TMI Blog2011 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... hat hydrogenated edible oil like vanaspathi oil should be treated as edible oil. - The Tribunal was right when it came to the conclusion that margarine should be taxed @ 4% as it is edible oil. - Order of HC quashed. - Decided in favor of assessee - 7731 of 2011 - - - Dated:- 7-9-2011 - Mukundakam Sharma and Anil R. Dave, JJ JUDGMENT Anil R. Dave, J 1. Leave granted. 2. Being aggrieved by the judgement and order dated 22nd September, 2006, delivered in S.T.R. NO. 569 OF 2004 by the High Court of Kerala at Ernakulam, the appellant has filed this appeal. 3. The short question which arises for consideration in this appeal is whether sale of margarine is to be taxed at 8% or 4% under the provisions of Kerala General Sales Tax Act, 1963 (hereinafter referred to as the Act ). 4. The Sales Tax Officer held that margarine is a lubricant and animal fat, which is used for making bakery products, is neither edible nor inedible oil. According to him, edible oil is defined in circular no.2439/96/TD dated 19.2.96, where it is stated that edible oil includes refined or hydrogenated oil such as ground nut oil, refined oil and vanaspathi and, therefore, he hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garine is not oil. Considering all the above facts, we are of the view that margarine could be considered as edible oil. Since margarine is edible oil, the appellant is entitled to the benefit of the reduced rate of tax of 4 % as provided in Entry 17A of the Second Schedule of the Government notification S.R.O. No. 1725/93 . 6. Against the order of the Tribunal, the respondent - State Government filed a revision petition in the High Court of Kerala at Ernakulam. The question raised in the revision petition was whether the Tribunal was justified in granting concessional rate of tax on BISBRI brand of bakery margarine sold by the appellant by treating it as an edible oil under Entry17A of the Second Schedule as per notification SRO 1728/1993 for the assessment year 1997-98. The High Court in the impugned judgement held that BISBRI brand bakery margarine sold by the appellant cannot be used for all purposes for which edible oils are used. The High Court observed: ........The product description of Respondent's product in the leaflet further shows that the item is enriched with vitamin A and vitamin D and also contains permitted emulsifiers and stabilizers. Even though c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. The first one is the label of BISBRI bakery margarine. It is stated in the label that the said margarine is made from vegetable oils only and that it is enriched with vitamins A and D and is made from any or all of the following permitted ingredients: Refined and/or hydrogenated sunflower, soyabean, cottonseed, palmoline, palm and sesame oils, salt, permitted emulsifier and stabilizers . 9. Similarly, details of some other brands were given so as to substantiate his case that margarine is an edible oil, which is being used in eatables. He further submitted that the margarine used by the appellant does not become inedible oil just because it is meant for preparing bakery products. The question is not the use to which the oil is put but whether the oil is edible. The learned counsel for the appellant also argued that the intention of Entry 17A of the Second Schedule was to confer a concessional rate of tax at 4% for edible oils. Margarine, being hydrogenated oil and also edible, qualifies for the concession. 10. On the other hand, the learned counsel for the respondent contended that the notification SRO 1728/93 granted exemption only to edible oils, whereas Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw-material by bakeries and those who manufacture confectionaries. 15. Looking to the contents of margarine, it is clear that it contains all edible things. Margarine is used exclusively as a raw-material for preparing bakery products and is also used in confectionary industry. Like butter, margarine also contains almost 80% fat and remaining constituents of margarine are edible things which are added thereto by the manufactures of margarine. Vegetable and hydrogenated oils are used in manufacturing margarine and as it is used for making eatables, margarine is also edible though it is not used for normal cooking as other oils like coconut, sunflower, soyabean, sesame oils are used but it can not be disputed that it is an edible oil. 16. So far as imposition of tax under the Act is concerned, there are two relevant entries, which are as under: First Schedule of KGST Act: Sl. No. Description of goods Point of levy Rate of tax (percentage) 90. Oils, edible or inedible including refined or hydrogerated oils and margarine not elsewhere mentioned in this Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31.3.1995 includes refined or hydrogenated oil such as groundnut oil, gingely oil, refined oil and vanaspathi. Thus, the term edible oil has been explained by virtue of the circular dated 19.12.1996. The afore-stated circular makes it clear that edible oil like refined or hydrogenated oil such as groundnut oil, gingely oil, refined and vanaspathi oils are to be taxed @ 4% and not at @8%. The definition of edible oil given in the aforestated circular is not dealing exhaustively with all edible oils. It merely illustrates some of the oils which are edible oils. It means that the definition of the term edible oil in the circular is not exhaustive but is illustrative. This circular does not say that only edible oils referred to in the said circular would be taxed @4%. 19. In the aforestated circumstances, one has to consider whether margarine can be considered as an edible oil. We clearly understand that edible oil is that oil which can be used for human consumption. It is not necessary that all edible things should be consumed in the form in which they are available. There are number of ingredients used in cooking for preparation of food articles which we do not cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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