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CASE NO.: Appeal (civil)  2522 of 2007

PETITIONER: M/s. Noorie Manure Mill, Sambhal

RESPONDENT: Commissioner, Trade Tax, U.P.

DATE OF JUDGMENT: 15/05/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T

WITH CIVIL APPEAL NO. 2522 of  2007 [Arising out of S.L.P. (C) No.  12061 of 2006] WITH CIVIL APPEAL NO. 2523 OF  2007 [Arising out of S.L.P. (C) No. 19593 of 2006] WITH CIVIL APPEAL NO. 2524 OF 2007 [Arising out of S.L.P. (C) No. 19858 of 2006]

S.B. SINHA, J.

1.      Leave granted.

2.      ’Horn’ and ’hoof’ in common parlance do not come within the  definition of ’bone’.   Horns and hooves whether can be used as fertilizer or  crushed bone within the meaning of various notifications issued by the State  of U.P. under the U.P. Trade Tax Act is the question involved in this case.   3.      Appellants herein are dealers in crushed bones as also crushed horn  and hoof.   It is registered under the Central Sales Tax Act as also the U.P.  Trade Tax Act.   

4.      Horn and hoof, on the one hand, and bone or crushed bones, on the  other, used to be treated differently by the State.   In a notification issued by  the State on or about 7.9.1981, ’bones’ were subjected to sales tax at the rate  of 6%; the taxing event being sale to the consumer.  By a notification dated  30.9.1982, it was declared that no tax was to be paid on sale or purchase of  bones but the same did not include crushed bones.  The said notification  dated 7.9.1981 was amended to include ’crushed bone’ against entry No. 8  which, as noticed hereinbefore, mentioned ’bone’. By a notification dated  31.1.1985, however, bone including horn and hoof but not including crushed  bones were exempted from payment of tax.  We may, however, notice that  yet again by a notification dated 12.9.1986, the following item was  substituted in place of the original item No. 32 which reads as under:- Sl. No.  Description of Goods Rate of Tax 1 2 3          

32 Horn combs and all other articles made from horn

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5.      Indisputably, fertilizer is exempted from payment of trade tax.  The  question as to whether crushed bones when sold to the farmers for use as  fertilizer despite the aforementioned notifications would be exigible to trade  tax or not came up for consideration before this Court in Commissioner,  Sales Tax v M/s. Bharat Bone Mill [(2007) 3 SCALE 383].  Therein the  effect of the aforementioned exemption notifications had not been gone into  as this Court’s attention had not been drawn thereto.  This Court opined:-

"11.  Moreover, it is well-known that the question as  to whether a commodity would be exigible to sales tax  or not must be considered having regard to its identity  in common law parlance.  If, applying the said test, it  is to be borne in mind that if one commodity is not  ordinarily known as another commodity; normally,  the provisions of taxing statute in respect of former  commodity which comes within the purview of the  taxing statute would be allowed to operate.  In any  event, such a question must be determined having  regard to the expert opinion in the field.  We have  noticed hereinabove the different between ’bone  meal’ and ’crushed bone’.  Different utilities of the  said items has also been noticed by the Allahabad  High Court itself.  The High Court or for that matter,  the Tribunal did not have the advantage of opinion of  the expert to the effect as to whether crushed bones  can be used only for the purpose of fertilizer or  whether crushed bones are sold to the farmers for use  thereof only as fertilizer."

       The said question was left open for subsequent cases.

6.      In one of the cases, namely, Commissioner, Trade Tax, U.P. Lucknow  v M/s Noori Manthor Mill, Muradabad Road Sabal,  the Tribunal has arrived  at the finding of fact  ".....Because on the crushed bones there is a tax liability  at the rate of 6 percent but against the crushed bones, no  description of horns and bones has been made that is to  say that the purpose of the government is to charge tax  on the crushed bones and not to charge tax on the  crushed bones and horns.   This was also pleaded by the  learned counsel that the crushed horns and Hooves are  used as manufacture (sic).  And it cannot be put to any  other use.  The department has not led any such  evidence which may conclude that the crushed horns  and hubes (sic) are used for any other purpose than the  manure and that the manure is a tax free  commodity....."

7.      In the appeals which were preferred thereagainst, the High Court,  however by reason of the impugned judgment dated 7.2.2006 held as under:- "...Bones including Horn and Hoof is exempted but  crushed bones has been excluded and made taxable.   When horns and hoofs are included in the bones  then in the exclusion part also crushed bone include  crushed Horn and Hoof.   In common parlance also,  Horns and Hoofs are considered as Bones.  Thus  inclusion of Horns  and Hoofs in Bones in the  notification appears to be clarificatory only.  Since  crushed bone is excluded from the entry "Bone  including Horn and Hoof", in my view the crushed  horns and hoofs being crushed bones are also  deemed to be excluded.   Tribunal has also  committed an error in treating crushed Horns and

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Hoofs as fertilizer.  In the case of M/s. Hindustan  Bone Mills Pvt. Ltd. Versus Commissioner of Trade  Tax reported in 2005 UPTC 885 this Court held that  crushed bone is not a fertilizer.  In this view of the  matter, the order of the Tribunal is liable to be set  aside and the appeal filed by the Commissioner of  Trade Tax before the Tribunal is liable to be  allowed."

8.      Following the said judgment, the High Court refused to interfere with  the direction of the Tribunal for pre-deposit of 25% of the disputed amount  of tax in the cases involving the other two appeals before us.

9.      Mr. Dhruv Agarwal, learned counsel appearing on behalf of the  appellant would submit that crushed horn and hoof being neither bone nor  crushed bone, despite its mention in one of the exemption notifications, it  does  not lose its character to be sold as fertilizer and the High Court,  therefore, was not correct in its view.          10.     The High Court, in our opinion, committed a serious error in opining  that crushed bone would also include crushed horn and hoof.  It went on to  hold that horns and hooves are considered as bone in common parlance and  its inclusion in the notification ’appeared to be a clarificatory one’.   In  absence of any definition of the term in the statute, the meaning thereof as  understood in common parlance for the purpose of imposition of tax should  be assigned.   Animal horn and hoof cannot be a part of animal bone even in  common parlance.  The High Court, therefore, in our opinion clearly fell in  error in arriving at the aforementioned conclusion.

11.     We, however, cannot also agree with the  finding of the Tribunal that  crushed horn and hoof are used only as manure.  No expert evidence has  been obtained in that behalf.  Even otherwise, in view of the notification  dated 12.9.1986, the said conclusion does not appear to be correct as combs  and other articles are made out of horn.

12.     We, therefore, are of the opinion that the interest of justice would be  met if the impugned judgments are set aside and the matter is remitted back  to the Tribunal for consideration of the matter afresh on merits.  It will be  open to the parties to adduce additional evidence before it.  The direction of  the Tribunal to deposit 25% of the disputed amount of tax is also directed to  be waived.  These appeals are allowed with the aforementioned observations  and directions.  In the facts and circumstances of this case, however, there  shall be no order as to costs.