Page 1

1

REPORTABLE

IN THE  SUPREME COURT OF INDIA        

CIVIL APPELLATE JURISDICTION                     

CIVIL APPEAL NO.4760 OF 2016 (Arising out of S.L.P.(C) No. 21015 of 2012)

M/S RAVI PRAKASH  REFINERIES (P) LTD.

.. APPELLANT(S)

                           VERSUS

STATE OF KARNATAKA .. RESPONDENT(S)      

                             J U D G M E N T

DIPAK MISRA, J.

Delay condoned.

2. Leave granted.

3. The  assessee-appellant  is  engaged  in  the  

manufacturing  of  refined  edible  oil  by  solvent  extraction  

process and refining along with trading in edible oil and oil-

cake.   For  the  assessment  year  ending  31-3-2003  the  

assessee  had  filed  Revised  Annual  Return  in  Form  4,

Page 2

2

declaring the Gross Taxable Turnovers at Rs.19,76,37,615-

00 and Rs.1,60,93,055-00 respectively.

4. As  the  factual  narration would show the  appellant  

sold Sunflower De-oiled Cake (SF DOC) and several  other  

goods in the course of inter-State trade and commerce and  

in the course of the said transaction the appellant produced  

'C' Forms obtained from the dealers in inter-State sales.  The  

assessee had admitted the liability of tax at 2 per cent on  

the sale of SF DOC in the course of inter-State trade and  

commerce. The Deputy Commissioner of Commercial Taxes  

(Assessment)  Chitradurga,  the  assessing  authority,  had  

passed an order  of  assessment under  Section 9(2)  of  the  

Central Sales Tax Act, 1956 (for brevity, 'the CST Act') on  

29th January, 2005, whereby it had expressed the view that  

a sum of Rs.4,75,68,764/- was subjected to tax              at  

2 per cent.  The assessing officer had granted the benefit on  

production of  'C'  Form in terms of  the Notification No.FD  

119 CSL 2002 (2) dated 31st May, 2002.

5. After  the  order  of  assessment  was  passed,  the  

succeeding assessing officer  formed an opinion that  there  

was an escapement of tax due to the reason that the inter-

Page 3

3

State sales of SF DOC was actually liable to tax at 4 per cent  

and not at 2 per cent, which had been erroneously adopted  

by the earlier assessing authority.  Following the principles  

of  natural  justice,  he levied the tax at  4 per  cent on the  

inter-State sales of SF DOC.

6. The  aforesaid  order  was  called  in  question  in  an  

appeal before the  Joint Commissioner of  Commercial Taxes  

(Appeals),  Davansere  Division,  Davangere  under  Section  

20(5) read with Section 9 (2) of the CST Act.  The Appellate  

Authority noted the submissions advanced on behalf of the  

assessee as well as the revenue and thereafter referred to  

Section  12-A  of  the  Karnataka  Sales  Tax  Act,  1957  (for  

short, 'KST Act') and  referred to the decisions in the cases of  

Nagaraja Overseals Traders vs.  The State of  Mysore,1  

Mahaveer  Drug  House  vs.  ACCT  Gandhinagar,   

Bangalore,2   State of Andhra Pradesh vs. Ampro Food  

Products,3 Giridharial Co. vs. State of Andhra Pradesh,4  

C.  Sathiragu and Sons vs. State of Andhra Pradesh,5  

Somani Brothers vs. State of Bihar,6 Eureka Forbes vs.  

1 JJ STC 315 2 [1994] 93 STC 51 (Kar) 3 96 STC 618 4 97 STC 442 5 111 STC 703 6 99 STC 47

Page 4

4

State  of  Bihar7  and  came  to  hold  that  the  change  of  

opinion  could  not  have  been  a  ground  for  reopening  of  

assessment in exercise of power under Section 12-A of the  

KST  Act  and,  accordingly,  set  aside  the  order  of  re-

assessment.

7. Though the assessee succeeded, yet it  preferred an  

appeal,  being  STA  No.425  of  2006  before  the  Karnataka  

Appellate Tribunal, Bangalore (for short, 'the tribunal'),  as  

the first Appellate Authority had not expressed any opinion  

with regard to rate of tax on oil-cake and de-oiled cake.  It  

was contended before the Tribunal  that   the oil cake and  

de-oiled cake as per the commercial parlance are one and  

the same and, therefore, the rate of tax has to be at 2 per  

cent  and  not  4  per  cent.   The  tribunal  after  noting  the  

submissions referred to the schedule in the notification and  

the  decision  in  M/s  Sterling  Foods  vs.  State  of  

Karnataka,8  State of Karnataka vs. M/s  Goa Granites9,  

M/s  Habeeb  Protiens  and  Fats  Extracts,  Hiriyur,  

Chitradurga District  vs.  Commissioner of  Commercial  

Taxes, Bangalore and Anr.10 and came to hold  as under : 7 119 STC 460 8 (1986) 63 STC 239 9     2007 (5) VST 434 (Kar) 10 2005 (58) Kar.L.J. 155

Page 5

5

“Thus, we hold that the expression 'oil cake in sl.  No.  6  of  the CST Notification No.  FD 119 CSL  2002(2) dated 31.5.2002 would include also de- oiled cake and that  therefore  the  reassessment  order passed by the AA under CST Act, 1956 for  the year 2002-03 in so far as it concerned levy of  CST at 4% on inter-State Sales of sunflower de- oiled cake  covered by  C Forms by denying the  benefit  of  reduction in  the rate  of  CST to 2%  granted in the  Notification dated  31.05.2002 is  liable to be held unsustainable and set aside.

….

Consequential  to  the  decision  taken  by  us  as  above, the appellate order of the learned FAA is  liable for modification accordingly.  As regards the  reassessment order set aside by the learned FAA  on  the  basis  of  lay  that  reassessment  is  not  permissible  by  change  of  pinion,  which  is  supported by the several case laws cited in the  appellate  order  itself,  it  need  to  be  placed  on  record that Hon’ble Supreme Court of India has  reiterated the said legal position that reopening of  an  assessment  by  change  of  opinion  is  not  permissible in the recent judgment rendered in  the  case  of  M/s  Binani  Industries  Ltd.  Vs.  Assistant Commissioner of Commercial Taxes, VI  Circle, Bangalore and others (2007) 6 VST 783.”

8. On  the  aforesaid  analysis,  the  tribunal  issued  the  

following directions:

“(i)  Reassessment  order  passed  by  the  DCCT  (Transition), Chitradurga under CST Act, 1956 for  the year 2002-03 in respect of rate of CST levied  at 4% on the turnover of Rs.4,75,68,764 relating  to  inter-State  sales  of  sunflower  de-oiled  cake  covered by C Forms is modified to 2%  allowing  the benefit of reduction in the rate of CST to 2%  granted in the Notification No.FD 119 CSL 2002  (2) dated 31-5-2002.

Page 6

6

(ii) The appellate order passed by the FAA in CST  AP  27/2005-06  dated  20-4-2006  shall  stand  modified accordingly.

(iii)  Directions  are  issued  that  the  AA  shall  accordingly issue revised demand notice.”

9. The aforesaid order  of  tribunal was assailed before  

the High Court in Revision Petition being STRP No. 32 of  

2009.   Be  it  noted,  the  High  Court  had  formulated  the  

following two substantial questions of law:-

(i) Whether,  on  the  facts  and  in  circumstances of the case, can it be held that  the  order  dated  12.7.2007  passed  by  the  Karnataka Appellate Tribunal in STA 425/2006  allowing the appeal is correct and in accordance  with law?

(ii) Whether  on  the  fact  and  in  circumstances of  the case,  can it  be held that  the  Appellate  Tribunal  was  right  in  law  in  ignoring that under the KST Act in the Second  Schedule in serial No.1 of Part O, oil cake and  de-oiled cake are listed under two separate sub- headings as two different commodities?

10. After deliberating on the aforesaid two questions, the  

High Court referred to the provisions of the KST Act and the  

Notification  issued  under  Section  8(5)  of  the  CST  Act,  

distinguished the decisions placed reliance upon by the first  

Appellate Authority and the tribunal as well as the decision

Page 7

7

rendered by this Court in M/s Sterling Foods (supra)  and  

came to hold that there is distinction between oil cake and  

de-oiled cake and they are two different commodities and  

not  one  and  the  same.   Elaborating  the  discussion,  the  

Division Bench held thus:-

“The contention that the commodities will have  to  be  understood  in  common  parlance  as  understood by a common man is even harder to  accept.  What a common man understands need  not  necessarily  mean  what  is  understood  in  accordance with law.  In the instant case,  the  framers  of  the  schedule  were  aware  of  the  distinction between oil  cake and de-oiled case.  Accordingly, they have treated it as two different  commodities.  Therefore, to hold that the view of  a common man has to necessarily over ride the  view of the Legislature is difficult to accept.  The  Distinction in law has been made which requires  to be followed.  Oil cake and de-oiled case cannot  stand extended to de-oiled cake.  The impact of  the  notification  reducing  the  tax  impact  was  every well known when the benefit was granted.  A notification has to be strictly construed.  The  Court cannot read into the notification what is  not  there.  The  notification  is  clear  and  unambiguous.  Any attempt to read it otherwise  is  not  only  uncalled  for  but  would amount  to  redrafting the notification.”

Being of this view, it answered the two questions that  

were framed  by it in favour of the Revenue and against the  

Assessee.   The  said  judgment   and  order  is  the  subject  

matter of  challenge in this appeal by special leave.

Page 8

8

11. We  have  heard  Shri  Dhruv  Mehta,  learned  senior  

counsel along with Ms. Anupama, learned counsel for the  

appellant and Shri Basava Prabhu S. Patil, learned senior  

counsel along with Shri V.N. Raghupathy, learned counsel  

for the State.

12. First,  we  shall  take  up  the  issue  pertaining  to  

Section  12-A  of  the  KST  Act.   Section  12-A(1)  which  is  

relevant for the present purpose is extracted below:

“12-A. Assessment of escaped turnover-(1) If the  assessing authority has reason to believe that the  whole or any part of the turnover of a dealer in  respect of any period has escaped assessment to  tax  or  has  been  under-assessed  or  has  been  assessed at a rate lower than the rate at which it  is assessable under this Act or any deductions or  exemptions have been wrongly allowed in respect  thereof,  the  assessing  authority  may,  notwithstanding the fact that the whole or part of  such  escaped  turnover  was  already  before  the  said  authority  at  the  time  of  the  original  assessment or re-assessment but subject to the  provisions of subsection (2), at any time within a  period of [eight years] from the expiry of the year  to which the tax relates, proceed to assess or re- assess to the best of its judgment the tax payable  by the dealer  in respect  of  such turnover  after  issuing a notice to the dealer and after  making  such enquiry as it may consider necessary.”

13. On a perusal of the aforesaid provision, it is limpid  

that it permits re-opening of an assessment on the ground

Page 9

9

that if the assessee has been assessed at a rate lower than  

the rate at which it is assessable under Act.  The rate of tax  

is four per cent.  The assessee had filed the return and the  

'C'  Forms  claiming  the  benefit  of  the  Notification  dated  

31.05.2002 in respect of  inter-State sale of  oil-cakes.  The  

assessing officer had accepted the 'C' Forms on verification  

and granted the benefit.  The assessing officer on a proper  

security  has  accept  the  ‘C’  Forms on the  basis  of  which  

reduced  rate  of  tax  was  claimed.   The  assessment  was  

reopened as there was no escapement of tax due in respect  

of inter-State sale in respect of SF DOC.    

14. Mr.  Dhruv  Mehta,  learned  senior  counsel  for  the  

appellant, would submit that once an assessment order was  

framed on all the material available on record and the rate  

of tax was accepted, the view expressed by the 1st appellate  

authority  which  had  got  the  stamp  of  affirmance  by  the  

tribunal  should  be  accepted  to  be  correct  more  for  the  

reason  the  revenue  had  not  challenged  the  order  of  

assessment  and  that  apart  the  High  Court  has  not  

appositely dealt with it. He would place heavy reliance on the  

pronouncement  in  M/s.  Binani  Industries  Limited  v.  

Page 10

10

Assistant Commissioner of Commercial Taxes, VI Circle,   

Bangalore11.

15. It is submitted by Mr. Basava Prabhu S. Patil, learned  

senior counsel, that claiming of benefit on production of 'C'  

Forms had nothing to do with the nature of  product that  

was sold.  Learned senior counsel would contend that the  

first Appellate Authority, as well as the tribunal, has been  

erroneously guided that there has been change of opinion.  

Learned  senior  counsel  has  submitted  that  the  words  

“reason  to  believe”  have  to  be  expansively  understood  to  

import a meaning to the provision, for when the assessment  

has taken place at a rate lower than the rate at which the  

turnover of a dealer is assessable, there can be reopening of  

assessment.

16. First, we shall proceed to consider the acceptability of  

the opinion expressed by the High Court.  The Government  

of Karnataka in exercise of its powers conferred by Section 8  

(5) of the CST Act, issued Notification No.119 FD 119 CSL  

2002(2) dated 31.05.2002 granting reduction in the rate of  

central  sales  tax  payable  on  inter-State  sales  of  goods  

specified in Serial Nos.1 to 11 of the notification, subject to  

11   (2007) 6 VST 783

Page 11

11

the  condition  that  the  Dealer   produces  declarations  in  

Forms 'C' obtained from the registered Dealers/Government  

to whom the goods are sold.  Be it noted oil cake is one of  

the goods specified in serial No. 6 of the notification.   

Submission of Mr. Mehta, learned senior counsel is that the  

High Court has clearly erred in law by distinguishing the  

facts and by opining that the judgment in the case of M/s  

Habeeb Protiens  (supra) is not a decision in issue and an  

obiter.   In  the  case  of  M/s  Sterling  Foods (supra),  the  

question that arose for consideration was whether shrimps,  

prawns and lobsters subjected to processing like cutting of  

heads  and  tails,  peeling,  deveining,  cleaning  and  freezing  

ceased to be the same commodity and became a different  

commodity for the purpose of the Central Sales Tax Act.  The  

Court posed the question whether they still  go under the  

description  of  shrims,  prawns  and  lobsters  or  in  other  

words, shrimps, prawns and lobsters would mean only raw  

shrimps,  prawns and lobsters  as  caught from the sea  or  

they also include process and frozen shrimps, prawns and  

lobsters.   After  referring  to  the  various  provisions  and  

placing reliance on the decision in  Dy. CST vs.  Pio Food

Page 12

12

Packers12 the Court held as under:-

“…..when  the  State  Legislature  excluded  processed  or  frozen  shrimps,  prawns  and  lobsters from the ambit and coverage of Entry  13a,  its  object  obviously  was  that  the  last  purchases  of  processed  or  frozen  shrimps,  prawns and lobsters in the State should not be  exigible to State Sales Tax under Entry 13a. The  State Legislature was not at all concerned with  the question as to whether processed or frozen  shrimps, prawns and lobsters are commercially  the same commodity as  raw shrimps,  prawns  and lobsters or are a different commodity and  merely  because  the  State  Legislature  made  a  distinction between the two for the purpose of  determining  exigibility  to  State  Sales  Tax,  it  cannot be said that in commercial parlance or  according to popular sense, processed or frozen  shrimps, prawns and lobsters are recognised as  different commodity distinct from raw shrimps,  prawns and lobsters. The question whether raw  shrimps,  prawns  and  lobsters  after  suffering  processing  retain  their  original  character  or  identity or become a new commodity has to be  determined  not  on  the  basis  of  a  distinction  made by the State Legislature for the purpose of  exigibility to State Sales Tax because even where  the commodity is the same in the eyes of  the  persons dealing in it the State Legislature may  make a classification for determining liability to  sales tax. This question, for the purpose of the  Central Sales Tax Act, has to be determined on  the  basis  of  what  is  commonly  known  or  recognised  in  commercial  parlance.  If  in  commercial parlance and according to what is  understood in the trade by the dealer and the  consumer, processed or frozen shrimps, prawns  and lobsters retain their original character and  identity as shrimps, prawns and lobsters and do  not become a new distinct commodity and are  

12  1980 Supp. SCC 174

Page 13

13

as much 'shrimps, prawns and lobsters', as raw  shrimps, prawns and lobsters, sub-section (3) of  section 5 of the Central Sales Tax Act would be  attracted  and  if  with  a  view  to  fulfilling  the  existing  contracts  for  export,  the  assessee  purchases  raw  shrimps,  prawns  and  lobsters  and  processes  and  freezes  them,  such  purchases of raw shrimps, prawns and lobsters  would be deemed to be in course of export so as  to be exempt from liability to State Sales Tax.”  

17. Relying  on the said passage, it is contended by Mr.  

Mehta  that  when  identity  of  the  goods  on  the  basis  of  

commercial parlance is similar, the High Court would have  

been  well  advised  to  follow the  principles  set  out  in  the  

aforesaid decision and should not have been guided by the  

concept of enumeration in the Notification. In essence, the  

submission is that there is no distinction between the oil  

cake and the de-oiled cake and both should be perceived as  

one in commercial parlance.  Thus, the emphasis is on the  

commercial  parlance  test.   To  bolster  the  said  stand,  

reliance  has  been  placed  on  M/s  Habeeb  Protiens  case,  

wherein the Division Bench of the High Court of Karnataka  

has  drawn  a  distinction  between  sunflower  oil  cake  and  

groundnut oil cake on the one hand and de-oiled sunflower  

cake and groundnut oil cake on the other.  The aforesaid

Page 14

14

analysis made in the said judgment should not detain us  

long, for Mr. Patil learned senior counsel for the State has  

brought to our notice a recent decision of this Court in the  

case  of  Agricultural  Produce  Market  Committee  vs.  

Biotor Industries Limited and Anr.13 .  In the said case,  

the  two-Judge  Bench  had  posed  five  questions  and  the  

question pertinent for our purpose reads thus:-

“13.4 Whether the Division Bench is justified in  recording  the  finding  on  the  second  issue  (see  para 7,  above at  p.737 c-d)  in connection with  LPA NO. 195 of 2006 that the respondent concern  is not liable to pay any market fee on the de-oiled  cakes sold by it which are stated to be the by- product in the course of manufacturing castor oil  which is not one of the items enumerated in the  Schedule to the Act and the notification issued by  the Directorate?”

18. Dealing with the distinction between the oil-cake and  

the  de-oiled  cake,  the  Court  referred  to  the  process  and  

quoted  from  the  findings  referred  by  the  learned  Single  

Judge.   Though  the  said  decision  was  rendered  in  the  

backdrop of Gujarat Agricultural Produce Markets Act, 1963  

to levy of market fee, it is absolutely distinctly perceptible  

from the judgment that the Court has arrived at a definite  

conclusion that there is a distinction between the  oil-cake  

13 (2014)  3 SCC 732

Page 15

15

and de-oiled  cake  and  they  are  two different  commercial  

products. Thus, when the difference has been drawn by this  

Court, the assessee herein cannot be allowed to advance a  

plea  that  the  said  test  should  not  be  applied,  but  the  

commercial parlance test should be adopted to determine  

the said goods for the purposes of Central Sales Tax Act. To  

have a complete picture,  we may refer  to the Notification  

dated 31.05.2002.  The relevant part of it reads as follows :

“In  exercise  of  the  powers  conferred  by  sub- Section (5) of Section 8 of the Central Sales Tax,  1956 (Central Act 74 of 1956), the Government of  Karnataka, being satisfied that it is necessary so  to do in the public interest,  hereby directs that  which effect from the First day of June, 2002, the  tax payable by a dealer  under Section 8 of  the  said  Act  on  the  sale  of  goods  specified  below,  made  in  the  course  of  inter-State  trade  or  commerce,  to  a  registered  dealer  or  the  Government shall be calculated at the rate of two  per cent subject to production of  declaration in  Form 'C' or certificate in Form 'D' duly filed and  signed by the registered dealer or the Government  to whom the said goods are sold:-

1. Cotton Yarn

2. Bicycles

3. Chemical  fertilizers  and  chemical  fertilizer mixtures  

4. Edible oil-refined and non-refined

5. Khandasari Sugar

Page 16

16

6. Liquid Glucose,  Dextrine,  Maixe Starch,  gluten, grits, maize, husk, oil cake, corn  steep  liquor,  dextrose,  corn  oil,  maixe  hydrol and maize germs.”

 19. From  the  said  Notification,  it  is  evident  that  the  

competent  authority  while  exercising  power  under  sub-

section  (5)  of  Section  8  of  the  CST  Act,  has  kept  the  

reduction  of  tax  qua  de-oiled  cake  from  the  purview  of  

Notification and has only provided oil cake to be taxed at the  

reduced rate of tax.  In view of the fact that the goods have  

distinct  and  different  identity  which  also  get  recognition  

from the Notification, we are obliged to hold that the High  

Court  has  correctly  distinguished  the  authority  in  M/s  

Sterling Foods (supra) and we unhesitatingly agree with the  

same.   

20. Though we have agreed with the said conclusion of  

the  High  Court,  yet  the  fact  remains  that  the  assessing  

authority had expressed the opinion with regard to the rate  

of  tax  on  the  de-oiled  cake  while  scrutinizing  ‘C’  Forms  

which is an expression of opinion on the available materials  

brought  on  record  and,  therefore,  the  first  appellate  

authority as well as the tribunal was justified in concurring  

with the said order. It is worthy to note that the revenue had

Page 17

17

not challenged the order passed by the Joint Commissioner.  

The High Court has not expressed any opinion on this score.  

Considering the cumulative effect of  the facts and law we  

have stated, we have not an iota of doubt in our mind that  

there  should  not  have  been  reopening  of  assessment.  

However, the finding recorded by the High Court overturning  

the view of the tribunal that  oil-cake and de-oiled cake are  

the same product and, therefore, both are liable to reduced  

rate of tax despite the notification only mentions oil-cake, is  

not defensible.

21. Consequently,  the  appeal  filed  by  the  assessee  is  

allowed in part. The finding of the High Court as regards oil-

cake and de-oiled cake being different products as per the  

notification dated 31st May, 2002 is correct.  However,  the  

assessee shall reap the benefit of initial assessment as the  

same could not have been reopened.   In the facts of the  

case, there shall be no order as to costs.

….............................J.                                         [DIPAK MISRA]             

….............................J.

Page 18

18

NEW DELHI,                                      [SHIVA KIRTI SINGH]    MAY 03, 2016.