The Hindu Business Line : And say which grain will grow and which will not

But what caused a near tempest between National Cereal Product and the Uttar Pradesh Commissioner of Trade Tax was the interpretation of barley, and it blew all the way to a three-judge Bench of the apex court recently.

At the heart of the dispute were UP sales tax notifications that spoke of tax treatment of foodgrains and cereals. National sold malted barley and claimed that the product was `cereal' or `foodgrain' within the meaning of the notifications.

The Allahabad High Court observed that malt and barley were two different commodities and that malt did not fall within the definition of the word `cereal' for the purposes of Section 14 of the Central Sales Tax Act.

However, the court instructed the Sales Tax Tribunal to decide whether National's product can be called foodgrain including cereal within the meaning of the notifications.

"If you can look into the seeds of time, and say which grain will grow and which will not," is a challenge that Banquo throws to the three surreal witches in Macbeth.

The challenge before the tribunal was no different: it had a cereal to study and three notifications that should have looked as troublesome as the witches.

However, after checking the meaning of `malt' and `cereal' in several dictionaries and encyclopaedias, the tribunal came to the conclusion that "the word `malt' was covered by the word `cereal' in the three notifications." When the parties went back to the High Court, the decision went in favour of National: that malt is merely another form of barley and was a foodgrain within the meaning of the three notifications.

The Department was aggrieved by the decision and knocked the doors of the apex court. Punit Dutt Tyagi, arguing for the taxman, said that both the tribunal and the High Court had erred, since the court had already held that malt was not a cereal.

He also took the help of `various other dictionaries' to support his claim that "malt is neither cereal nor a foodgrain". Grain, according to Tyagi, was "a seed that is yet to be germinated". For National, it was S. K. Bagaria who fought the case.

Justices Ruma Pal, Arijit Pasayat and C. K. Thakker heard the rival contentions and pointed out that none of the various dictionary meanings referred to by the taxman limited the word `grain' to an un-germinated seed. "On the contrary, malt has been described as a foodgrain," they said.

On the earlier observation of the High Court that barley malt was not a cereal for the purposes of Section 14 of the CST Act, the apex court had this to say: "It was clearly envisaged by the order of remand that despite such finding, barley malt could still be a cereal or a foodgrain for the purposes of the three notifications."

The Supreme Court stated that the definition of foodgrains in the notifications was wider than that what was in the CST Act.

Also, the notifications were not providing exemptions but were of charging nature. "The onus to prove that the malted barley does not fall within foodgrains or cereals was on the Revenue. They have failed to discharge the onus," said the court, ticking off the taxman's work. There was some more rapping that the Department had to take from the court. "We find that the question of law formulated in the Special Leave Petition was wholly incorrect," reads the judgment.

"The question of law as framed was whether the Tribunal was justified in holding that barley malt falls under the category of cereals and pulses contained in Section 14 of the Central Sales Tax Act. That was not the subject matter of remand nor decided by the Tribunal nor affirmed by the High Court."

Let me not rub salt into the sore, but I'd leave the vanquished with a quote from King Lear, where the Fool says: "I'll speak a prophecy ere I go: when priests are more in word than matter; when brewers mar their malt with water... " To which, I'd add ere I go: When taxmen ruin their cases with chatter...

Tailpiece

"What's the opposite of VAT?"

"VST, for Value Subtracted Tax?"

"No, it's VAR, for Value Added Refund!"

Detaxification@TheHindu.co.in

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