TMI Blog2011 (8) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... te of four per cent and not classifiable under entry 1 of the Schedule E, with a rate of tax of 12.5 per cent? 2. If the answer to question No.1 is in the negative under which Schedule entry are the products mouth freshener and mukhwas classifiable and what shall be the rate of tax on such products? The appeal is admitted and with the consent of counsel for the appellant and the respondent is taken up for hearing and final disposal. The respondent is a registered dealer under the Maharashtra Value Added Tax Act, 2002 ( the Act ). The respondent purchases spices such as fennel seeds, sesame seeds, oil seeds, cumin, cloves, cardamom, black pepper and dried ginger which are then subjected to a process of manufacture. The final product is sold in pouches as mukhwas or a mouth freshener. Literally speaking, the word mukhwas is comprised of two elements : mukh being mouth and was being fragrance. The respondent moved the Commissioner of Sales Tax under section 56, seeking a determination of three issues:- (i) Whether the process of preparing a mouth freshener by mixing fried spices with salt, sugar and other like material amounts to a manufacturing proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assification and submits that:- (i) It is well settled that in determining the issue of classification, the Court must be guided by the common parlance test; (ii) Though the respondent purchases spices in the first instance, a manufacturing process is involved in which the spices are combined with other ingredients, including salt, sugar and flavouring substances to produce a commercially distinct article which cannot be regarded as spices; (iii) Entry 91 of the Schedule C which comprehends within its purview, spices of all varieties and forms must nonetheless comprehend products which in common parlance are regarded as spices and would not include mouth fresheners manufactured by the respondent. The products, in the present case, involve inter alia the process of roasting and frying which the respondent has now conceded, involves a manufacturing process. On the other hand, counsel appearing on behalf of the respondent while submitting that admittedly the process engaged in by the respondent does involve manufacture and as a result of which a separate commercially distinct commodity comes into existence, stated that:- (i) Entry 91 of the Schedule C com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pipal, cumin seed, harde, amchur, pepper, sunth, black salt and sat nimbu. The product is sold as a mouth freshener. 7. Gilly Gilly mouth freshener:- The product is processed by mixing proportionate quantum of gulkand, betel nuts, fennel seeds and flavouring material. The processed product is sold as a mouth freshener. 8. Jiragoli Sp. mouth freshener:- The applicant purchases cumin seed, black pepper, sunth, dry mango, sat nimbu. Proportionate quantum of the above materials is mixed with sugar and the processed product is then sold as a mouth freshener. 9. Orangevati mouth freshener:- The applicant purchases cumin seed, black pepper, sunth, dry mango, gulkand, cassia and clove. Proportionate quantum of the above material is mixed with black salt and permitted flavours. The product is then sold as a mouth freshener. 10. Culcutta Mitha Pan mouth freshener:- The applicant purchases betel leaves, sweetened rose petals, fennel seeds, cardamom, cloves, sandal flavour, silver foil. The above materials are mixed proportionately and the final product is sold as a mouth freshener. Entry 91 of the Schedule C to the Maharashtra Value Added Tax Act, 2002, was at the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to turn. In A. P. Products v. State of A. P. [2007] 8 VST 373 (SC), the appellant purchased spices such as cumin seed, fenugreek, cinnamon and caraway from registered dealers and produced masala powder by mixing and grinding all these spices together. The appellant claimed that tax having been paid on the spices on their first sale, the sale of masaia powder was not subjected to further sales tax under the Andhra Pradesh General Sales Tax Act, 1957. A Bench of two learned judges of the Supreme Court placed extensive reliance on the law enunciated in an earlier judgment of four judges of the court in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC) ; [1976] 1 SCC 834, which was reiterated in Rajasthan Roller Flour Mills Association v. State of Rajasthan [1993] 91 STC 408 (SC) ; [1994] Supp 1 SCC 413. The principle of law as enunciated in the earlier decision was thus (page 325 in 37 STC):- ...Sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed. When spices are ground and mixed, it gives rise to a new product, which is a mixed masala. Different ingredients are used in preparation of masala after grinding and mixing several ingredients and when they are so ground they lose their own identity and character and a new product separately known to the commercial world comes into existence. Sales tax is levied on sale of commercial commodities, therefore, individual spices could be termed as different commercial commodities. When they are ground and mixed they give rise to a separate commercial commodity altogether which could be taxed separately. . . Apart from the abovementioned decisions of the Supreme Court, there is a judgment of a Division Bench of the Gujarat High Court in Acharyaashree Mahaprabhujini Ranavaswala Bethak Mandir Trust, Godhra v. General Manager and Deputy Industries Commissioner, Jamnagar [1991] 1 GLR 563, to which a reference has been made on behalf of the Revenue during the course of the submission. The petitioner manufactured Dhana-Dal which according to it, was used as mukhwas or a mouth freshener in a small quantity. The issue was as to whether the petitioner was entitled to the benefit of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of each of the ten products as a result of the manufacturing process. The manufacturing process involves in certain cases, the roasting or frying of spices to which several other additives are added including sugar, salt, or as the case may be, flavouring substances. The final product is one in the manufacture of which spices are used as ingredients. But the final product cannot be regarded as a spice nor for that matter as one which falls within the description of the expression spices of all varieties and forms . The character of the final product does not partake of the character of the individual ingredient. Though spices are used as ingredients, the manufactured article is not a spice or spices. Though entry 91 of Schedule C comprehends within its purview spices of all varieties and forms, the entry applies to a product which retains its essential character of being a spice. Having regard to the law laid down by the Supreme Court in the two judgments in Jalani Enterprises [2011] 39 VST 421 (SC) and A. P. Products [2007] 8 VST 373 (SC), we are of the view that the final products of the respondent noted earlier do not fall within the purview of entry 91 of Schedule C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The judgment of the Division Bench does not advance the contention of the respondent and is in a clearly different context. The Tribunal in the present case has placed extensive reliance on the position as it obtained under the Central Excise Act and on the Harmonized commodity description. In construing an entry not in the Central Excise Act; but under the Maharashtra Value Added Tax Act, 2002, the Tribunal, with respect, fell into error in placing reliance on the position as it obtained under Central excise legislation. The Tribunal was required to consider the entry, as it stands, in the Value Added Tax Act enacted by the State Legislature. For the reasons that we have already indicated, we are of the view that the Tribunal was in error in the view which it took. We accordingly allow the appeal by answering the first question in the negative. In our view, the Tribunal was not correct in holding that the products of the respondent were classifiable under entry 91 of Schedule C and that they were liable to tax at the rate of four per cent. There being no other competing entry, the product would fall for classification for the relevant period under residuary entry 1 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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