Civil Writ Petition No. 17329 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No. 17329 of 2008 Date of Decision: February 6th,2009 Garg Cattle Feed Industries ..Petitioner Versus Food Corporation of India and others ..Respondents CORAM : HON'BLE MR. JUSTICE M.M.KUMAR HON'BLE MR. JUSTICE H.S.BHALLA Present:- Mr. K.L.Goel, Advocate for the petitioner. Mr. R.P.Sawhney, Senior Advocate with Mr. Kishan Singh Baghi, Advocate for respondent Nos. 1 to 4. Ms. Sudeepti Sharma, DAG, Punjab for respondent No.5. 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? H.S.BHALLA, J The short question arising in the petition is whether the respondent-Corporation is entitled to charge tax on the sale of damaged food grains despite the fact that it is a tax free item falling under Schedule `A' of Punjab Value Added Tax Act, 2005 (for brevity, `the Act'). The petitioner is a dealer duly registered under the Civil Writ Petition No. 17329 of 2008 2 provisions of the Act and engaged in manufacturing and sale of cattle feed having its business place at village Manwala Dhuri. For the purpose of manufacturing of cattle feed, it is also registered with the Dairy Development Department and is also registered as an approved party for the purchase of damaged food grains from the Food Corporation of India vide registration certificate dated 3.6.2008. It is approved only for the manufacturing of Feed- II and Manure. Respondent-Corporation through its Regional Officer invited proposals for the disposal of damaged foodgrains, which can only be used for the purpose of cattle feed vide its Tender Notice No. 57/2008 dated 27.8.2008. The petitioner in response to this tender participated in the auction proceedings and since the bids of the petitioner were the highest for some lots, the tender was awarded to him. The information was also given to the Area Manager of the respondent- Corporation, wherein he was asked to accept full costs along with sales tax and other leviable charges and on the receipt of the same, the Release Order was to be issued to the petitioner. The petitioner has further categorically pleaded that it is not liable to pay sales tax on the aforesaid damaged food grains, which was actually cattle feed, for the reason that no tax is payable under the Act on such sales and in fact, the respondent-Corporation is actually prohibited from collecting any sales tax on sale of tax-free goods as per Section 16 of the Act. In such like circumstances, the petitioner had no other option but to knock at the door of this court by filing a writ petition under Article 226 of the Constitution of India for the issuance of a writ in the nature of mandamus directing the respondents to deliver the damaged food grains for which the offer of the petitioner has been Civil Writ Petition No. 17329 of 2008 3 accepted subject to payment of amount mentioned in the Tender without charging any VAT/Sales Tax as the goods are cattle feed and thus tax free under section 16 of the Act. The petition was contested by the respondents and through their replies, it was pointed out that the petitioner is liable to pay sales tax under the Act to the respondents in addition to the accepted rates. They further pleaded that as per the conditions laid down in the tender, the petitioner has to use the damaged rice only as a raw material for the manufacturing of cattle feed and therefore, it cannot be treated as a feed itself. It is a raw material to be used for manufacturing of cattle feed and not exempt from payment of tax and as such, it is not covered under Entry 4 of the Schedule `A' of the Act and by denying other assertions raised in the petition, it was finally prayed that the petition be dismissed. We have heard learned counsel for the parties and also gone through the paper-book with their assistance minutely. Section 16 of the Act, which is relevant to issue raised reads as under: “16. Tax Free Goods- No tax shall be payable on the sale of goods specified in Schedule `A' and no person including a taxable person or a registered person shall charge tax on the sale of goods which are declared as tax free goods under this Section.” The relevant entry in the instant case would be entry No.4 of Schedule `A' of the Act, which reads as under:- Civil Writ Petition No. 17329 of 2008 4 Serial No.4 Name of Commodity Aquatic feed, poultry and cattle feed including feed supplements, grass, hay and straw. A bare reading of the aforesaid section clearly spells out that not only certain goods are tax free which are provided in Schedule `A', but any person, who is selling those goods, which are declared tax free, shall charge tax thereon. It is, thus, crystal clear that under the Act, `cattle feed' in addition to other goods are free from levy of tax. It is no doubt true that the petitioner purchased damaged rice from the Food Corporation of India, which was declared unfit for human consumption. It is also an admitted case that the product being sold by the Food Corporation of India is actually covered under the aforesaid Entry and is not taxable under the Act. Learned counsel for the petitioner has rightly placed reliance in the case of Commissioner of Sales Tax UP vs. Ram Chandra Asa Ram, 2001(9) STC 415., wherein Hon'ble the Supreme Court has observed as under: “ What is exempted under the notification of June 5,1985 is cattle fodder. In generic sense the expression `cattle fodder' is inclusive of everything that is fed to cattle including damaged wheat. In the decision relied on by the learned counsel for the appellant this aspect is noticed but in that particular case fodder was defined as `fodder except cottonseed and oilcakes'. In the present case there is no such exclusion of the damaged wheat that is processed and used as feed for the cattle. If that is so, we do not think that there is any justification to interfere with Civil Writ Petition No. 17329 of 2008 5 the view taken by the High Court. The appeal is dismissed. However, in the circumstances of the case there shall be no order as to costs.” (emphasis added) It is, thus, evident that Hon'ble the Supreme Court has interpreted the expression 'cattle fodder' to include everything i.e. Fed to cattle including damaged wheat. It is further pertinent to mention that the reliance of the revenue on a judgment of the Madhya Pradesh High Court in the case of Kalloomal Samaldas v. Commissioner of Sales Tax, M.P., [1983] 54 STC 103 (MP) was not accepted by their Lordships' on the ground that the legislature in Madhya Pradesh has expressly excluded from the expression 'fodder', cotton seed oil cakes. Therefore, damaged wheat has been considered by the Supreme Court as cattle fodder and we see no reason why the damaged rice would not come within the sweep of expression 'cattle feed'. In this manner, the sale of cattle-feed being made by the Food Corporation of India being tax free, can not be sold after charging tax, but even then respondent-Food Corporation of India has asked the petitioner to pay the same. In our opinion, Schedule `A' further spells out that the cattle feed would be tax free as per Entry No.4. Product being sold by them is nothing but cattle feed as has been held by Hon'ble the Supreme Court in Ram Chandra Asa Ram's case (supra) and after having gone through the tender, we find that the intention of both the parties is to treat the item in question as to be cattle feed. It has been provided by the tender notice that sealed tenders are invited for the sale of damaged food-grains for Feed Grade-I, Feed Grade-II, Feed Grade-III. It has further been provided under the various clauses of the Tender that the aforesaid Civil Writ Petition No. 17329 of 2008 6 goods would be used for cattle feed only. It has also been provided by way of the terms of the tender that it would be absolutely necessary that the buyer of a particular category of stock shall use the same only for the purpose indicated and shall make no attempt whatsoever for adulteration or misuse of the stocks. An undertaking has also been obtained from the petitioner that the aforesaid goods would be used for manufacturing of Feed Grade-I, Feed Grade-II, Feed Grade-III for the purpose for which food-grain is being purchased. Moreover, in similar circumstances, the Punjab State Warehousing Corporation had to refund the money back to a dealer namely M/s Bajaj Rice Mill after he was forced to make the payment of sales tax while the damaged food-grains were purchased. The refund of the aforesaid amount was based upon an opinion given by the Additional Solicitor General of India Shri Mohan Prasaran. Learned counsel for the petitioner has placed on record Annexure P-6, which is an opinion given by the Additional Solicitor General of India and on the basis of which, a refund order was issued to M/s Bajaj Rice Mill vide order dated 24.7.2007 (Annexure P-7). Learned counsel for the respondents has not been able to show that before rice was purchased by the petitioner, it has to be used as a raw material like other taxable raw-material and the petitioner is bound to pay tax on the purchased or damaged rice. In fact, the Corporation is violating Section 16 of the Act, which prohibits it to charge any sale tax for the goods, which fall under Schedule `A'. What is exempted under the Schedule is cattle fodder and the definition of cattle fodder would also include damaged rice. In the present case, viewing the matter from every angle, it is crystal clear that the petitioner is not liable to incur liability of sale tax and Civil Writ Petition No. 17329 of 2008 7 the question posed hereinabove is answered in favour of the petitioner and against the respondents. In the light of what has been observed above, writ petition filed by the petitioner succeeds and is allowed. Accordingly, the respondent-Corporation is directed to deliver the damaged food- grains to the petitioner without charging any VAT/ sales tax since the goods are cattle feed and are exempt from levy of tax under Section 16 of the Act. ( H.S.BHALLA ) JUDGE ( M.M.KUMAR ) February 6th, 2009 JUDGE