The main legal point established in the judgment is that damaged rice and wheat fit for cattle/poultry feed fall under Entry 15 of the Fifth Schedule and are exempt from tax under the Karnataka Sales Tax Act.

( 1 ) PETITIONER is a registered dealer under the Karnataka Sales Tax 1957 (Act for short) carrying on business inter alia, in buying and selling damaged food grains (wheat and rice) nom Food Corporation of India.

( 2 ) FOOD Corporation of India (FCI for short) first respondent herein periodically issues tender notices for disposal of damaged food grains specifying the purpose for which such imaged food grains can be used The four specified purposes are: (1) fit for cattle/poultry feed; (2) fit for industrial use as manure as for use as manure; (3) fit for use as manure only; and (4) fit for manufacture of inedible starch only. Clause (L) (i) of the General terms and conditions of sale of damaged food grains provides thus: it is absolutely necessary that the buyer of any particular category of stock shall use the same only for the purpose indicated and shall make no attempt whatsoever for adulteration or misuse of the stocks. The Food Corporation of India will take a serious view of any breach of these conditions of sale. It will also not be open to the buyers to question the categorization of the stock as shown in the tender.

( 3 ) PETITIONER made several purchases in pursuance of tender Notices issued by FCI for disposal of damaged rice and wheat fit for cattle and poultry feed between the assessment years 1993-94 to 1998-99. Petitioner contended that even damaged rice and wheat continued to be wheat and rice and therefore they were exempted from payment of tax under Schedule V to the Act. It would appeal that FCI was however collecting sales tax at 2% under Part A-Entry 6 of Schedule-II treating the damaged rice/wheat as animal feeds. The petitioner claims to have paid such sales tax at 2% under protest, obtain release of the goods.

( 4 ) WHEN matters stood thus, the Commissioner of Commercial Taxes, Karnataka issued a clarification dated 18-8-1994 to FCI stating that damaged Rice and Wheat, which are unfit for human consumption is taxable at 8% on the first sale point under Section 5 (1) of the Act (as goods not falling under any of the schedules ). Having regard to the said clarification issued by the Commissioner of Commercial Tax on 18-8-1994, FCI, by its letter dated 4-9-1995 demanded the difference in tax at 6% in regard to sales under three invoices release orders dated 9-11-1994. Feeling aggrieved, petitioner filed W. P. No. 33686/1995 for quashing the demand letter dated 4-9-1995. Subsequently, petitioner filed W. P. No. 7971/1998 for a declaration that damaged wheat/rice purchased by him from FCI was taxable only at 2,10 under Part A Entry 6 of Schedule-II and not at the higher rate under Section 5 (1) of the Act. Both these Writ petitions were disposed of by a learned Single Judge, by the following common order dated 25-5-1998 without assigning any reasons: heard the learned Counsel. The Circular issued by the Commissioner date 18-8-1994 (Annexure-C) shall not be acted upon. Petitions stand disposed of with the above observations. It is stated that in respect of sales effected subsequent to the receipt of Commissioners classification dated 18-8-1994, FCI was collected Sales Tax under Section 5 (1) of the Act (initially at 8%, taken at 12% and at 10% from 1-4-1998 ).

( 5 ) THE petitioner by letter dated 18-1-1999 requested the FCI to reimburse Rs. 33,263/- being the sales tax and surcharge paid by him on purchase of damaged Rice/wheat between 14-7-1993 and 10-8-1998, on the ground that no sales tax was payable on such purchases. As the amount was not refunded, the petitioner has filed this petition. Subsequent to the filing of this petition petitioner received a communication dated 30-5-2000 demanding sales tax at 10% + cess at 5% in regard to sales of damaged rice effected from 28-10-1998. Petitioner amended the petition by adding a relief in respect of the communication dated 30-5-2000. The prayers in the writ petition are: (a) A declaration that damaged wheat and rice purchased from the responden