TMI Blog2015 (9) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect: With the exclusion of 'Liquid Margarine', can we presume that margarine, sans liquid margarine includes every other category, or is there anything left so that it can be classified along with other analogous products, going by their technical analysis of its constituent elements? Hon'ble Supreme Court has already disapproved the technical analysis of products to extricate them from the tax net. Further, it is, again, a well established cannon of statutory interpretation that if a genus comprises many species and only one or a few of the species have been excluded for a particular purpose, the inexorable indication of such an arrangement is that all the rest of species have been included under the genus. Moving from abstract to the concrete, we can say Margarine is a generic produce having sub-classifications, among which Liquid Margarine stands excluded. Essentially what follows is that the rest of varieties are included or at least have not been separately dealt with. Classifiable with HSN Code No. 1517 - liable to be tax @12.5% - Decided against the assessee. - W. A. No. 576 of 2014 - - - Dated:- 10-10-2014 - ANTONY DOMINIC AND DAMA SESHADRI NAIDU JJ. S. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exigible to tax at the rate of 4%, whereas Margarine in general, with milk ingredient, falling under Entry 64 of SRO 82/2006 is exigible at a higher rate of tax, that is, 12.5%. 6. According to the learned Senior Counsel, once the ratio laid down in Aluva Sugar Agency v. State of Kerala ((2011) 45 VST 1 (SC)) is followed, the impugned assessments would not stand. It is the further contention of the learned Senior Counsel that the ratio in SSD Oil Mills Co. Ltd. v. State of Kerala ((2011) 37 VST 594), is per incuriam and ought not to have relied on by the learned single Judge. 7. The learned Senior Counsel has contended that Harmonised System of Nomenclature (HSN) 1517 does not take in wholly or partly hydrogenated, inter-esterified, re-esterified or elaidinised vegetable fats and oils. HSN 1516.20.91 relates to other products, including Vanaspathy, which do not have a specific HSN Code. According to the learned Senior Counsel, the expression 'including Vasnaspathy' assumes importance, for the term 'hydrogenated vegetable oil' has larger scope for taking into its sweep Margarine also. Accordingly, what has been specified, contends the learned Senior Counsel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts Standards and Food Addictives) Regulations Act, 2006. He has also drawn our attention to Rule 25 of the Rules of Interpretation to contend that Entry 38 of III Schedule includes only the edible grade of vegetable oils, and that non-edible grade oils come under Entry 138 of the same schedule. 11. Further, with reference to the products coming under Entry 64(8), the learned Senior Counsel has contended that all products enlisted therein are milk products. On the other hand, edible oils, whether hydrogenated or not, are not intended to be covered under Entry 64(8). Ipso facto, Industrial Margarine will not come under that Entry. He has contended that there is no difference between Margarine and Vanspathy and in fact they are very similar. 12. The assessing authorities, according to the learned Senior Counsel, are blowing hot and cold. Expatiating further, he has submitted that when the assessee challenged Exhibit P1 clarification, the authorities relied on Aluva Sugar Agency's case (supra) to substantiate their plea that Margarine is hydrogenated edible oil and consequently leviable to tax only at the rate applicable to edible oils. 13. Attacking Exhibits P1 and P1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inctively new produce having its own classification. He has further contended that margarine has not been mentioned anywhere in the II or III Schedule, but stands included with a specific HSN Code of 1517.10 only under Entry 64(8) of the relevant notification. 17. The learned Government Pleader would contend that the distinction sought to be made by the appellant between 'Table Margarine' and 'Bakery Margarine' is artificial and of no consequence. According to him, both of them are edible in nature. Placing reliance on Kevi Hardware v. State of Kerala (2003) 11 KT R5 62 (Ker.)), the learned Government Pleader contends that 'User Test' is neither safe nor conclusive in determining the nature and classification of produce for taxing purpose. 18. Eventually, the learned Government Pleader has taken us through the Rules of Interpretation and submitted that they do not leave any room for misconception in the classification of margarine, inasmuch as it is a wholesome, separate Entry. In this regard, he has placed reliance on (2008) 15 VST 10 (SC). Issues: 19. Whether Industrial Margarine or Bakery Margarine is required to be treated as a produce under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it is declared that in the case of goods specified in the II and III Schedules, the levy of tax should be at the rates specified therein. Commodity Classification Code for VAT Tariff is based on the Harmonised System of Nomenclature (HSN) adopted by the Customs Tariff Act, 1975. As such, wherever any doubt arises about the classification of goods, help may be sought from the Customs Tariff Act, 1975. 25. Relevant entries from the Notified List of Goods Taxable for our purpose are as follows: Entry 64 of S. R. O. No. 82 of 2006. SI. No (1) Description of goods (2) HSN Code (3) 64. Milk products including, condensed milk, ghee, butter, butter oil, ice creams, margarine, whether or not bottled, canned or packed. (1) to (7) . . . (8) Margarine 1517.10 (9) . . . Relevant entry of the Third Schedule to the KGST Act is as follows:- SI. No (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractions of heading 1516. 1517 10 Margarine, excluding liquid margarine. -Of animal origin -Of vegetable origin Types of Margarine: 27. HSN Code 1517 10 expressly specifies Margarine. Yet, it is the contention of the learned Senior Counsel for the appellant that Margarine is not a singular term of reference to a particular food product. Based on the manufacturing process and ingredients that go into the produce, Margarine has, according to the learned Senior Counsel, sub-classifications, though compendiously referred to as Margarine. He has gone to the extent of stating that Bakery Margarine is not at all edible like Table Margarine or Vanaspati. Before proceeding further, it may have to be clarified that all that is eatable need not be readily edible or consumable. An item may be a food ingredient, without it being food itself; thus, it may not be edible, not being palatable, e.g., cooking oil, chilli-powder, to name a couple of them. Nevertheless, it does not cease to be a food item. 28. Vanaspati is otherwise called 'Desi Vegetable Ghee'. It is, indeed, a fully or partially hydrogenated vegetable oi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral Sales Tax Act, 1963. Their Lordships have concluded that Margarine is an edible oil available for tax concession, essentially based on a Departmental Circular dated 19.02.1996, explaining the term edible oil . Having found that it was the intention of the Government to give relief in tax to edible oils, and that, precisely for that purpose, the said circular had stated that edible oils would also include hydrogenated oils, such as ground nut oil, gingelly or till oil, refined oil and vanaspathi oil, it was ruled in favour of the assessee that margarine should be taxed at 4% as it is edible oil. Stare Decisis: 34. Before appreciating the ratio of Aluva Sugar Agency, it is apt to recall to mind the judicial dictum that it is the ratio decidendi of a judgment and not the final order in the judgment, which forms a precedent. In this regard, a word of caution has to be served. A decision is only an authority for what it actually decides and not what logically follows from it. What is of the essence in a decision is its ratio and not every observation found therein. It is also well settled that a little difference in facts or additional facts may make a lot of difference in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the former case, the Rules of Interpretation of Schedules have not been invoked. In the face of the ratio in Khandelwal Metal and Engg. Works (infra), the whole issue shows itself in a different light. 37. Once we examine SSD Oil Mills (decided on 08.06.2010) in the light of the dictum laid down in Aluva Sugar Agency (decided on 07.09.2011), we fail to persuade ourselves to see any repugnancy in the ratio of SSD Oil Mills to brand it per incuriam. As we have already held, they have been decided under two different statutes. Furthermore, the Rules of Interpretation of Schedules give a different perspective to SSD Oil Mills ratio. A Question of Interpretation: 38. In Oswal Agro Mills Ltd. v. CCE ((1993) Supp. 3 SCC 716 (at p. 720)), the Hon'ble Supreme Court has dealt with the General Rules of Interpretation of Taxing Statues in the following words:- 4. The provisions of the tariff do not determine the relevant entity of the goods. They deal whether and under what entry, the identified entity attracts duty. The goods are to be identified and then to find the appropriate heading, sub-heading under which the identified goods/products would be classified. To find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' is to be classified under heading 04.04 as other dairy produce and not under heading 21.05. On the other hand, Revenue claims that ice-cream has not been defined under heading 21.05 or in any of the chapter notes of Chapter 21; upon conducting enquiries it was found that 'Soft Serve' is known as ice-cream in common parlance; and hence, it must be classified in the category of ice-cream under heading 21.05 of the Tariff Act. 40. In fact, Chapter 4 of the Tariff Act deals, inter alia, with dairy produce. Since Heading 04.04 is applicable to other dairy produce; or edible products of animal origin which are not specified or included elsewhere , the note appended thereto reads to the effect that the Heading applies, inter alia, to butter-milk, curdled milk, cream, yogurt, whey, curd and products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa and includes fats and oils derived from milk (e.g. milk fat, butterfat and butter oil), dehydrated butter and ghee. 41. In the above factual backdrop, the issue in Connaught Plaza case can be summarised thus: 'So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , mentioned in Section 2 of the Tariff Act, classification of an excisable good shall be determined according to the terms of the headings and any corresponding chapter or section notes. Where these are not clearly determinative of classification, the same shall be effected according to Rules 3, 4 and 5 of the general rules of interpretation. However, it is also a well known principle that in the absence of any statutory definitions, excisable goods mentioned in tariff entries are construed according to the common parlance understanding of such goods. Produce Specifications: 45. On the other hand, if a product is specified, it does not call for any 'Common Parlance Test', as has been held in Dunlop India Ltd. v. Union of India and Others ((1976) 2 SCC 241). While holding that VP Latex was to be classified as raw rubber under Item 39 of the Indian Tariff Act, 1934, the Court observed:- 34. We are, however, unable to accept the submission. It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is classifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of Schedules, it is well established that the question of classification of goods under the Import Tariff cannot be decided by implications, when there are Rules of Interpretation which are specially framed to aid and assist the classification of goods under appropriate Headings. Those Rules must have precedence over other aids of interpretation. (Ref. Khandelwal Metal and Engg. Works v. Union of India ((1985) 3 SCC 620). 49. If we observe the Rules of Interpretation of Schedules, it is clear that the commodities in the Schedules are allotted with Code Numbers, which are developed by the International Customs Organisation as Harmonised System of Nomenclature (HSN) and adopted by the Customs Tariff Act, 1975. At the very threshold it is mandated:- However, there are certain entries in the schedules for which HSN Numbers are not given. Those commodities which are given with HSN Number should be given the same meaning as given in the Customs Tariff Act, 1975. Those commodities, which are not given with HSN Number, should be interpreted, as the case may be, in common parlance or commercial parlance. While interpreting a commodity, if any inconsistency is observed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evice, namely ejusdem generis. Indeed, the learned Senior Counsel for the petitioner, too, has laid much stress on this principle of interpretation. Ejusdem generis principle is a facet of the principle of noscitur a sociis. The Latin maxim noscitur a sociis contemplates that a statutory term is recognised by its associated words. The Latin word sociis means society . Therefore, when general words are juxtaposed with specific words, general words cannot be read in isolation. Their colour and their contents are to be derived from their context. But, like all other linguistic canons of construction, the ejusdem generis principle applies only when a contrary intention does not appear (Ref: Maharashtra University of Health Sciences v. Satchikitsa Prasarak Mandal ((2010) 3 SCC 786). 54. But, Lord Scarman in Quazi v. Quazi ((1980) AC 744) made the following pertinent observation (as quoted in Satchikitsa Prasarak Mandal (supra)):- If the legislative purpose of a statute is such that a statutory series should be read ejusdem generis, so be it; the rule is helpful. But, if it is not, the rule is more likely to defeat than to fulfill the purpose of the statute. The rule, like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a particular purpose, the inexorable indication of such an arrangement is that all the rest of species have been included under the genus. Moving from abstract to the concrete, we can say Margarine is a generic produce having sub-classifications, among which Liquid Margarine stands excluded. Essentially what follows is that the rest of varieties are included or at least have not been separately dealt with. Notified List of Goods Taxable: 59. Another contention of the appellant is that the item falls under Entry 38(19)(d) of the III Schedule to the KVAT Act. This contention stood rejected in SSD Oil Mills on the ground that none of the items covered by the sub-entry (19) has the same HSN Code for margarine provided in the customs tariff. In fact, it is clear from Entry 38(19) that all four items referred to there are covered under six digit HSN Code 1516.20. The other contention is that margarine referred to in Entry 64(8) of S.R.O. No. 82/06 is only margarine made with one of the milk products as an ingredient. This contention too stood answered in SSD Oil Mills. The learned Division Bench has observed that none of the items covered by HSN Code 1517 of the Customs Tariff A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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