2010 (6) TMI 732 - HC - VAT and Sales Tax

Whether the Tribunal was justified in holding that margarine is an item falling under entry 64(8) (HSN No. 1517.10) taxable at 12.5 per cent under Notification S.R.O. No. 82 of 2006 issued by the Government under section 6(1)(d) of the Kerala Value Added Tax Act and not an item falling under entry 38(19)(d) of the Third Schedule to the KVAT Act which provides for other edible oils including vanaspati as claimed by the assessee? Held that - It is very clear that under the description of commodities the H.S.N. Code for margarine is 1517.10. The contention of the petitioner that the item falls under entry 38(19)(d) of the Third Schedule to the KVAT Act cannot be accepted because none of the items covered by the sub-entry (19) has the same HSN code for margarine provided in the customs tariff. In fact it is clear from entry 38(19) that all four items referred to there are covered under six digit HSN 1516.20. We are of the view that petitioner s contention that margarine falls under other edible oils falling under entry 38(19) is incorrect and unacceptable. We therefore hold that margarine in all forms fall under HSN code 1517 under the customs tariff and consequently it is covered by entry 64(8) of S.R.O. No. 82 of 2006 which has the same HSN code taxable at 12.5 per cent.

Summary

Issues:
Interpretation of entry for taxation under the Kerala Value Added Tax Act regarding the classification of "margarine" as an item.

Analysis:
The court examined whether "margarine" should be categorized under entry 64(8) (HSN No. 1517.10) taxable at 12.5% under a specific notification or under entry 38(19)(d) of the Third Schedule to the KVAT Act, as contended by the assessee. The court referred to a previous decision regarding the interpretation of entries in the KGST Act but proceeded to decide the issue on its merits due to differences in entries between acts. The petitioner argued that margarine, used in baking and made from vegetable oil, falls under entry 38(19)(d) of the KVAT Act. Conversely, the Government Pleader claimed that all forms of margarine are covered under common entry 64(8) of the notification. The court analyzed the entries under the S.R.O. and the Schedule, along with a certificate from the Chief Food Inspector explaining the distinction between types of margarine. The court also referred to the Customs Tariff Act for classification, concluding that margarine falls under HSN code 1517 and is taxable at 12.5%.

The court rejected the petitioner's argument that margarine should be classified under entry 38(19)(d) of the Third Schedule, as the HSN code for margarine did not align with the items listed under that entry. The court emphasized that margarine falls under HSN code 1517, not under the category of other edible oils. The court also addressed the petitioner's claim that only certain forms of margarine made with milk products should be taxed under a specific entry, stating that the Legislature did not intend for margarine to be classified under edible oils. The court highlighted the distinction in the Customs Tariff Act between vegetable and animal origin margarine, which is not covered under the Third Schedule to the KVAT Act.

Additionally, the court dismissed the reliance on notifications under the Entry Tax Act, emphasizing that classification under the VAT regime is based on HSN code numbers. The court upheld the Tribunal's order, confirming that margarine, in all its forms, falls under entry 64(8) of the Third Schedule to the KVAT Act and is taxable at 12.5%.