Madhya Pradesh High Court Upholds Tax On Soya Flour, Holds It Not Covered Under Exempt 'Atta' Category

The Madhya Pradesh High Court on 30 June upheld the orders of commercial tax authorities imposing Central Sales Tax on interstate sales of soya flour, holding that the product does not qualify as exempt “atta” under the relevant exemption notification.

A Division Bench of Acting Chief Justice Vivek Rusia and Justice Pradeep Mittal dismissed the writ petition filed by Sonali Soya Pvt. Ltd. & Ors. and affirmed the tax demand raised against the petitioners. The judges held:

“The Soya Flour sold by the petitioner is neither imported nor registered branded. Therefore, the flour falls under the tax-free category, and thus, no tax was levied.”

The dispute arose from assessment proceedings against Sonali Soya Pvt. Ltd. for the financial year 2002–03 involving manufacturers engaged in producing oil and soya flour from soyabean.

Initially, the tax authorities had treated soya flour as exempt, but later initiated revisional proceedings and imposed Central Sales Tax on interstate sales of soya flour, resulting in a tax computation of Rs.12.33 crore and an additional demand of Rs.1.23 crore.

The petitioners contended that soya flour was covered under Notification No. 48 dated 23 April 2002 granting exemption to atta and besan, and further challenged the revisional action on jurisdictional and procedural grounds.

Rejecting the contention, the Court held that the exemption notification applied only to atta derived from cereals and besan derived from pulses, whereas soyabean is classified as an oilseed and not a pulse under the statutory scheme.

It further held that soya flour could not be equated with cereal-based flour and that extending the exemption would go beyond the express language of the notification. The Bench observed:

“The Assessing Authority wrongly accepted Soya Flour Soya Flour under 'flour' and passed an assessment order under Section 28(1) of the Act. Therefore, the order passed under Section 28(1) in this matter is adverse to government revenue. As the said order is detrimental to public revenue, let the same be taken into revision and suo motu revision proceeding under Section 62(3) of the "Madhya Pradesh Commercial Tax Act, 1994" be initiated.”

Accordingly, the High Court dismissed the petition, finding no error in the exercise of revisional jurisdiction or the consequent tax demand.

For Petitioner: Mukesh Agrawa, Advocate

For Respondent: Rajvardhan Dutt Padraha, Government Advocate