Holding

A commodity’s taxability under the sales‑tax statute must be decided by its ordinary common‑law identity and, where necessary, by expert opinion; in the absence of such opinion, the earlier tax orders are set aside and the question of whether crushed bone is a fertilizer is left open.

Summary

The appellant, Bharat Bone Mill, manufactures crushed bone and argued that the product should be classified as a fertilizer and therefore exempt from Uttar Pradesh sales tax under the state's exemption notifications. The State had earlier exempted fertilizers (including chemical fertilizers) but later taxed "bone to consumer" at 6% and chemical fertilizers at 5%. The High Court dismissed the appellant's writ petition, holding that crushed bone was taxable. The Supreme Court held that the taxability of a commodity must be determined by its identity in common‑law parlance and, where necessary, by expert opinion; it found that no expert opinion was on record to establish that crushed bone is solely used as a fertilizer. Consequently, the Court set aside the orders of the Assessing Authority and the High Court, leaving the question open for future determination. The Court also clarified that the Assessing Authority could not rely on the rectification power under Section 22 of the Income Tax Act to alter its earlier order.

Issues considered

Whether "crushed bone" falls within the definition of "fertilizer" for the purpose of exemption under the U.P. Sales Tax Act, 1948.
Whether the Assessing Authority could rectify its order on the basis of Section 22 of the Income Tax Act.
Whether expert opinion is required to decide the taxability of a commodity.

Legislation cited

Income Tax Acts. 22

Subjects

sales taxfertilizercrushed bonetax exemptionexpert opinioncommon law identityassessment authorityrectification

Judgment

A COMMNR, SALES TAX, U.P.
··+
v.
M/S BHARAT BONE MILL
..;
FEBRUARY 20, 2007

B [S.B. SINHA AND MARKANDEY KA TJU, JJ.]

U.P. Sales Tax Act, 1948-Crushed bone, if can be treated as Fertilizers r-
for exemption from payment ofsales tax-Held: There being no expert opinion
before High ·court or Tribunal, as to whether crushed bones can be used only
c for purpose offertilizer or are sold to farmers for use thereof only as fertilizer-
Order of courts below set aside-Question of law left open.

The question which arose for consideration in this appeal was whether
a 'crushed bone' can be treated to be 'fertilizer'.
D
Respondent is engaged in manufacture of crushed bone. By a
notification, State exempted 'Fertilizers' other than 'Chemical Fertilizers' -{
from payment of sales tax. By another notification 'Chemical Fertilizers' were
. (_
also exempted. Thereafter, by yet another notification sale of 'bone to
consumer' was exigible to sales tax at 6% and Chemical Fertilizer at 5%.
E Courts below relying on other decisions held that the crushed bone would
come within the purview of fertilizer. High Court dismissed the writ petition
filed by the appellants. Hence the present appeal.

Allowing the appeal, the Court
,>
F HELD: 1. 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 offormer commodity which comes within
G 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. The difference between 'bone meal' and 'crushed bone' is noticed. ...--
'
Different utilities of the said items has also been noticed by the High Court
itself. The High Court or for that matter, the Tribunal did not have the

H 886
COMMNR, SALES TAX, U.P. v. BHARAT BONE MILL [S.B. SINHA, J.] 887
advantage of opinion of the expert to the effect as to whether crushed bones A
+- 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 orders of the
Assessing Authorities including that of the High Court are set aside.
However, the question is left open for subsequent cases, if any.
(Paras 11 and 12] (890-E-H) B
Commissioner ofSales Tax, Madhya Pradesh v. Sagar Bone Mills, Sagar
: No. J (18 STC 338); CSTv. Crusher and Fertilizer Company, (1985) UPTC
905; The Rat/am Bone and Fertilizer Co. v. The State of Madhya Pradesh
and Anr., 35 STC 132; Yasin Bone Mills v. State of U.P. and inr., 46 STC
112: (1980) UPTC 450, referred to. C

2. The Assessing Authority proceeded to determine the taxability in view
of the decisions, as were prevailing. It sought to rectify its order keeping in
view the subsequent decisions. The question which arose for consideration
before the Tribunal was as to whether the Assessing Authority could pass
such an order having regard to the power of rectification in terms of Section D
22 of the Income Tax Act. (Para 13] (891-A-B)

The Income Tax Officer, Alwaye v. The Asok Textiles Ltd., Alwaye (1961)
3 SCR 236, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 852 of2007. E

From the final Judgment and Order dated 20.10.2003 of the High Court
of Judicature at Allahabad in S.T.R. No. 1570/1990.

Kavin Gulati, Kamlendra Mishra, Gourabh Sarin and Rajeev Kumar Dubey F
for the Appellant.

The Judgment of the Court was delivered by

S.B. SINHA, J. 1. Leave granted.

2. Whether a 'crushed bone' can be treated to be 'fertilizer' is the G
.. question involved in this appeal arising out of a judgment and order dated
'
20.10.2003 passed by a learned Single Judge of the Allahabad High Court in
Sales Tax Revision No. 1570 of 1990 whereby and whereunder the revision
petition filed by the appellant herein was dismissed.
H

•
888 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 3. Respondent herein is engaged in manufacture of crushed bone. It
runs a bone mill
for the above-mentioned purpose. ·1-
4. The question as to whether crushed bone-meal would come within
the definition of the term "fertilizer" must be considered having regard to
some notifications issued by the State of Uttar Pradesh from time to time. By
B a notification dated 16.07.1956, 'Fertilizers' other than 'Chemical Fertilizers'
were exempted from payment of sales tax by the State in exercise of its powers
conferred upon it under the U.P. Sales Tax Act, 1948. However, by reason of
a notification dated I0.3.1970, 'Chemical Fertilizers' were also brought within
the purview of exemption from payment of sales tax. By a notification dated
C 31.03.1976 a taxing entry was introduced in the Schedule appended to the
notification dated 15.11.1971 in terms whereof sale of 'bone to consumer' was
exigible to sales tax of 6 per cent. Yet, in terms of 7.09.1981, the Schedule
appended to the said Act was amended; the relevant entries being 8 and I0
read as under:-

D "SI. No. Description of good Point of tax Rate of Tax

8. Bones Sale to consumer 6%

IO. Chemical fertilizer Mor I 5%"

E 5. It is in the aforementioned context, the question as to whether
'crushed bone' would answer the description of 'fertilizer' or not is required
to be considered. We may notice that the High Court in view of some
decisions rendered by the Tribunal as also a decision of the learned Single
Judge of the M.P. High Court in Commissioner of Sales Tax, Madhya Pradesh
v. Sagar Bone Mills, Sagar: No. I [18 STC 338) opined that 'crushed bone'
F would come within the purview of 'fertilizer'. Reference was also made to a >
decision of a learned Single Judge of the said Court in CST v. Crusher and
Fertilizer Company (1985) UPTC 905.

6. Mr. Kavin Gulati, learned counsel appearing on behalf of the appellant,
G would submit that the High Court committed a serious error in arriving at the
said conclusion relying on or on the basis of the decisions of the M.P. High
Court in Sagar Bone Mills (supra) and the Allahabad High Court in Crusher
and Fertilizer Company (supra). •--

In Sagar Bone Mills (supra), the Madhya Pradesh High Court stated
H the law, thus:
COMMNR, SALES TAX, U.P. v. BHARAT BONE MILL [S.B. SINHA, J.l 889
" .... It cannot be denied that bone-meal or crushed bones are "bones A
+- of animals" which include powdered bones. The three entries referred
to earlier must be read harmoniously, and, so read, their effect is
clearly to impose sales tax on bones of animals which include crushed
,.. bones and bone-meal.

4. In coming to the conclusion that the question whether cruslled B
bone or bone-meal manufactured by the assessee was "fertilizer" for
the purpose of the Sales Tax Acts should be determined with reference
to the definition of"fertilizer" given in the Fertilizer (Control) Order,
;:.
--< 1957, the Sales Tax Tribunal altogether overlooked the settled rules of
construction about the meaning of words used in different statutes.
c
It is firmly settled that the interpretation or definition clause occurring
in a statute can be used only for the purpose of interpreting words
appearing in that statute and not for the purpose of interpreting
words appearing in other statutes. To take a word bearing a peculiar
meaning in a particular Act and to clothe that word with the same
meaning when found in different context in a different Act is a fallacious D
process of interpretation. The Tribunal was, therefore, not justified in
pressing into service the definition of "fertilizer" given in the Fertilizer
'r (Control) Order, 1957-a statutory provision, the scope and object of
_., which is altogether different from the Sales Tax Act. The Tribunal was,
therefore, in error in remanding the matter to the Sales Tax Officer for
a fresh decision after determining whether the produce manufactured E
by the assessee was or was not a "fertilizer" according to the definition
of that term given in the Fertilizer (Control) Order, 1957."

8. The said view was approved by a Full Bench of the said Court in The
Rat/am Bone & Fertilizer Co. v. The State of Madhya Pradesh and Anr., [35
__...., STC 132].
F
I
9. In Yasin Bone Mills v. State of UP. and Anr., 46 STC 112 (1980 UPTC
450) the Allahabad High Court considered a report of the Directorate of
Marketing and Inspection, Ministry of Food and Agriculture, Government of
India, in terms whereof four products were obtained from bones known as: G
(I) Bones sinews, (2) Crushed bones, (3) Bone grits, and (4) Bone meal. The
characteristics of the said four products from bones are said to be different.
--,,..& The learned Judges also referred to the Standard Cyclopedia of Modem
Agriculture, wherein a distinction had been drawn between 'bone meal' and
'crushed bone', on the basis whereof it was opined :
~ . H
~-

890 SUPREME COURT REPORTS [2007) 2 S.C.R.

A " 6. As noted above in the instant case the assessee is dealing
in crushed bones and not bone-meal. The distinction between the -t-
two-commodities is quite clear on the basis of the information contained
in the report of the Directorate of Marketing and Inspection, Ministry
of Food and Agriculture, Government of India and the Standard ,
Cyclopaedia of Modem Agriculture referred to above. It is not possible,
B therefore, to hold that crushed bones are fertilisers. Apart from this
the assessee himself does not appear to have been making sales of
crushed bones as fertilisers. This commodity is not sold by the
assessee. in the country and the turnover of the years under
consideration goes to show that almost the whole of it was in the form '>- ~

c of exports to foreign countries. As noted above crushed bones are
meant for use as raw material in the manufacture of glue and gelatine,
the industries which have not developed to any appreciable extent in
Indh and, hence, this commodity has to be exported to countries·
outside India.''

D I0. Therein reliance wa.s placed on the opinions of some experts to
establish 'crushed bone' and 'fertilizers'. The Court, however, found the
report of the Directorate of Marketing and Inspection more creditworthy,
opining that bone-meal and not crushed bones can be treated as fertilizers. ""
11. Moreover, it is well-known that the question as to whether a '
E 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
F 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 >-
difference 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
G the purpose of fertilizer or whether crushed bones are sold to the farmers for
use thereof only as fenilizer.
a..:--
12. For the reasons aforementioned, we set aside the orders of the
Assessing Authorities including that of the High Court. However, we intend
to leave the question open for subsequent cases, if any.
H
COMMNR, SALES TAX, U.P. 1·. BHARAT BONE MILL [S.B. SINHA, J.] 89]

13. There is another aspect of the matter, notice whereof must be taken A
by us, viz., the Assessing Authority proceeded to determine the taxability in
view of the decisions, as were prevailing. It sought to rectify its order keeping
in view the subsequent decisions. The question which arose for consideration
before the Tribunal was as to whether the Asses~ing Authority could pass
such an order having regard to the power of rectification in terms of Section B
22 of the Act.

· 14. This aspect of the matter has been considered in The Income Tax
Officer, Alwaye v. The Asok Textiles Ltd., A/waye [1961] 3 SCR 236, wherein
it was held that the provisions for rectification of "mistakes apparent on the
record" cannot be equated with a power of a civil court to review its own C
order as envisaged under Order XL VII Rule I of the Code of Civil Procedure
stating:

"The learned Judges of the High Court seem to have fallen into an
error in equating the language and scope of s. 35 of the Act with that
of0.47, r. l, Civil Procedure Code. The language of the two is different D
because according to s. 35 of the Act which provides for rectification
of mistakes the power is given to the various income-tax authorities
within four years from the date of any assessment passed by them to
rectify any mistake "apparent from the record" and in the Civil
Procedure Code the words-are "an error apparent on the face of the
record" and the two provision·s do not mean the same thing." E
15. The appeal is allowed with the aforementioned observations. No
costs.

-- NJ. Appeal allowed.