Case: Commissioner of Sales Tax, U.P Vs. S. R. Brothers, Kanpur

2. The dealer carries on the business, inter alia, of selling food colours and syrup essences. The dealer also carries on the business of petroleum jelly but we are not concerned withs that item in this appeal : nor are we concerned with the sales of imported scents and perfumes which, according to the order of the Sales Tax Officer, were separately shown in the statement filed by the dealer, during the assessment proceedings for the year 1960-61. For the said year the Sales Tax Officer taxed food colours and syrup essences imported by the dealer from outside Uttar Pradesh under S. 3A of U. P. Sales Tax Act, 15 of 1948 (hereinafter called the Act) treating them as imported colours and perfumes. The figures of the dealers trading account were accepted by the Sales Tax Officer. The dealer, according to whom, food colours and syrup essence being unclassified goods were taxable under S. 3 and not under Section 3A of the Act, unsuccessfully appealed against the order of the Sales Tax Officer to the Assistant Commissioner (Judicial); II Sales Tax, Kanpur. Further revision to the Court of the Judge (Revisions) Sales Tax, Lucknow, also failed. It may, however, be pointed out that for the assessment year 1957-58 the Appellate Authority had, in disagreement with the assessing officer, held food colours and essences of syrup to be unclassified items and had granted the relief claimed by the dealer. Against that decision of the Appellate Authority the Department preferred a revision to the Court of the Judge (Revisions), Sales Tax. Both these revisions, by the Department with respect to the assessment year 1957-58 and by the dealer with respect to the assessment year 1960-61 were heard together and disposed of by the common order dated November 19, 1965. The dealers application for reference was, however, allowed and the learned Judge (Revisions), Sales Tax referred for determination of the Allahabad High Court the question reproduced in the beginning of this judgment. The High Court agreed with the dealers contention and held food colours and syrup essences not to fall within the entries at items nos. 10 and 37 of the Notification under S. 3A of the Act. The reference was accordingly answered in the negative and against the Department. The only question which now falls for determination is the one referred to the High Court and which has already been reproduced. There is no dispute about the turnover. The dealer claims that on imported food colours and syrup essences the rate of tax should be 2 nP per rupee as unclassified goods under S. 3, whereas according to the Commissioner the tax should be 6 nP per rupee under S. 3A of the Act. Section 3 provides for liability to tax under the Act whereas Section 3A, which was inserted by U.P. Act 25 of 1948 and has thereafter been amended from time to time, deals with single point taxation. Section 3A reads:"3-A. Single point taxation : (1) Notwithstanding anything contained in Section 3, the State Government may, by notification in the official Gazette, declare that the turnover in respect of any goods or class of goods shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify(2) If the State Government makes a declaration under sub-section (1), it may further declare that the turnover in respect of such goods shall be liable to tax at such rate not exceeding ten naya paise per rupee as may be specified(3) Every notification made under this section shall be laid before the Legislative Assembly of the State as soon as may be after it is made and if a resolution amending or modifying it is passed by the Assembly within the session in which it is laid, it shall, from the date of passing of the resolution, be amended or modified accordingly but without prejudice to the validity of anything previously done or of any liability incurred or assessment made."On March 31, 1956 the Governor of Uttar Pradesh issued a notification in exercise of the powers conferred by S. 3A of the Act. That notification so far as relevant for our purpose reads :"Notification No. ST-905/X dated 31st March, 1956. In exercise of the powers conferred by Section 3A of the U. P. Sales Tax Act, 1948 as amended from time to time and the supersession of all previous Notifications on the subject, the Governor of Uttar Pradesh is hereby pleased to declare that the turnover in respect of the goods specified in the list below shall not with effect from April 1, 1956, be liable to tax except - (a) in the case of goods imported from outside Uttar Pradesh at the point of sale by the importer; and(b) in the case of goods manufactured in Uttar Pradesh at the point of sale by the manufacturer;..... ..... ..... .....10. Dyes and colours and compositions thereofxx xx xx xx xx xx37. Scents and perfumes3. The narrow point requiring decision is whether food colours and syrup essences imported by the dealer from outside U.P. fall within the entries 10 and 37 respectively. If they do, then the appeal of the Department has to succeed and if they do not then the appeal must fail. As noticed earlier the High Court has in the impugned judgment, in disagreement with the view taken by the Sales Tax Officer, the Assistant Commissioner (Judicial) and the Judge (Revisions), Sales Tax, held that the food colours and essences do not fall in the entries at items 10 and 37 of the Notification. This is how the High Court has dealt with the point in controversy:"The notification with which we are concerned in the instant case is notification no. ST-905/X dated March 31, 1956. Item nos. 10 and 37 of that notification read as follows :10. Dyes and colours and composition thereofThe case of Commissioner of Sales Tax is that food colours would fall under item no. 10 i.e., dyes and colours and composition thereof and essence would fall in the entry given in item no. 37 i.e., scents and perfumes. Food colours are edible articles. The expression dyes and colours and composition thereof does not relate to item of food but only to colouring and dyeing material i.e., material for colour washing or colour painting or dyeing of fabrics. In our opinion, it stands in contradistinction to bleaching material. Similarly, the entry at item no. 37 relates to articles which cater to the smelling sense i.e., those which appeal to nose. Essence is a flavouring material and its function is to add flavour to the food i.e., to make it more palatable. It appeals to the tongue or to the palate. By scents and perfumes is meant articles or perfumery. In our opinion, therefore, the food colours and essences would not fall in the entries at items nos. 10 and 37 of the notification aforesaid. In our opinion they could not be taxed under Section 3A but under Section 3 of the Act."

Court's reasoning:
7. It cannot be gainsaid that "food colours" and "syrup essences" are edible goods whereas "dyes and colours and compositions thereof" and "scents and perfumes" as specified in entries nos. 10 and 37 of the List do not seem prima facie to connote that they are edible goods.This is the reasoning of the High Court and it appears to us to be both logical and rational. Indeed, except for items like salt in entry no. 34, the "sugar manufactured by mills" (entry no. 40) and "Banaspati, including refined coconut oil" (entry no. 43) which is capable of being used as medium for cooking is prima facie edible there does not seem to be any other edible article included in the List. Item no. 25 speaks of "oils of all kinds other than edible oils manufactured on Ghanis by human or animal power". This scheme suggests that, apart from the undoubted edible goods, in cases where the import of the specified goods is wide enough to include both edible and non-edible category then the intention has been clearly expressed whether or not to include edible goods. Now in the case of entries nos. 10 and 37 we are inclined to think in agreement with the High Court that these entries are not intended to extend to edible colours like food colours and to edible essence like syrup essences. It would indeed be straining the meanings of the words and expressions in those entries as understood in popular commercial sense to include edible colours and essence. If the intention of the State Government was to include food colours in entry No. 10 and syrup essences in entry no. 37 then in our view these goods could easily have been specified by their own popularly known description. In any event assuming that another view as to the meaning of these entries is possible we have not been persuaded to hold that the view taken by the High Court is so grossly erroneous that we should interfere on special leave appeal under Art. 136 of the Constitution.