2019 (7) TMI 1670 - HC - VAT / Sales Tax

Classification of goods - Lays Kurkure Cheetos Quaker Oats - whether taxable in the residual entry under the provisions of Pondicherry Value Added Tax Act 2007? - Notification issued on 31.07.2013 viz. G.O.Ms.No.25/F2/2013 by the Government of Puducherry - HELD THAT - It is undoubted and as rightly referred and relied upon by the Coordinate Bench of Madras High Court in the case of Pepsico 2009 (11) TMI 851 - MADRAS HIGH COURT that in order to decide the questions like the one involved in the present case the rule of interpretation is to adopt the common parlance test and the resort to residual entry cannot be made unless by no conceivable process of reasoning the commodities in question can be brought under any of the tariff items specified in the relevant Notification. As far as the settled legal position about invoking the residual entry and common parlance test is concerned not much of the serious debate is now left to be decided and the above two yardsticks for interpreting the relevant Notification are now well settled viz. to apply common parlance test and the resort to residual entry only if it is not possible to bring the commodity in question in the specified entry. The Special Entry like the Special Law overrides the General Entry or the General Law. Generalia Specialibus Non Derogant is a settled maxim for interpretation. By the Dictionary meaning and common parlance test again there is no iota of doubt that all broken grains or cereals including oats when cooked with water or milk will result in a food item which can be described as Porridge . It is on the breakfast table for most of us. So Porridge may be made of different grains and oats amongst them being one which in the present case has been sold under the brand name of Quaker and the same cannot be ruled out of the definition of Porridge so as to fall in the Entry 99 of III Schedule of the taxable at 5% . Again the contention of the learned counsel for the Revenue that it is to be taxed in the residual entry is devoid of any merit. The items in question viz. Potato Chips Salted in the brand name of Lays Salty Kurkure and Cheetos are taxable as Savories at the rate of 2 % in the Notification dated 31.07.2013 and Quaker Oats are taxable at 5 % as Porridge - Revision allowed.

Summary

Issues Involved:
1. Classification of Lays, Kurkure, Cheetos, and Quaker Oats under the Pondicherry Value Added Tax Act, 2007.
2. Applicability of the concessional tax rate under G.O.Ms.No.24/F2/2013 dated 31.07.2013.
3. Interpretation of "savories" and "processed vegetables" under the PVAT Act.
4. Taxability of Quaker Oats as "Porridge".
5. Validity of the Advance Ruling Authority's decision on the tax rate for Oats.

Issue-wise Detailed Analysis:

1. Classification of Lays, Kurkure, Cheetos, and Quaker Oats:
The Assessee contested the classification of these commodities, arguing they should be taxed at a lower rate as "savories" or "processed vegetables" rather than under the residual entry attracting a higher tax rate. The Tribunal had earlier held these items taxable under the residual entry at 14.5%.

2. Applicability of the Concessional Tax Rate:
The Assessee relied on G.O.Ms.No.24/F2/2013, which reduced the tax rate for "all kinds of cooked food, including sweets, savories and mineral water" from 14.5% to 2%. The Assessee argued that Lays, Kurkure, and Cheetos fall under "savories" and thus should be taxed at 2%.

3. Interpretation of "Savories" and "Processed Vegetables":
The court emphasized the common parlance test for interpreting tax entries. It noted that "savories" commonly refer to salty food items, which include Lays, Kurkure, and Cheetos. The court rejected the Revenue's argument that these items should be taxed under the residual entry at 14.5%, stating that the intention of the notification was to extend the benefit of a concessional tax rate to such items.

4. Taxability of Quaker Oats as "Porridge":
The Assessee argued that Quaker Oats should be taxed as "Porridge" at 5% under Entry 99 of the III Schedule of the PVAT Act. The court agreed, citing the dictionary definition of "Porridge" and common parlance understanding, which includes oats cooked with water or milk.

5. Validity of the Advance Ruling Authority's Decision:
The court criticized the Advance Ruling Authority's decision, which classified "Lion Oats" under the residual entry taxable at 14.5%, for lack of reasoning and non-application of mind. The court quashed this ruling, emphasizing the need for detailed reasoning in such decisions.

Judgment:
The court held that Lays, Kurkure, and Cheetos are taxable as "savories" at the concessional rate of 2% as per the Notification dated 31.07.2013. It also held that Quaker Oats are taxable at 5% as "Porridge". The Tribunal's order was set aside, and the case was remitted to the Assessing Officer to pass fresh orders in line with this judgment. The excess tax collected was ordered to be refunded with interest within one month. The revision petitions filed by the Assessee were allowed, and the connected miscellaneous petitions were closed.