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TMI Blog2010 (8) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... cturers of animal feeds only. According to the assessee, the said product is classified under the First Schedule to the Act and, therefore, it is not liable to tax under the Act. The Assistant Commissioner of Commercial Taxes (Audit) passed an order under section 39 of the Act classifying the product di-calcium phosphate (animal feed grade) at entry No. 51 of the Third Schedule to the Act read with serial No. 62 of the notification dated April 30, 2005. Aggrieved by the same, the assessee preferred an appeal to the Joint Commissioner of Commercial Taxes (Appeals) under section 62 of the Act. The first appellate authority modified the order holding that the product di-calcium phosphate sold by the assessee is classifiable under entry 5(i) of the First Schedule to the Act. The Revenue did not prefer any appeal against the said order. However, the Additional Commissioner of Commercial Taxes, Zone II, Gandhinagar, Bangalore, in purported exercise of his power under section 64(1) of the Act revised the order, set aside the same and restored the order of the Assistant Commissioner of Commercial Taxes (Audit). Being aggrieved by the same, the assessee is in appeal before this court. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry No. 51 at serial No. 62 of the Third Schedule? Point No. (i):-Section 64 of the Act deals with revisional powers of Commissioner and Additional Commissioner. Sub-section (1) is sufficient for our purpose which reads as under: "64. Revisional powers of Additional Commissioner and Commissioner.-(1) The Additional Commissioner may on his own motion call for and examine the record of any order passed or proceeding recorded under this Act and if he considers that any order passed therein by any officer, who is not above the rank of a Joint Commissioner, is erroneous insofar as it is prejudicial to the interest of the Revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the person concerned an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment or directing a fresh assessment." A perusal of the aforesaid provision makes it clear that the said power could be exercised only when any order passed or proceeding recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. . ." The first appellate authority in its order has observed as under: "12. The classification of di-calcium phosphate (animal feed grade) has been settled by the honourable Supreme Court in the case of M/s. Kerala Chemicals and Proteins Ltd. (The appellant has purchased di-calcium phosphate-animal grade-from this party) in order dated July 19, 2001 wherein, the honourable Court upheld the classification of the product as 'preparations of a kind used in animal feeding' falling under tariff heading 2302.00 of the CET as it stood to February 28, 2005 and that entry is under heading 2309 with effect from February 28, 2005. 13.. The appellant has also filed copies of orders issued by the Commissioner of Commercial Taxes, Kerala and Commissioner of Central Excise, Calicut, wherein it is clarified that di-calcium phosphate falls under heading 2309.90.90 as 'preparations of a kind used in animal feeding'. Therefore, what will come under 2835.00 under this entry would be di-calcium phosphate other than animal feed grade. Hence, the impugned goods fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001. Thus the classification of di-calcium phosphate (animal feed grade) under heading No. 23.02 as product of a kind used in animal feeding had attained finality." Then the first appellate authority has referred to the relevant entries both under the First Schedule and the Third Schedule. Thereafter, it held di-calcium phosphate (animal feed grade) cannot be brought under heading No. 283500 as alleged in the notice. What will come under 283500 under this entry would be di-calcium phosphate other than animal feed grade. It is also necessary that all di-calcium phosphates should come under one entry alone. Di-calcium phosphate of animal feed grade continues to merit classification as "preparation of a kind used in animal feeding" under heading 2302 of the Central Excise Tariff as it existed prior to February 28, 2005 and under heading 2309 on or after February 28, 2005. In the absence of any change in the scope of Chapter 28 or heading No. 2835 both prior to and on or after February 28, 2005 either by way of change in the chapter notes or section notes, di-calcium phosphate (animal feed grade) cannot be brought under 28352500 merely because the said sub-heading refers to di-calcium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of this case and, therefore, the impugned order is liable to be set aside on this short ground. Point No. (ii):-In order to answer this point, it is necessary to first look at the entry No. 5 of the First Schedule as well as entry No. 51 at serial No. 62 of the Third Schedule, which reads as under: "5(i) Animal feed and feed supplements, namely, processed commodity sold as poultry feed, cattle feed, pig feed, fish feed, fish meal, prawn feed, shrimp feed and feed supplements and mineral mixture concentrate, intended for use as feed supplements." The above entry does not cover rat feed and rabbit feed. Hence not liable for tax exemption. Since the entry specifically mentioned the name of the items, the decision of the assessing authority is in order. The next issue is that, whether di-calcium phosphate is covered under the above entry as feed supplements, when sold to the dealer other than a manufacturer of animal feed. The reason given by the assessing authority to levy tax on sale of di-calcium phosphate is that it has been notified by the Government vide Notification No. FD 197 CSL 2005(6), Bangalore, dated April 30, 2005 as industrial inputs taxable at four per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 0.2 as below: 'In the field of animal feeds manufacturing industry a large number of feeding stuffs (ingredients) are utilised, which may be by-products of other industries and also subjected to certain processing before utilisation.' Para 5: The understanding of the Indian Standard Institution as referred in IS 9703, thus goes to suggest that ingredients by themselves cannot be termed to be animal feed. It may be a component or ingredient or a basic stuff, but it cannot be termed to be animal feed. A very common example on this score remains that of oil cakes- whereas oil cakes are used as protein supplement in livestock food stuffs and mixed with the animal feed, oil cakes by themselves cannot be termed to be an animal feed, since animal feed not only consists of its ingredients but the total bulk in form, shape and size which would feed an animal. Animal feed thus cannot be an ingredient or a part of the feed but in its entirety and as a whole taken together with even vitamins and calcium mix. Para 6: The whole substance thus is the mix and not any specific item as such. In the same manner, products which supplement animal feed and which generally added to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rine is less than 0.2 per cent by weight; that for this reason the product by its method of manufacture and use is outside the scope of tariff heading 28 and due to the contents of fluorine being less than 0.2 per cent is excluded from Tariff Heading 31; the beneficiaries of exemption of this product are farmers and persons rearing animals and birds in the rural areas; that it is for this reason the Government as a matter of pragmatic policy had fully exempted the product from excise duty and that the adoption of the eight digit tariff description had not in anyway changed the classification of the product." Accepting the arguments, the Tribunal has held as under: "The classification of di-calcium phosphate (animal feed grade) has been settled at the highest level, that is, at the apex court level in the party's own case in order dated July 19, 2001 wherein the honourable apex court upheld the classification of the product as 'preparations of a kind used in animal feeding' falling under Tariff Heading No. 2302.00 of the Central Excise Tariff as it existed prior to February 28, 2005 as held by the Tribunal in their order dated May 21, 1999. Further, it observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied to such cases is how is the product identified by the class or section of the people dealing with or using the product. That is a test, which is attracted whenever a statute does not contain any definition. It is a matter of common experience that the identity of an article is associated with its primary function. It is only logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between an article and the need it supplies in his life. It is the functional character of the article, which identifies it in his mind. Therefore, glass mirror is not treated as glass and glassware ever in trade parlance." Di-calcium phosphate (animal feed grade) is a feed supplement used in the manufacture of animal feeds. It is purchased by animal feed manufacturers for the preparation of animal feeds. The words "di-calcium phosphate" is not specifically mentioned at serial No. 62 in the Third Schedule. Similarly, the said product is also not mentioned at serial No. 8 in the First Schedule. It is not in dispute that the said product is a feed supplement used in the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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