Asian
Chemical Works Vs. Union of India [1993] INSC 203 (8 April 1993)
Kuldip
Singh (J) Kuldip Singh (J) Yogeshwar Dayal (J)
CITATION:
1994 SCC Supl. (2) 95
ACT:
HEAD NOTE:
ORDER
1. The
question for consideration before the High Court was whether Food Flavours,
Concentrates and essences are the "food products" and "food
preparations" in terms of the Exemption Notification No. 55/75-CE dated March 1, 1975 issued under Rule 8(1) of the
Central Excise Rules, 1944.
The
authorities under the Central Excise Act answered the question in the negative.
The writ petition filed by the appellant was dismissed by the High Court.
2. We
have heard learned counsel for the appellants. We have been taken through the
orders of the authorities below and also of the High Court. We see no ground to
interfere with the orders of the authorities under the Act as upheld by the
High Court. We agree with the reasoning and the conclusions reached therein.
Even otherwise the order of the Central Government in this case, has been indirectly
approved by this Court in Collector of Central Excise v.
Parle
Exports (P) Ltd. I In this view of the matter we see no force in the appeal and
the same is dismissed. No costs.
1
(1989) 1 SCC 345 : 1989 SCC (Tax) 84: 1988 Supp (3) SCR 933 96 ORDER
1.
This appeal is preferred against the judgment of the Gauhati High Court
answering the question referred to it against the assessee. The question
referred is :
"Whether
on the facts and in the circumstances of the case, the assessee i.e., Assam
Cooperative Apex Marketing Society Ltd., is entitled to exemption under Section
81(1)(c) in respect of their income arising out of procurement of paddy and
other agriculture produce?"
2. The
assessment year concerned herein is 1962-63, the first assessment year under
the Income Tax Act, 1961.
During
the accounting year relevant to the said assessment year, the appellant The
Assam Cooperative Apex Marketing Society Ltd., Assam was appointed as the procuring agent for paddy by the
Government under a scheme evolved by the Government of Assam and contained in
its proceeding dated November
23, 1962. The assessee
is a Society 97 registered under the Assam Cooperative Societies Act, 1949.
The
objects of the society are :
"(i)
to arrange for the sale of produce of the members of affiliated societies and
other members to the best advantage.
(ii) to
purchase and sell agricultural produce and farm and farmers' requisites
including seeds, manures, fertilizers and machinery etc.
(iii) to
act as agent of members for the disposal of their produce; and
(iv) to
act as a central purchasing agency for agricultural as well as Consumers
Society and for other members. The membership of the assessee society is
divided into three classes as follows:
(a)
A-Class consisting of cooperative institutions;
(b)
B-Class consisting of individual cultivators and sympathisers;
(c)
C-Class consisting of traders, commission agents etc.
(d)
The State Government."
3.
There are various categories of societies in the State of Assam. We are concerned
with two such categories i.e. Village Service Cooperative Societies and Primary
Marketing Societies. The assessee, of course, is at the apex. The Village
Service Cooperative Societies are at the base of the pyramid. Their membership
consists of agriculturists.
These
village societies are the members of the Primary Marketing Societies. The
Primary Marketing Societies in turn are members of the assessee Society. It
does not appear that any agriculturists as such are members of the assessee
society.
4. The
system of procurement was that the Village Service Cooperative Societies
procured agricultural produce from their respective members at the prescribed
price and made it over to the Primary Marketing Society. The Primary Marketing
Society in turn made over to the same to the assessee society. In lieu of this
procuring activity, the assessee society was being paid remuneration at the
rate of Re 1 per maund. This one rupee commission was divided between the three
cooperative societies. The Apex Society took 19 paise, the Village Service
Cooperative Society was entitled to 19 paise and the remaining 62 paise went to
the Primary Marketing Society.
5. In
the assessment proceedings, the assessee claimed exemption of its income from
the said activity under Section 81 (i)(c), as it then stood. This plea was negatived
by the Income Tax Officer but on appeal, the Appellate Assistant Commissioner
agreed with the assessee. The Revenue went up in appeal to the Tribunal. The
appeal was allowed, whereupon the assessee obtained the reference aforesaid.
6.
Section 81(i) read thus:
"8
1. Income of cooperative societies.- Income tax shall not be payable by a
cooperative society (i) in respect of the profits and gains of business carried
on by it, if it is (a) a society engaged in carrying on the business of banking
or providing credit facilities to its members; or (b) a society engaged in a
cottage industry;
or (c)
a society engaged in the marketing of the agricultural produce of its members;
or 98 (d) a society engaged in the purchase of agricultural implements, seeds,
livestock or other articles intended for agriculture for the purpose of
supplying them to its members;
or (e)
a society engaged in the processing without the aid of power of the
agricultural produce of its members; or a (f) a primary society engaged in
supplying milk raised by its members to a federal milk cooperative society:
Provided
that, in the case of a cooperative society which is also engaged in activities
other than those mentioned in this clause, nothing contained herein shall apply
to that part of its profits and gains as is attributable to such activities and
as exceeds fifteen thousand rupees;"
7.
Sub-clause (c) of clause (1) exempts the income of a cooperative society
,engaged in the marketing of the agricultural produce of its members'. The
contention of Shri Parekh, learned counsel for the assessee-appellant is that
inasmuch as the assessee has marketed the agricultural produce of its members,
namely, the agricultural produce belonging to Primary Marketing Societies, the assessee
is entitled to the benefit of the said sub-clause. Learned counsel submits that
the High Court was not right in holding that for obtaining the benefit of the
said sub-clause, the agricultural produce by such members (sic). Such an
interpretation, according to the learned counsel, amounts to adding words to
the said clause which are not there. We find it difficult to agree with the
learned counsel. A reading of clause (i) of Section 81 shows that the idea and
intention behind the said clause was to encourage basic- level societies
engaged in cottage industries, marketing agricultural produce of its members
and those engaged in purchasing and supplying agricultural implements, seeds
etc.
to
their members and so on. The words 'agricultural produce of its members' must
be understood consistent with this object and if so understood, the words mean
the agricultural produce produced by the members. If it is not so understood,
even a cooperative society comprised of traders dealing in agricultural produce
would also become entitled to exemption which could never have been the
intention of Parliament. The agricultural produce produced by the agriculturist
can legitimately be called agricultural produce in his hands but in the hands
of traders, it would be appropriate to call it agricultural commodities; it
would not be his agricultural produce. Accordingly, it must be held in this
case that since the agricultural produce marketed by the assessee was not the
agricultural produce produced by its members namely, the Primary Cooperative
Society, the assessee cannot claim the benefit of the said exemption. The High
Court was right in holding that the benefit of the said subclause is not
available to the assessee herein.
8. Mr Parekh
then contended that wherever the Act wanted to provide that it should be the
produce raised by the members of such society, it has provided so expressly, as
in sub-clause (f), which speaks of "milk raised by its members".
Counsel says that no such words are found in sub- clause (c), which is an
indication of the intention of Parliament. It is not possible to agree.
Sub-clause (f) speaks of a Primary Cooperative Society engaged in supplying
milk to a Federal Milk Cooperative Society. Evidently, Parliament did not want
to use the words "milk of its members" which would have been
inappropriate and 99 awkward, and that is why it used the words "milk
raised by its members". The idea again was to provide an exemption only in
favour of the base-level society.
9. For
the reasons stated above, the appeal fails and is dismissed. No order as to
costs.
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