TMI Blog2010 (9) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. - C.W.P. No. 1506 of 2009 - - - Dated:- 9-9-2010 - KURIAN JOSEPH C.J. AND RAJIV SHAARM , JJ. The judgment of the court was delivered by KURIAN JOSEPH C.J. Whether potato chips would fall within the classification of processed vegetables in the Schedule under the Himachal Pradesh Value Added Tax Act, 2005, is the question essentially to be tackled in this case, though several other legal and factual issues are also raised ancillary thereto. The petitioner-company is . . . engaged in the sale of processed potato, i.e., potato chips under the brand name 'Lays' and 'Uncle Chips'. The processes involved in obtaining potato chips from potato are very simple, namely, slicing, frying and adding salt-spices or flavouring agents (extracted from the writ petition). The Himachal Pradesh Value Added Tax Act, 2005 came into effect from April 1, 2005. The charging provision under section 6, to the extent relevant, reads as follows: 6. Levy of tax. (1) Subject to the provisions of this Act, there shall be levied a tax, (a) at every point of sale in respect of the goods specified in the second column of Schedule A, (b) at the prescribed points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Processed meat, poultry and fish. 95. Spices of all varieties and forms including cumin seed, aniseed, turmeric and dry chillies. 98. Starch. 109. Vegetable oil including gingili oil and bran oil. A bare comparison of the two Schedules would give a clear indication that though the Legislature exempted certain goods wholly from tax, if the very same exempted goods are processed in the manner indicated in Schedule A, Part II, such goods are liable to tax at four per cent. and in respect of other processes not indicated in Schedule A, Part II, such goods are to be covered by the Part III, residuary entry. In this context, it is also required to refer to the definition of the term goods as appearing under section 2(k) of the Act, which reads as under: (k) 'goods' means every kind of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes livestock, all materials, commodities and articles and every kind of property (whether as goods or in some other form) involved in the execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods would be covered only by Part III, the residuary entry. Under the exempted goods covered by Schedule B, potato is at entry No. 26. Other items in entry No. 26 are garlic, ginger, green chillies, onions, sweet potatoes, tapioca and their seeds. Entry 22 is fresh fruits, No. 25 is fresh vegetables, 39 is meat, fish, prawn and other aquatic products when not cured or frozen; eggs and livestock and animal hair (except when sold in sealed container). The Legislature in Schedule B having specifically exempted all agriculture and horticulture produce under entry No. 2, fresh fruits under entry No. 22, fresh vegetables under entry No. 25, potato under entry No. 26, meat, fish, prawn, etc., under entry No. 39, deemed it fit to impose tax at four per cent, on coffee, beans and seeds, cocoa pod, tea of all kind (whether leaves or in processed form) and chicory under entry No. 21, on dry fruits under Sl. No. 30, flour (atta), maida, suji, besan, etc., under Sl. No. 39, fried and roasted grams under serial No. 41, herbs, bark, dry plants or dry roots (jari booti) and dry flowers under processed fruits under entry No. 78, processed vegetables under entry No. 78, fruit jams, jelly, pickles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts except pickles. Though fruits are also sometimes used to make pickles-achars (and sometimes meat, fish including prawns are also used to make pickles), in common parlance, nobody would dare to give the colour and company to the group of pickles or paste or jam or jelly or fruit squash with potato chips. Potato chips in common parlance are known as snacks. No doubt, they are vegetable in content; but in form, it is not specified as an item either under entry 78 or any other entry under four per cent group of Part II of Schedule A despite indicating several all such processed goods, the basic form of which are exempted under Schedule B. The petitioner-assessee itself understood potato chips as an item covered by the residuary entry as is born out from the fact that from 2005 to 2008, the petitioner had paid tax at 12.5 per cent, only treating it as covered under the residuary entry. Only in the year 2008, the objection is raised by the petitioner who made a self-classification on re-thinking after three years of payment of tax, to be covered by the four per cent group under entry No. 78 in Part II of Schedule A, as a processed vegetable. It has also to be specifically noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, would attribute to it'. Such words must be understood in their 'popular sense'. The particular terms used by the Legislature in the denomination of articles are to be understood according to the common, commercial understanding of those terms used and not in their scientific and technical sense 'for the Legislature does not suppose our merchants to be naturalists or geologists or botanists'. The expression 'timber', it seems to us, has an accepted and well recognised legal connotation and is nomen juris. It has also a popular meaning as a word of everyday use. In this case, the two meanings, of 'timber' the legal and the popular, coalesce and are broadly subsumed in each other. It may be noted that the apex court in the said decision held that stacks of eucalyptus-wood sold by the Forest Department after separating the Ballies and Poles do not constitute and answer the description of timber under the Madhya Pradesh General Sales Tax Act, 1958. In Collector of Central Excise, Bombay-I v. Parle Exports (P) Ltd. reported in [1989] 75 STC 105; AIR 1989 SC 644, the apex court held as follows (at page 116 of STC): . . . The expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner-company that potato chips should be taken to be included in the general expression processed vegetables . The reliance placed on the decision of the apex court in Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. reported in [1989] 72 STC 280 (SC); [1989] 1 SCC 150, wherein it has been held as follows (at page 289 of STC): . . . But there is a word of caution that has to be borne in mind in this connection, the words must be understood in popular sense, that is to say, these must be confined to the words used in a particular statute and then if in respect of that particular items, an artificial definition is given in the sense that a special meaning is attached to particular words in the statute then the ordinary sense or dictionary meaning would not be applicable but the meaning of that type of goods dealt with by that type of goods in that type of market, should be searched. . . has no relevance or application in the instant case. The Legislature has not given any artificial definition or attributed a special meaning to processed vegetables. In fact, the intention of the Legislature is to the contrary by attributing a special meaning t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conditions and exception 17. Fresh plants, saplings and fresh flowers 18. Fresh vegetables and fruits 19. Garlic and ginger 24. Meat, fish, prawn and other aquatic products when not cured or frozen; eggs and livestock and animal hair The Second Schedule deals with goods taxable at four per cent. To the extent relevant, we may extract the Schedule as under: SECOND SCHEDULE (at the relevant time) Sl. No. Description Rate of tax (paise in the rupee) 31. Flour, atta, maida, suji and besan 4 32. Fried grams 4 35. Herb, bark, dry plant, dry root, commonly known as jari booti and dry flower 4 80. Processed or preserved vegetables and fruits including fruit jam, jelly, pickle, fruit squash, paste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. v. State of Andhra Pradesh reported in [1994] 92 STC 239 (SC); [1994] Supp. 1 SCC 429. The question considered in the said decision was where the entry livestock, that is to say, all domestic animals such as oxen, bulls, cows, buffaloes, goats, sheep, horses, etc., would take in chicks though in the scientific and technical sense and meaning of the words livestock and animals , chicks are also included. The Supreme Court reiterating also the settled proposition that expressions occurring in sales tax statutes must be understood in their popular sense, in the sense in which people conversant with the subject-matter with which the statute deals with would attribute to it, held that chicks will not be covered by the expression domestic animals. It was held that the animals mentioned in the class are illustrative of the class or nature of group of animals and that chicks cannot take the shade or colour from the group of domestic animals indicated in the entry, being generally included in the group of birds. It will be profitable to refer to the paragraph 6 of the judgment wherein various celebrated decisions have been discussed (at pages 243-244 of STC): 6. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to words used in a taxing statute has also been adopted in English, Canadian and American courts. Pollock, B., pointed out in Grenfell v. Inland Revenue Commissioners [1876] 1 Ex. D. 242 at 248, that if a statute contains language which is capable of being construed in a popular sense such 'a statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning of course, by the words popular sense , that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. So also the Supreme Court of Canada said in Planters Nut and Chocolate Co. Ltd. v. The King [1952] 1 DLR 385, while interpreting the words fruit and vegetable in the Excise Act: They are ordinary words in every day use and are, therefore, to be construed according to their popular sense . The same rule was expressed in slightly different language by Story, J., in 200 Chests of Tea [1824] 9 Wheaton (U.S.) 430 at 435; [22 US (9 Wheaton) 430, 438], where the learned Judge said that the particular words used by the Legislature in the denomination of articles are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, fruit squash, fruit drink, fruit juice and pickles have been specified. Potato chips, as discussed above, in common parlance cannot be included in that group; it is a processed food, snacks. It is significant in this context to note that the Gauhati High Court(1) has analysed and understood the above aspect of the matter in that manner only, as can be seen at paragraph 21, wherein it is stated (at page 49 of 25 VST): . . . 'Potato chips' processed or manufactured from potato, though it may be sold or purchased as a snack item, discloses certain common characteristics or features that are to be found in fruit or vegetable items specifically included under entry 80. In such a situation, we are of the view that it would be correct to hold that 'potato chips', though not specifically included, yet, as the same have not been excluded either, would come within the inclusive definition of 'processed vegetable or fruit' so as to fall under entry 80 of Part A of the Second Schedule to the Act. Under the H.P. VAT Act, as discussed above, there is no exclusion by omission, there is only inclusion by express specification. It has also to be noted that inclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profitable to refer to the guidance at paragraphs 12, 13 and 14 of SCC of Royal Hatcheries Pvt. Ltd. [1994] 92 STC 239 (SC); [1994] Supp. 1 SCC 429 (at paragraphs 9, 10 of STC): 9. Certain notifications and clarifications issued by the Central Board of Direct Taxes under the Wealth Tax Act and the Income-tax Act and by the Central Board of Excise and Customs under the Central Excise Act are brought to our notice which say that hens on a poultry farm are animals, that poultry farming falls within the meaning of animal husbandry and that poultry feed is treated as animal feed respectively. It is also pointed out that the Indian Customs Tariff Act, 1986-87 has classified 'poultry' as a species of 'live animals'. Reliance is also placed upon a textbook 'Genetics and Animal Breeding' by Maciejowski wherein domestic animals have been divided into five broad categories, namely, cattle, oxen, swine, sheep and poultry. Domestic animals are also classified into farm animals and those which are merely associated with farms. 10.. On the other hand, Mr. C. Sitaramiah, the learned counsel for the State of Andhra Pradesh, relied upon the following decisions in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the said decision are the Immigration Rules. It may not be altogether out of context to also make an observation that in all other contemporaneous expressions regarding the classification of potato chips as processed vegetable, the context related to food processing and the promotion and encouragement, the Ministry concerned intended to give to such sectors. It is a well-settled position that there is no equity in tax as held in Cape Brandy Syndicate v. Commissioners of Inland Revenue [1921] 1 KB 64: In a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. In Pepsico India Holdings Pvt. Ltd. v. Commissioner of Commercial Taxes, Chennai reported in [2010] 29 VST 214, the Madras High Court has followed the Gauhati decision See [2009] 25 VST 41. and yet we may deal with the factual position and dispute involved in that case. Entry 51 of Part B of the First Schedule to the Tamil Nadu VAT Act, specifically dealt with chips, for tax at four per cent. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered and on that angle also, the decision is to be distinguished on facts and hence, we regret, we are unable to be persuaded by the decision of the Madras High Court as well. The situation with the Punjab and Haryana High Court is also not different. Under the Punjab Value Added Tax Act, 2005, the exempted goods under item 18 of Schedule A entry reads as follows: SCHEDULE A Fresh fruits and vegetables. Potato is not an item included to the exempted category. In Schedule B, for four per cent tax, entries 75 and 88 read as follows: 75. Seeds, other than seeds of grass vegetables and flowers. 88. Processed fruits and vegetables, i.e., fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice (whether in sealed container or otherwise). The Punjab and Haryana High Court has followed the decision of the Gauhati High Court and that of the Madras High Court. However, it is interesting also to note that under the Punjab VAT Act, entry No. 88 prior to the amendment specifically included potato chips as an item taxable at four per cent and the same was taken away, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, which is the residuary entry. List of goods taxable at 12.5% Goods not mentioned in any other Schedule. Therefore, also all taxable goods not mentioned elsewhere are to be governed by the residuary entry. Unfortunately, these aspects of the matter have not been brought to the notice of the Punjab and Haryana High Court and thus not considered and hence, we are unable to be persuaded by the judgment of the Punjab and Haryana High Court, as well. In Nestle India Limited v. State of Uttarakhand [2010] 31 VST 404 (Uttara), learned single judge of the High Court of Uttarakhand considered the question as to whether tomato sauce would come under the category of fruit jams, jelly, fruit squash, paste, fruit drink, fruit juices and aachar. It has been held in the affirmative. We have no quarrel with the said decision since tomato sauce should take the shade and colour from the enumerated items of processed or preserved vegetables, illustrated as jelly, jam, paste squash, etc. But, by no stretch of imagination, potato chips can be included in that category. We may also refer to yet another contention advanced by the learned senior counsel Sh. Lodha, appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would depend on the language used for the Schedule and the specific expression of entry in the Schedule. Viewed as above, potato chips being not specified elsewhere would come only under the residuary entry. In other words, an unspecified article in the background of the legislative intent which we have already discussed above has a definite parentage under the residuary entry as an item not specified elsewhere. We may also deal with the last contention that in the event of any doubt the benefit should go to the assessee. No doubt, it is a well-settled position that in the event of any doubt, the benefit should go to the assessee. See the decision in Mauri Yeast India (P) Ltd. v. State of Uttar Pradesh [2008] 14 VST 259 (SC); [2008] 5 SCC 680. In the instant case, there is no doubt or ambiguity regarding the entry. Potato chips are to be covered by the residuary entry only since the legislative intent is very clear from the statute. In Mauri Yeast [2008] 14 VST 259 (SC); [2008] 5 SCC 680, it has been held that only if there is a conflict between two entries, between a specified tariff entry and residuary entry, the specified entry should be preferred. In the instant case, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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