TMI Blog2011 (3) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... nutralite table margarine, it cannot be said that the product manufactured by the appellant is a vegetable oil covered under Schedule C, entry 100 or hydrogenated vegetable oil covered under heading Schedule C, entry 102. Nutralite table margarine manufactured by the appellant is classified under the residuary entry under heading E1 and not under heading Schedule C, entry 100 as held by the MSTT. - Sales Tax Appeal No. 1 of 2010 in VAT Appeal No. 16 of 2007 - - - Dated:- 4-3-2011 - J. P. Devadhar, Mridula Bhatkar, JJ. V. A. Sonpal for the Appellant C. B. Thakar for the Respondent JUDGEMENT Mridula Bhatkar, J:- This appeal is preferred by the appellant against the order dated August 2, 2008 passed by the Second Bench of the Maharashtra Sales Tax Tribunal at Mumbai ( MSTT , for short) by which it was held that nutralite table margarine is classifiable under Schedule C, entry 102 of the Maharashtra Value Added Tax Act of 2002 and therefore, it is taxable at the rate of four per cent. In the present appeal, the following question is required to be answered:- Whether the product, nutralite table margarine, manufactured by the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule C or Schedule E, one has to consider predominant use and ancillary use of the product, i.e., margarine. He argued that if one goes to the shop and places order for vegetable oil, nobody will give nutralite table margarine for vegetable oil. Vegetable oil is not directly consumable or edible. The learned counsel in order to buttress his submissions, relied on common parlance test and reversible test. He elaborated that if nutralite table margarine is gained after process of emulsification on the palm oil, it cannot be reverted back to palm oil. Per contra, learned counsel appearing for the respondent-assessee, submitted that nutralite table margarine is covered by Schedule C, entry 100. Vanaspati is a hydrogenated vegetable oil which is taxable at four per cent. Margarine is obtained by the process of hydrogenation and emulsification, yet it does not lose its character of a vegetable oil. Nutralite table margarine is made salty to add taste and to make it usable. The learned counsel has submitted that nutralite table margarine is also a margarine which can be used for baking and cooking. Further it is specially processed to reduce the percentage of bad cholesterol and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covers vegetable edible oil. Nutralite table margarine is made out of palm oil which is a vegetable oil, that means nutralite itself is not a vegetable oil. Table margarine is a vegetable oil based product. Therefore, a reversible test can be successfully applied. It is argued that table margarine if heated becomes oil and again gets converted in solid stage after chilling. Argument was advanced on the basis of test of reversibility and on the basis of cases in Punjab Aromatics v. State of Kerala reported in [2008] 14 VST 519 (SC) where it is held that (page 524 in 14 VST):- The 'test of irreversibility' is an important criterion to ascertain as to when a given process amounts to manufacture. In the present case that test is not satisfied. In the present case, the Tribunal has examined the process and has come to the conclusion that by adding impurities to the sandalwood oil the product could become red oil once again. In the circumstances, it cannot be said that red oil and sandalwood oil are two separate and distinct products as held by the High Court overruling the judgment of the Tribunal. In Dakini Health Foods Pvt. Ltd. v. State of Maharashtra in Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant and paramount test of fixing the classification and the entry of the commodity under the VAT is whether the product in issue is a distinct marketable commodity or not. A commodity should be distinguishable from its mother product in its character, ingredients, nature, form, look, use, pack, etc., and secondly, it is to be recognized as an independent separate commodity in the market. The term marketable connotes two aspects, i.e., firstly the product should be saleable in the market and secondly it should establish its own identity as a commodity in the eyes of the consumer. Thus though one or two guiding principles may be applicable to a product but if the product refuses to merge into its original product and establishes its own identity in the market then it is treated as a distinct marketable commodity. Due to emulsification, a semi-solid product emerges out of a palm oil and though a test of reversibility and predominant component is applicable to it, other 20 per cent ingredients, i.e., water, fatty acid, milk powder and salt, undoubtedly transform the product as a distinct marketable commodity as it severes itself from its family of vegetable oil. In Shri Chitta Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that their product is nothing but a margarine which is used for spread and therefore, they labelled it as nutralite table margarine. For the purpose of classification in the Schedule of the Maharashtra Value Added Tax Act, it is immaterial how the product is advertised, under what name and title the commodity is marketed by the manufacturer. Not the label but the contents, ingredients in the product and its nature and form are required to be considered whether it is a distinct marketable commodity or not. In C. C. Mahajan and Co. v. State of Bombay reported in [1958] 9 STC 133 (Bom), the articles before the Division Bench were toilet articles and soaps. It was held that ...what a manufacturer calls an article does not determine its true character or his liability to tax under the Sales Tax Act ; and it is only the character of the article that attracts the tax and not the name by which it is known in the market... Similar view is taken in Commissioner of Sales Tax, Maharashtra State, Bombay v. La Beta Products reported in [1985] 59 STC 221 (Bom), when the auto sticking bindies were sold under the name of beauty spots as toilet articles and they fall within the entry in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shtra reported in [2004] 136 STC 462 (Bom) and Mauri Yeast India Pvt. Ltd. v. State of U. P. reported in [2008] 14 VST 259 (SC). It was also argued that when two views are possible, one which favours the assessee should be adopted. However, in the present case, no such settled view was taken in respect of nutralite. In the present case palm oil is subjected to the process of emulsification and the resultant product that emerges is nutralite table margarine. Admittedly, table margarine is considered to be a distinct marketable commodity under the Central Excise Act. The fact that the said product is exempted from payment of Central excise duty would not mean that the nutralite table margarine is not manufactured by the appellant. Moreover, unlike palm oil, the nutralite table margarine is used as a bread spread which clearly shows that a distinct product is manufactured. Vegetable oil falling under heading Schedule C, entry 100 when subjected to the process of hydrogenation, the resultant product is classified under heading Schedule C, entry 102 as hydrogenated vegetable oil. Hydrogenated vegetable oil when subjected to the process of emulsification, margarine is obtained. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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