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State of Karnataka Versus Merino Industries Ltd.

2015 (4) TMI 1000 - KARNATAKA HIGH COURT

Classification of goods - Clarification of the rate of tax applicable - Whether the commodities (a) to (e) namely, Vegit-Aloo hara bara kebab, vegit aloo veg cutlet, vegit aloo yummy cheese balls, vegit mazedar bonda and vegit aloo jatpat tikki, are covered by Entry 3 to the third Schedule of the Act attracting levy of tax @ 4% or falls under the residuary entry, liable to be taxed at a higher rate - Held that:- While construing the provisions relating to commodity classification, the understand .....

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he ordinarily understanding of the phrase by a common man. Normally, 'processed vegetables' can be accepted as an alternative to 'fresh vegetables'. The 'processed vegetables' generally available in the market are in different forms viz., canned, frozen, dried, juiced. The benefits of these processed vegetables and fruits is for convenience, longer shelf life and availability around the year. - The commodities (a) to (e) referred to above are classified as, 'commodities falling under residuary e .....

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by the learned Single Judge in Writ Petition No.40521/2010 dated 10.02.2011. 2. The brief facts of the case are: - The respondent is a registered dealer under the provisions of the Karnataka Value Added Tax Act (hereinafter referred to as 'the Act' for brevity). Respondent filed an application under Section 59(4) of the Act seeking clarification of the rate of tax applicable under the Act on the following commodities, the detailed description of the commodities are as follows: (a) Vegit- .....

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east extract, mixed spices, maltodextrin, hydrolysed vegetable protein, flavour enhancer and spice oleoresins. The dehydrated vegetable content in the entire pack of Vegit Aloo Veg Cutlet is 85%. (c) Vegit-Aloo Yummy Cheese Balls: Ingredients are dehydrated potato flakes (51%), cheese powder (15%), skimmed milk powder, potato starch, maltodextrin, dehydrated onion bits, edible vegetable fats, mixed spices, common salt, flavour enhancer. The dehydrated vegetable content in the entire pack of Vegi .....

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kes (73%), potato starch (10.5%), edible veg fat, cheese powder, yeast extract, salt, maltodextrin, mixed spices, flavour enhancer, spice oleoresins. The dehydrated vegetable content in the entire pack of Vegit Aloo Mazedar Bonda is 83.5%. 3. The Commissioner of Commercial Taxes by order dated 24.07.2010 clarified that the commodities in question i.e., vegit aloo hara bara kebab, vegit aloo veg cutlet, vegit aloo yummy cheese balls, vegit mazedar bonda and vegit aloo jatpat tikki are unscheduled .....

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stion falls under Entry 3 of the III Schedule to the Act and as such exigible to levy of tax @ 4%, the State is in appeal before this Court. 4. Heard the learned counsel appearing for the parties. 5. Learned counsel Sri K M Shivayogiswamy appearing for the revenue argued that Entry No.3 of the III Schedule to the Act enumerates the goods liable to tax at 4% and the said Entry covers only the processed fruits and vegetables including fruit jams, jelly. pickle, fruits squash, paste, food drink and .....

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evenue also placed reliance on the Judgment of the High Court of Himachal Pradesh in Pepsico India Holdings (P.) Ltd. v. Assessing Authority ((2010) 36 VST 563 (HP)) and Raman Boards Ltd. v. State of Karnataka (STRP Nos.389-435 of 2012, dated 20-8-2014). 7. Learned Senior Counsel Sri K P Kumar, appearing for the assessee/respondent contended that the Entry 3 of III Schedule to the Act is not a restricted entry, the word "including" enlarges the scope of the preceding words viz., " .....

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and mixed with certain ingredients to make it a snack mix. As such, giving a different interpretation to the product, would defeat the intention of the Legislature. The learned Single Judge having examined these aspects has rightly held that the products in question fall under Entry 3 of third Schedule to the Act and it does not call for any interference. Reliance was placed on the following judgments: 1. M/s Saraswathi Sugar Mills v. Haryana State Board and Others (AIR 1992 SC 224). 2. Stovekr .....

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l on record the only question that arises for our consideration is : "Whether the commodities (a) to (e) namely, Vegit-Aloo hara bara kebab, vegit aloo veg cutlet, vegit aloo yummy cheese balls, vegit mazedar bonda and vegit aloo jatpat tikki, are covered by Entry 3 to the third Schedule of the Act attracting levy of tax @ 4% or falls under the residuary entry, liable to be taxed at a higher rate?" 9. Entry 3 of the third schedule to the Act reads thus: "All processed fruit and ve .....

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eparation of vegit snack mix is as under: a. The potatoes are peeled trimmed and sliced to about 5/8 inches thickness. The potatoes are then cooked at a temperature between 150 degree Fahrenheit and 165 degree Fahrenheit. This is done to ensure that the starch in the potato is gelatinized. The potatoes are then cooled to stop the cooking process. After a while they are cooked again. Certain additives are incorporated into the mash before drying to improve the texture and shelf life. The final st .....

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ld that, "the Masala powder prepared after grinding and mixing various spices and the condiments in certain preparation is commercially a different commodity liable to be taxed." The Hon'ble Supreme Court in the said Judgment has further held as under: "The ingredients used in preparation of masala after grinding and mixing lose their own identity and character and a new product separately known to the commercial world comes into existence. The sales tax is intended to tax sal .....

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hile considering the expression "cooked food" used in certain notifications issued under the U.P. Sales Tax Act, 1948 can be construed as including within its meaning biscuits also, has held that: "It may be that biscuit is served at tea time and in its wider meaning "cooked food" may include biscuit. But ordinarily biscuit is not understood as cooked food. If a person goes to a hotel or restaurant and asks for some cooked food or *pakaya hua bhojan certainly he will not .....

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es "parts" as well as "accessories" which are required for use in projectors or other cinematographic equipment. We think that the Andhra Pradesh High Court correctly held that the main use of the arc carbons under consideration was duly proved to be that of production of powerful light used in projectors in cinemas. The fact that they can also be used for search lights, signaling, stage lighting, or powerful lighting for photography or other purposes may be required, could n .....

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e understood in its popular and commercial sense with reference to the context in which it occurs." 16. The learned Senior counsel appearing for the assessee heavily relied upon the decision of the High Courts of Guwahati, Madras and Uttarakhand in the case of Pepsico India Holdings (P.) Ltd. (supra), wherein the question involved was, "Whether potato chips sold under the brand names "Lays" and "Uncle Chips" would be classified as 'processed vegetables' or d .....

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t from October 16, 2008, the entry 80 of Part A of the second schedule to the Assam VAT Act, reads as follows: "Processed or preserved fruits and vegetables excluding fruit jams, jelly, pickles, fruit squash, paste, fruit drinks and fruit juice but excluding 'potato chips', banana chips and cooked preparation of the vegetables and fruits." 18. By the said amendment, 'potato chips' are excluded by explicit terms. Considering the legislative history of the said entry and .....

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r to the amendment, what would be inferred is that 'potato chips' was included in the processed vegetables. The very same commodity 'potato chips' has not been considered as a processed vegetable in the case of Pepsico India Holdings (P.) Ltd. (supra) by the High Court of Himachal Pradesh. However, this issue is pending consideration before the Apex Court. Be that as it may, we are not dealing with the classification of the 'potato chips' in the present case. Under the ci .....

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uding' enlarges the meaning of the words 'processed vegetables', reliance is placed on the Judgment of the Apex Court in the case of Rajasthan Taxchem Ltd. reported in (2007) 5 VST 529 (SC) and our attention was drawn to paragraph 23 of the said Judgment which reads thus : "We have already extracted the definition of "raw material" under section 2(34) which specifically includes fuel required for the purpose of manufacture as raw material. The word "includes" .....

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as considering the definition of 'raw material' as it stood in the Rajasthan Sales Tax Act and the question that was considered by the Apex Court was, "Whether the diesel can be called raw material in the manufacture of polyester yarn." In that context, the Hon'ble Supreme Court has held that diesel being specifically and intentionally included in the definition of raw material by the Legislature, the question whether it is directly or indirectly used in the process of manu .....

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ic or farming use; fit for use, has arrived at a conclusion that the word, 'all' and 'including' has special significance and classified stainless steel stove, kerosene stove and vacuum flask as utensils. 22. To distinguish between "manufacture" and "processing", the learned Senior Counsel for the assessee relied on the judgment of the Hon'ble Supreme Court in case of M/S. SARASWATHI SUGAR MILLS VS HARYANA STATE BOARD AND OTHERS has held as under : "1 .....

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form involves progressive action in performing, producing or making something. (Vide Corn Products Refining Co. v. Federal Trade Commission, (1994) CCA 7: 144 F 2d 211)." 23. The learned counsel appearing for the revenue placed reliance on the judgment of this Court in the case of Raman Boards Ltd. M/S. RAMAN BOARDS LTD., VS. THE STATE OF KARNATAKA (STRP Nos.389-435/2012, D.D.20.8.2014) wherein it is held at para 38 as under :- "38. There are a number of factors which have to be taken .....

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egard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the enactment. If the tax-payer is within the plain terms of the exemption, he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the enactment or by necessary implication there from, the matter is different. The normal function of the word 'including' in an entry .....

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ry. The item about which there is no scope for doubt or there is comparatively less scope for doubt would accordingly stand automatically covered by the main items in the entry. In the absence of any inclusion or exclusion of words in the expression "paper, it must be held that it includes 'all kinds of paper'." 24. The Hon'ble Supreme Court in the case of Hindustan Aluminium Corporation vs State of U.P. reported in AIR 1981 SC 1649 dealing with the expression, 'includi .....

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he word "metal" and must be understood in a conjunctive sense, as a substitute for "and". This is the reasonable and proper construction having regard to the scheme followed in the framing of those notifications.' 25. We have bestowed our anxious consideration to the rival contentions and the judicial pronouncements referred to above. Thus, it is clear that while construing the provisions relating to commodity classification, the understanding of the commodity in its popu .....

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nding of the phrase by a common man. Normally, 'processed vegetables' can be accepted as an alternative to 'fresh vegetables'. The 'processed vegetables' generally available in the market are in different forms viz., canned, frozen, dried, juiced. The benefits of these processed vegetables and fruits is for convenience, longer shelf life and availability around the year. This is the general perception of the common man as regards 'processed vegetables and fruits'. .....

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