TMI Blog2010 (8) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... ka Value Added Tax Act, 2003 (hereinafter for short referred to as, the Act ) and the Central Sales Tax Act, 1956. The assessee is engaged in the manufacture and sale of animal feed and feed supplements. During the years 2005-06 and 2006-07 (up to October 2006), the assessee effected sales of various animal feed and feed supplements. The case of the assessee is, the product di-calcium phosphate (animal feed grade) is normally used by the assessee in the manufacture of animal feed. When the assessee had surplus stock of di-calcium phosphate (animal feed grade), they sold the same to their sole selling dealer who in turn sold the same to manufacturers 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 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the revisional authority was justified in interfering with the order passed by the first appellate authority and in holding that this particular item falls in the Third Schedule, as such he submits no case for interference is made out. In the light of the aforesaid facts and the rival contentions, the questions of law that arise for our consideration in this appeal are as under: (i) Whether the revisional authority was justified in invoking section 64 of the Act in interfering with the impugned order passed by the first appellate authority? (ii) Whether di-calcium phosphate (animal feed grade) fall under entry 5 of the First Schedule or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning it is of wide import and is not confined to loss of tax. . . . . . The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nourable Supreme Court in the form of dismissing the Department's civil appeal against it as noted above. We also note that the honourable Gujarat High Court has clearly and unequivocally quashed the circular of the Central Board of Excise and Customs noted above dated March 3, 1997 by their decision supra. Therefore, we find that the law with regard to the classification of this product is now clearly well-established one to the effect that the same shall be classified under 23.02 of the Central Excise Tariff Act, 1985.' 14.. The Department's civil appeal against this Tribunal's order was dismissed by the honourable apex court in their order dated July 19, 2001. 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 anim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of these proceedings was the subject-matter of the earlier proceedings. In fact the revisional authority has relied on yet another judgment of the apex court which on a proper construction would assist the assessee and do not support the order passed by the revisional authority. Under these circumstances, there is a jurisdictional error committed by the Additional Commissioner in exercise of his powers of revision, when the order passed by the first appellate authority was in consonance of the law declared by the apex court. The order passed by the first appellate authority was neither prejudicial to the Revenue nor was erroneous. Both the conditions are not satisfied in the 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 mixt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prefer to add the vitamins either to animal feed or to poultry feed separately. These products strengthen the nutritional quality of animal feeds. Thus, for example, items like Bournvita or Complan also add nutrients to milk. But they are not for that reason, medicines. In a general sense every kind of nourishment strengthens the body against ailment. But such nourishment cannot be considered as a medicine or a drug. The two products are also known in the trade as animal feed supplements and they are sold by the suppliers of animal feed. . . At para No. 4 it is held as under: The term 'animal feed' has not been defined in the Tariff Act excepting noting the ordinary dictionary meaning of the word or the user and understanding of the word in common parlance. In IS 97031980, it is found 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 33019029 and further that with regard to classification matters the description in the HSN has got very great persuasive value as held by the Supreme Court, High Court and Tribunals. According to the HSN under heading 2835, calcium hydrogenorthophosphate (di-calcium phosphate) (Ca HPO4 2H2O) is obtained by the action of an acidulated calcium chloride solution on di-sodium hydrogenorthophosphate, that it is a white powder insoluble in water, used as fertilizer; as a mineral supplement to animal fodder, and in the manufacture of glass medicaments, etc.; that calcium hydrogenorthophosphate containing not less than 0.2 per cent by weight of fluorine calculated on the dry anhydrous produce is excluded (1 leading No. 31.03 or 31.05); that in the di-calcium phosphate manufactured by the assessee, the content of fluorine 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Chapter 28 covering 'inorganic chemicals, organic or inorganic compounds of precious metals, of rare earth metals, of radio-active elements or of isotopes' in relation to group of products covered under the heading 'phosphates' so as to include within its scope di-calcium phosphate of animal feed grade. This judgment of the appellate authority is confirmed by the apex court. It is in this background, we have to decide this di-calcium phosphate (animal feeds) falls under which category. In this context, it is also useful to refer to the case of Dunlop India Limited and Madras Rubber Factory Limited v. Union of India reported in [1983] 13 ELT 1566 (SC). While deciding the classification of glass mirror, the apex court laid down the following principle of classification: The test commonly applied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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