The division bench of Bombay High Court held that, the sale of ‘bagasse‘ is exempted from sales tax under section 5 of the Bombay Sales Tax Act covered under schedule entry A-44.
The respondent dealer M/s. Bhima Sahakari Sakhar Karkhana Ltd contended that it is manufacturing sugar. It is purchasing sugarcane for the purpose of manufacturing sugar. The sugarcane is crushed and juice is taken out. Even after the juice extracted and taken out, some of it still remains in the residuary of the sugarcane.
The argument was whether the word ‘sugarcane’ can also include ‘bagasse’. Schedule ‘A’ is titled as “Goods, the sale or purchase of which is free from all taxes”.
The revenue submitted that, whether section 5 of the Bombay Sales Tax Act is covered under Schedule Entry A-44, means that bagasse is tax free or not and that is the question.
The appellant also submitted that from the order passed by the tribunal, both on the second appeals and the reference applications, it would be apparent that the bagasse is leftover of sugarcane after crushing and cannot be called as sugarcane. Bagasse is known to the commercial world as distinct and different. It has different uses. It is used as fuel and raw material for manufacture of paper. It is a fibrous residue from the sugarcane after extracting cane juice and is used to produce steam and power for operation of factories. The bagasse is also used as a bio-fuel for manufacture of pulp.
When sugarcane setts were attempted to be equated with sugarcane and noticing their usage, the division bench found that if sugarcane is asked for, sugarcane setts cannot be supplied by a merchant. It is in these circumstances that sugarcane setts are not sugarcane as is understood in commerce and trade. We have no such material before us.
While disposing the appeal, the division bench comprising of Justice S C Dharmadhikari and Justice B.P.Colabawalla observed that, it is not disputed that section 5 of the Bombay Sales Tax Act refers to and covers such goods on which there arises no liability to pay tax. The sales and purchase of certain goods free from tax is what is provided by section 5. Therefore, so long as the conditions or exceptions, if any, set out against each of the goods specified in column 3 of the Schedule ‘A’ are satisfied, no tax shall be payable on the sales or purchases of the goods specified in that Schedule.
“What we have before us is the Bombay Sales Tax Act and we have definition of the term “goods” appearing in section 2(13). “Goods” means every kind of movable property (not being newspapers, or actionable claim or money, or stocks, shares or securities), and includes growing crops, grass, and trees and plants (including the produce thereof) and all other things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”, the bench said.
It is common ground that sugarcane is used to manufacture sugar. Therefore, ordinarily, the word “goods” as defined in section 2(13) would cover and include sugarcane. In the circumstances, whether bagasse is sugarcane or not was the controversy. It was, therefore, and in that context, held that so long as these are not identifiable and distinctly known goods to the commercial world, they cannot be brought to tax or if they are part and parcel of sugarcane or are a waste or a by-product when sugarcane is crushed, then, that cannot be brought to tax. It is in that context that all the factual circumstances were taken into consideration. It is in that context the common parlance test as to whether these are distinctly known goods to the market and particularly the commercial world was applied universally.
The division bench also opined that, once it has been consistently held that residue or waste of something like sugarcane does not amount to manufacturing a distinct product or goods known to the commercial world, then, we do not think that there was any need for referring the question to this court. The question as proposed and referred by the tribunal cannot be termed as question of law since it was a mixed question. In the opinion of the court, there exists no ambiguity or vagueness nor there is any possibility of the question being answered differently.
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