils from any such place in the course of inter state trade or commerce to any registered dealer having his place of business in any other State or Union Territory of India, shall be calculated at the rate of one per cent of his turnover in so far as the turnover or any part thereof relates to such sales, subject to the production by him of declaration in form ‘C’ as prescribed under sub-section (4) of “section 8 of the Central Sales Tax Act, 1956.”

    2. The petitioner sold rice bran oil of the value of Rs. 4590357/- in inter-State sales during the assessment year 1980–1981 against ‘C’ forms and deposited tax voluntarily at the rate of 1 per cent. The Assessing Authority vide order dated February 1, 1983, (P. 12) held that the rice bran oil sold by the petitioner is not edible and should, therefore, be taxed at the general rate i.e 4 per cent instead of 1 per cent. In other words, the Assessing Authority held that the rice bran oil sold by the petitioner of the value of Rs. 4590357/- in inter-State sales against ‘C’ forms being not edible oil was not covered by the notification dated January 11, 1979, (P. 5). The tax liability of the petitioner was accordingly raised. The petitioner has assailed the assessment order (P. 12) of the Assessing Authority in the present writ.

    3. The Excise and Taxation Commissioner addressed communication dated February 4, 1982, (P. 11) to all the Assistant Excise and Taxation Commissioners in relation to taxability of rice bran oil in the course of inter-State trade and commerce. The relevant part of this communication reads:—

    “During the course of verification of transactions of edible oil by the Central Enforcement wing, Punjab. It was noticed that Central Sales Tax is being deposited at the rate of 1 per cent on rice bran oil. This is perhaps being done under the impression that rice bran oil sold by Punjab dealers in the course of interstate trade is an edible oil. Our enquiries have, however, established that only a negligible proportion of this oil falls in the category of edible grade oil. That is to say that rice bran oil produced in Punjab is not edible grade and should, therefore, be taxed at the general rate i.e at the rate of 1 per cent or 4 per cent if it is sold to a registered dealer of other States against ‘C’ form.

    It may be mentioned here that the dealers/manufacturers take shelter for depositing less tax under the plea that rice bran oil is a vegetable oil and Government of India has allowed this oil to be used in some measure in the manufacture of what is commonly known as vegetable ghee. Whereas this argument may appear correct superficially this dees not make the rice bran produced in Punjab an edible oil. According to the technical advice received from the Government of India only that oil is used in the manufacture of vanaspati which has lower than 5 F.F.A or 10 Acid value. However, according to the information gathered at the State level it has been noticed that rice bran oil manufactured here contains more than 8 F.F.A (16 Acid Value) and is, therefore, not permissible for the use in manufacture of vanaspati. It means that rice bran oil is not an edible oil as being presently manufactured in Punjab, although it continues to be a vegetable oil. It may be kept in mind that many vegetable oils are unfit for human cousumption. A.D.O letter No. ETD(E) IV-81/72-85, dated 13th March, 1981, has already been addressed to you by the Chief enforcement Officer, Punjab, on this topic.

    In this context, it is relevant to point out that the Assistant Excise and Taxation Commissioner, Sangrur, issued a notice to Messrs Vee Kay Oils Pvt. Ltd., Ahmedgarh to pay tax at the rate of 4 per cent on Inter-state sales. The dealer went in a writ petition before the Punjab and Haryana High Court, which was subsequently dismissed as withdrawn Copies of the points raised in writ petition and the reply filed by the Department are enclosed for your information

    It is therefore, suggested that thorouh scrutiny of cases be made in the light of facts narrated above before, finalising assessments in such cases. It may be ensured that pending assessments are finalised in the light of these instructions within the current financial year and tax whenever due is recovered”

    4. The petitioner has also prayed that the communication P. 11 be quashed.

    5. The learned counsel for the petitioner has argued that rice bran oil is edible and the Assessing Authority has wrongly held in the impugned assessment order that it is not edible. Reliance has been placed on the orders of the Ministry of Commerce and Civil Supplies, Government of India, dated August 29, 1979, (P. 1), dated December 26, 1980, (P 2) and October 27, 1977, (P 3) issued under sub-clause (1) of clause 4 and sub-clause (1) of Clause 48 of the Vegetable Oils Products Control Order, 1947, wherein a specified percentage of rice bran oil has been permitted to be used in the manufacture of vegetable oil products by making a mixture thereof with specified percentage of refined sesame oil. The argument proceeds that vegetable oil products other than products, manufactured for non edible industrial use are edible. In view of the fact that the Government of India has permitted the use of rice bran oil in the manufacture of edible vegetable oil products, it should be inferred that the rice bran oil is edible. A contrary view taken by the Assessing Authority in the impugned order in liable to be set aside

    6. The learned Assistant Advocate General has Contended that the rice bran oil in its crude form without the removal of impurities and free fatty acids is not edible. The rice bran oils becomes edible when it is refined and the impurities and free fatty apids etc. therefrom are removed. The petitioner did not effect sale of refind rice bran oil nor had it means to produce it. The petitioner having sold rice bran oil which is not edible against ‘C’ forms as detailed in the assessment year 1980–1981 it is liable to pay tax at the rate of 4 per cent and not at the rate of i per cent in terms of notification dated January 11, 1965 Reliance has been placed on item ‘A’ 17???23 of Appendix ‘B’ of the Prevention of Food Adulteration Rules, 1955, (hereafter the Rules)

    Rule 5 of the Rules reads:—

    “Standards of quality of the various articles of food specified in Appendix B to these rules are as defined in that appendix.”

    7. Item A 17 23 of Appendix ‘B’ reads:—

    “Rice Bran Oil means the oil obtained from the layer around ??? the endosperm of rice obtained from paddy of Oryza Sativa Linn, Fam Gramineae, which is removed during the process of rice milling and is generally known as rice bran.

    Refined Rice Bran Oil shall be obtained from solvent extracted oil, neutralised with alkali, bleached with bleaching earth or activated carbon or both and deodorised with steam. Alternative deacidification, bleaching, and deodorisation may be done by physical means.

    The oil shall be clear and free from rancidity, adulterants sediments, suspended and other foreign matters separated water and added colouring and flavouring substances. The clarity of the oil shall be judged by the absence of turbidity after keeping the filtered sample at 35 C for 24 hours. Rice, bran oil shall be sold for human consumption only after refining. It shall conform to the following standards, namely.

    (span) ……….……

    (ii) ……….……

    (iii) ……….……

    (iv) ……….……

    (v) Free Fatty Acids (as Oleic Acid)Not more than 0.25 per cent by weight

    Acid valueNot more than 0.5”

    8. The word “edible” was examined in Chandausi Oil Mills, Chandausi. Moradabad v. Sales Tax Commissioner, U.P??? . 1961 12 S.T.C 310. and it was held that it should be interpreted to mean fit to be eaten as food. It is cloarly prescribed under item A. 17.23 reproduced above that the rice bran oil shall be sold for human consumption only after refining. It means that the rice bran oil which is not refined is not fit for human consumption. The rice bran oil not fit for human consumption cannot be termed edible.

    9. It is true that the Government of India has permitted the use of specified, percentage of rice bran oil mixing it with specified percentage of refined sesame oil for the manufacture of edible vegetable oil products. The constituents of edible oil product are not necessarily edible. The rice bran oil becomes edible after it is refined. Similarly, it becomes edible after it is mixed with refined sesame oil and undergoes the process for the manufacture of edible vegetable oil products like vegetable ghee. It is, therefore, difficult to agree with the contention of the learned counsel for the petitioner that since a specified percentage of rice bran oil is permitted to be used for the manufacture of edible vegetable oil products it should also be treated edible in terms of the notification dated January, 11, 1979.(p. 5).

    10. The learned counsel for the petitioner has argued that the Assessing Authority has not recorded a firm finding in the impugned assessment order that the rice bran oil sold by the petitioner in inter-State sales was not refined. The impugned assessment order is liable to be set aside on this ground. The contention is without merit. The petitioner had produced ‘C’ forms of the value of Rs. 4590357/- relating inter-State sales of rice bran oil. The petitioner did not raise any plea before the Assessing Authority that the product sold by them was refined rice bran oil and not rice bran oil. The petitioner wanted to avail the benefit under notification dated January 11, 1979, (P. 5). The onus to prove that the rice bran oil sold by the petitioner was refined rice bran oil and as such edible was on the petitioner. The petitioner has even laid no foundation in the writ petition that the oil sold was refined rice bran oil and not rice bran oil in its crude form.

    11. The learned Assistant Advocate General has urged that the impugned assessment order is appealable under section 20 of the Punjab General Sales Tax Act and an appeal against the order of the Appellate Authority lies to the Sales Tax Tribunal under sub-section (2) thereof. The alternative remedy of two appeals against the impugned assessment order being available to the petitioner, the present writ petition is liable to fail on this ground.

    12. The learned counsel for the petitioner has contended that the Assessing Authority has passed the assessment order in pursuance of the instructions issued by the Excise and Taxation Commissioner in communication dated February 4, 1982, (P. 11). The appeal against the impugned assessment order lies before the Deputy Excise and Texation Commissioner who is likely to be influenced by the views expressed by the Excise and Taxation Commissioner in the communication P. 11. It is futile co file an appeal against the impugned assessment order because it cannot be treated an effective or meaningful alternative remedy. The contention of the learned counsel for the petitioner is without force.

    13. The Assessing Authority has neither relied upon nor referred to communication P. 11 in the impugned assessment order. It it not disputed that the views expressed in the communication P. 11 are not binding either on the Assessing Authority or the Deputy Excise and Taxation Commissioner. This apart, second appeal lies to the Sales Tax Tribunal which is an independent authority. The petitioner, therefore, can avail of an effective and meaningful alternative remedy by filing an appeal against the the impugned assessment order. The writ petition is liable to fail on this ground.

    14. The learned counsel for the petitioner has argued that the communication dated February 4, 1982, (P. 11) is liable to be quashed as instructions contained therein are adverse to the interest of the petitioner and have been issued by an unauthorised authority and without hearing the petitioner. It is, therefore, liable to be quashed. The learned Assistant Advocate General has rightly conceded that the communication P. 11 has no force of law and is not binding on the Assessing Authority. It has further been argued that the Assessing Authority has in fact neither relied upon it nor has referred to it in the impugned assessment order. The grievance of the petitioner regarding the communication P. 11 is misplaced. The contention of the learned Assistant Advocate General must prevail. The communication P. 11 has no force of law. It has neither been followed nor referred to by the Assessing Authority in the impugned assessment order, The petitioner, therefore, cannot make any grievance about it.

    15. In view of discussion above, the writ petition fails and is dismissed with no order as to costs.

    R.M.S
    Petition dismissed.

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    Comments

    M/S Chhatar Extractions Pvt. Limited v. The Excise And Taxation Commissioner And Another
    (Sep 14, 1984)