Rajashekara Murthy, J.
1. The petitioners are engaged in the business of manufacture and sale of poultry feed and cattle feed and are dealers registered under the provisions of the Karnataka Sales Tax Act. The petitioners purchase dry fish which is an ingredient in the manufacture of poultry feed. The said purchases are made both from unregistered dealers such as fishermen and also from registered dealers who deal in dry fish.
2. For the deepavali year ending 1st November, 1980, the assessment of the petitioner in W.P. No. 6316 of 1989, was completed by the assessing authority on 15th April, 1987. While concluding the assessment the assessing authority exempted the purchase turnover in dry fish from levy of purchase tax under section 6 of the Karnataka Sales Tax Act ('the Act') on the ground that the fish is exempt from tax under section 8 of the Act. This is what the assessing authority held in the course of the assessment order :
'The assessee has effected purchases of rice bran extraction, GN extraction, wheat bran, mollasses, maize, chemicals, fish, etc. Out of the above purchases, purchases of dry fish are to some extent from unregistered dealers. As the fish is exempted from tax under section 8, it does not attract tax under section 6.'
3. After the assessment was completed notice under section 12-A was issued by the Assistant Commissioner of Commercial Taxes (Assessments), Hubli, as per annexure-B on 18th February, 1989, proposing to levy purchase tax under section 6 on the turnover of dry fish on the value of Rs. 2,32,831.52. The reason for issuing this notice as can be seen from the notice itself is, that the Commissioner of Commercial Taxes, Bangalore has clarified that such turnover is to be subjected to tax when those goods are consumed by a manufacturer in cattle feed and poultry feed.
4. There are two circulars issued by the Commissioner. The first circular is dated 23rd April, 1987, which reads thus :
'14. No. CLR. CR. 1502/86-87 Dry fish for use as poultry feed
23rd April, 1987 in gunny bags would be taxable
under section 5(1) at 7 per cent.'
The next circular is dated 18th May, 1987, which reads :
'52. No. CLR. CR. 1730/86-87 Under the Fifth Schedule only fish
18th May, 1987 that is edible is exempt from tax.
Dry fish that is not edible but
for use in the manufacture of
poultry feed would be taxable at
7 per cent as per section 5(1)
of KST Act, 1957.'
5. It is urged by Sri Indra Kumar that the levy of purchase tax under section 6 is attracted only to the goods which are taxable under the Act and in cases where such tax is not paid by the first dealer, such as non-payment of tax by an unregistered dealer.
6. On the facts of the present case it is the contention of the petitioner that purchase of dry fish is made from unregistered dealers such as fishermen and also from other registered dealers. The petitioner's contention is that no tax is leviable on dry fish purchased by the petitioner whether it is from registered or unregistered dealers in view of the exemption under entry 6-A of the Fifth Schedule which enumerates the goods exempted from tax under section 8. It is the contention of the petitioner that the petitioner would be liable to pay the tax as first dealer under section 6 only if the said goods are 'taxable goods' under the Act. Therefore, it is argued that 'fish' which is one of the goods enumerated under the Fifth Schedule cannot be considered as taxable goods under the Act and that therefore, the proposal to levy purchase tax on the value of dry fish purchased by the petitioner is illegal and without authority of law.
7. The proposition notice impugned in the writ petition was issued on the basis of circulars dated 23rd April, 1987 and 18th May, 1987, referred to earlier. The gist of the two circulars is that only fish that is edible is exempted under the Fifth Schedule and dry fish that is sold to manufacturers of poultry feed should be subjected to levy under section 5(1) of the Act. In the same proposition notice the respondent exempts the sale of dry fish edible purpose and proposes to levy tax only on dry fish sold to poultry owners.
8. Now coming to the facts in the Writ Petition No. 2367 of 1988, the proposition notice issued by the respondent proposing to levy tax on the sale of dry fish to manufacturers of poultry feeds, for non-edible purpose, is challenged. The learned counsel also draws my attention to the assessment order, a portion of which is extracted already, from which it is seen that the assessing officer did not levy purchase tax on the dry fish since it does not attract tax, fish being exempted from tax under section 8.
9. Sri Shimoga Subbanna, the learned Government Pleader, has argued justifying the circulars issued by the Government. He submitted that the Commissioner has power to issue clarification by virtue of section 3A of the Act as substituted by Act 27 of 1985. It is his argument that the clarification is issued by the Commissioner in the case of dry fish since he was of the opinion that such clarification or instructions was felt necessary for the purpose of administration of the Act and to levy tax in all cases covered by the two circulars.
10. I have considered the contentions of the learned counsel for the petitioners and the argument of the learned Government Pleader. Before dealing with the validity of the circulars, it is necessary to refer to the scheme of the Act. In these cases the tax is sought to be levied on the purchase turnover of dry fish under section 6 on the ground that it has not suffered tax under section 5(1) of the Act. In the other case tax is sought to be levied on the sales turnover of dry fish under section 5(1) of the Act.
11. Section 5 speaks of levy of tax on sale or purchase of goods.
12. Section 5(3) speaks of the sale of the goods mentioned in column (2) of the Second Schedule, payable by the first or the earliest of successive dealers who is liable to tax under the Act.
13. Under section 5(4) tax is levied in respect of sale or purchase of any of the declared goods mentioned in column (2) of the Fourth Schedule at the rates specified. This levy, however, is subject to concessional rate not exceeding 4 per cent.
14. The next section that is required to be examined is section 6, under which purchase tax is levied under certain circumstances. As already noticed the purchase tax is attracted in respect of taxable goods and in the circumstances referred to in the said section.
15. The next important section is section 8 under which the goods enumerated in the Fifth Schedule are exempted from the levy of tax under the Act.
16. The question that arises for consideration on these facts and in the light of the scheme of the Act explained above is, whether the sale or purchase of dry fish can be subjected to levy of tax under section 5(1) or under section 6 and the liability of the petitioners to pay tax on the turnovers disputed in these two writ petitions
'6-A. Fish (excluding shrimps, prawns and lobsters), except when sold in sealed containers.'
17. The petitioners in these cases have purchased dry fish both from registered and unregistered dealers. The sales turnover of dry fish to poultry owners for manufacture of poultry feed is sought to be taxed under section 5(1) in W.P. No. 2367 of 1988. The sole reason for this proposal to levy of tax on the sale of dry fish for 'non-edible' purpose is the circulars of the Commissioner referred to above.
18. There are two important aspects to be noticed in the circulars issued by the Commissioner. In the first circular dated 23rd April, 1987, in the opinion of the Commissioner, dry fish sold for use as poultry feed in gunny bags would be taxable under section 5(1). Under the second circular dated 18th May, 1987, it is the opinion of the Commissioner again that only fish which is edible, is exempt from tax under section 5(1) and that the fish that is not edible but used in the manufacture of poultry feed would be taxable under section 5(1).
19. Therefore, the primary question that is to be decided is, whether the clarifications run counter to the object and intendment of the legislature in exempting 'fish' from the levy of tax under the Act
20. The fish, that is referred to in the Fifth Schedule, is not classified as dry fish and fresh fish nor is any exemption carved out in order that only non-edible fish could be subjected to levy and further whether such non-edible fish supplied to manufacturers of poultry feed could be subjected to levy under the Act. Therefore, the Commissioner proceeds to make a classification of two categories of fish which should attract tax under section 5(1) : (i) dry fish sold for use as poultry feed; (ii) dry fish which is non-edible and sold for use as poultry feed.
21. What follows from the clarifications issued by the Commissioner is that all fish other than edible fish should be subjected to levy under the Act. The question, that, therefore, arises for consideration is, whether the Commissioner is justified in making such a distinction on the basis of use to which the dry fish is put and whether his opinion that only the edible fish is exempted under the Fifth Schedule flows from the provisions of the Act and its language
22. The power to exempt tax in respect of goods is vested in the legislature. There is no other provision except section 8 under which the legislature is empowered to declare that certain goods shall not be subjected to tax under the Act. Pursuant to the said power exercised by the legislature the goods on which no tax is payable under the Act are enumerated in the Fifth Schedule.
23. The only other section under which the sale or purchase of specified goods or class of goods or by specified class of persons is exempted from tax is section 8A of the Act. Under section 8A, notwithstanding the general exemption granted by the statute under section 8, the State Government may by notification, grant exemption or reduction in the rate of tax in exercise of the power vested in the State Government by section 8A.
24. Section 3A, no doubt, enables the Commissioner to issue instructions to subordinate authorities for the administration of the Act. Directions issued under section 3A are binding on the subordinate authorities. Appellate authorities functioning under the Act are not bound by such orders, instructions or directions issued by the Commissioner under section 3A of the Act.
25. Reverting back to the entry 6-A of the Fifth Schedule, the entry is to be understood and interpreted as found in the entry which speaks of 'fish' in general. If it was the intention of the legislature to carve out any exception for the purpose of levy of tax on any particular kind of fish whether dry or fresh, edible or non-edible, it was for the legislature to make such distinction and to provide for levy of tax subject to the exceptions or provisions.
26. Having regard to the plain meaning of fish in entry 6-A, which has got to be interpreted as it stands and the meaning which it conveys, it does not admit of any further distinction being made for the purpose of treating dry fish or non-edible fish as taxable goods. That an entry in the schedule to the taxation act should be interpreted having regard to the plain language used by the legislature, is the settled principle of interpretation. Giving any other meaning or to exclude non-edible fish from the purview of the entry would amount to legislating and amending the statutory entry, which is the exclusive privilege of the legislature. The Commissioner's circular (clarification) issued in this regard is therefore without competence. It is difficult to appreciate the strained meaning given by the Commissioner in his clarification. The Commissioner cannot ignore the meaning of the words used in the statute and the acceptance of the popular meaning of the term 'fish' and the acceptance of a particular meaning by the trade and give a different meaning for purposes of taxation.
27. One other approach by the courts in such matters in the 'user-test' 'whether the use for which the articles or the goods are put, should be the criteria for determining the liability to tax.'
28. In support of these propositions, Sri Indra Kumar has relied upon the following decisions :
(i) Annapurna Carbon Industries Co. v. State of Andhra Pradesh : [1976]3SCR561 .
The Supreme Court was interpreting entry 4 of the First Schedule to the Andhra Pradesh General Sales Tax Act, and the Supreme Court ruled that the entry should be interpreted on the basis of the predominant user for determining the category in which the articles fell under entry 4 referred to above. Though the decision proceeded on the basis of the observations only one sentence occurring in page 381 supports the contention of the petitioner, namely, that the meaning of an entry can only be satisfactorily determined in the light of the language of the entry itself considered in the context in which it occurs.
(ii) The other case relied upon by the learned counsel relate to the user-test.
Dunlop India Ltd. v. Union of India AIR 1977 SC 597.
The question that came up for consideration in that case was, whether the V.P. latex was classifiable as rubber raw under item 39 of the Tariff Act.
The Supreme Court held that the V.P. latex would not come under rubber raw. The reason for this conclusion was that the end-use of the article was absolutely irrelevant in the context of the entry where there is no reference to the use or adaptation of the article. It was further held, that once an article is classified and put under a distinctive entry, the basis of classification is not open to question.
(iii) Evans Food Corporation v. State of Kerala [1978] 42 STC 7 (Ker).
The interpretation of entry 10 to the Third Schedule to the Kerala General Sales Tax Act (see page 8), came up for consideration before the High Court of Kerala. In the context of the said entry the issue before the High Court was whether tapioca sold by the dealer whose business was in cattle feed, fell under the said entry and was, therefore, entitled for exemption from tax.
The High Court held, that the exemption provided under entry 10 in so far as it related to the tapioca could not be denied with respect to the turnover of the dealer which was relatable to tapioca sold by him as cattle feed.
Though the entry did not specifically exclude tapioca when used as a cattle feed for the purpose of attracting the tax under the Sales Tax Act, the High Court held, that by reason of the inclusive definition of the tapioca, it qualified for exemption irrespective of its use whether for human consumption or as cattle feed.
(iv) The latest in the series in the case reported in : [1988]2SCR501 (Mukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh).
29. The question that came up for consideration in that case was, whether the tax on eucalyptus wood sold by the Forest Department would fall under the description of 'timber' under entry 32A of Part II of the Second Schedule to the Madhya Pradesh General Sales Tax Act.
30. The Supreme Court held that the nature of goods cannot be determined by the test of the use to which they are capable of being put, and the user-test, though may be logical, is not conclusive. It was further held that the particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods.
31. Allowing the appeals of the assessee in part, the Supreme Court held that the subsidiary parts of the eucalyptus tree could not be called timber, meant or fit for building purposes. The matter was, however, remanded to the High Court to find out as to which other entry the goods in question attract.
32. In the light of the enunciation of the law as explained by the Supreme Court in the decisions cited above, what remains to be decided on the facts of the present case is : whether dry fish when sold for non-edible purposes can be subjected to levy under section 5(1) of the Act and, whether the respondent was justified in following and applying the clarification issued by the Commissioner in this regard
33. As already stated, the expression, 'fish' should be understood as inclusive of all types of fish, whether fresh or dry, edible or non-edible. The only exception which is provided in entry 6-A itself is that the said entry excludes prawns, shrimps and lobsters when sold in sealed containers.
34. Therefore, the plain meaning to be attached to that entry is clear and it should be given effect to as, viz., fish in general. The clarifications issued by the Commissioner, therefore, cannot be upheld and are hereby declared void.
35. In the result, the proposal to levy tax under section 5(1) on the turnover of non-edible fish in the proposition notice impugned in W.P. No. 2367 of 1988 has to be quashed and it is ordered accordingly.
36. In W.P. No. 6316 of 1989, the proposal to levy tax under section 6 on the purchase turnover of dry fish by the petitioner has also to be quashed as without authority of law for the very same reasons. Besides, the question of levying tax under section 6 arises only when the goods in question are taxable under section 5(1) as already stated.
37. It may be noticed that the assessing authority had taken the correct view in the assessment order while exempting the purchase turnover of dry fish from purchase tax. His reason for exemption was that the fish was exempt from tax under section 8 of the Act. This view taken by the assessing authority is correct and needed no interference.
38. I am, therefore, unable to uphold the reasons given in the notice issued under section 12A proposing to levy purchase tax on the purchase turnover. The reasons given for quashing the proposition notice in W.P. No. 2367 of 1988 hold good for allowing this writ petition also.
39. The writ petitions are accordingly allowed and the proposition notice issued in form 31-A in W.P. No. 2367 of 1988 and the notice issued in W.P. No. 6316 of 1989 under section 12A, are quashed.
40. Writ petitions allowed.