Supreme Court Affirms Taxation of Maize Starch, Dismisses Appeals Seeking Exemption

In a significant ruling, the Supreme Court of India has upheld the taxation of maize starch and dismissed the appeals filed by Santhosh Maize & Industries Limited, seeking exemption. The bench, comprising Hon'ble Justice S. Ravindra Bhat and Hon'ble Justice Dipankar Datta, declared on July 4, 2023, "Maize starch falls under the taxation entry for 'sago and starch of any kind,' subject to a 4% tax rate."

The case centered on the classification and taxation of maize starch under the Tamil Nadu General Sales Tax Act. The appellant, Santhosh Maize & Industries Limited, argued for exemption based on an Exemption Notification issued by the Government of Tamil Nadu. However, subsequent amendments to the Act altered the entry for maize starch, making it subject to a 4% tax rate.

Represented by Mr. K.K. Mani, the appellant contended that Exemption Entry No. 8, covering products of millets, encompassed maize starch. The appellant relied on previous circulars issued by the Commissioner of Commercial Taxes to support their claim. Mr. C. Kranthi Kumar, representing the respondents, asserted that maize starch should be taxed under the broader category of 'sago and starch of any kind.'

The Supreme Court, after careful analysis of the provisions and amendments, concurred with the High Court's judgment. They stated, "Taxation Entry No. 61 encompasses maize starch under the category of 'sago and starch of any kind,' attracting a 4% tax rate." The Court emphasized that Exemption Entry No. 8 specifically applied to products of millets and did not extend to maize starch due to its status as a processed product.

Rejecting the appellant's argument regarding the retrospective effect of the Commissioner's clarification, the Court declared, "Clarifications issued by the Commissioner can have retrospective application to make the rate of tax explicit."

Consequently, the Supreme Court found no merit in the appeals and upheld the taxation of maize starch. Each party was directed to bear its own costs.

DATE OF DECISION: July 4, 2023

Santhosh Maize & Industries Limited vs The State of Tamil Nadu & Anr.