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2016 (2) TMI 815 - KERALA HIGH COURT

2016 (2) TMI 815 - KERALA HIGH COURT - [2016] 92 VST 291 (Ker) - Rate of VAT @14.5% or 20% - Classification of Appy Fizz as 'Fruit Juice Based Drink', as similar other products not mentioned or aerated branded soft drinks excluding soda - Held that:- Going by common parlance that the product is a soft drink is beyond dispute. Aeration being the process of adding a gas especially carbon dioxide to a liquid under pressure or “charging with air or carbon dioxide or other gas”. It is clear from the .....

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ist as amended would go to show that aerated water and soda water are the aerated products included in the entry. Sub entries 2 to 4 refer to soft drinks which are not aerated or branded and to health drinks. This is clearly because aerated branded soft drinks have already been included in the tax net with a higher rate of tax. - The product answers to the description of aerated branded soft drink which would fall specifically within the confines of Section 6(1)(a) - Decided against the asse .....

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t who is a manufacturer of the product Appy Fizz had preferred Annexure 2 application for clarification under Section 94 of the Act. The clarification sought was whether the product, which had been classified as a 'Fruit Juice Based Drink', is liable to be included under Entry No.71(5) as similar other products not mentioned under any other entry in the list or any other schedules and would therefore be chargeable to VAT @ 14.5%. Clarification was also sought whether the product classifi .....

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uthorities to state that the drink was not 'carbonated water' and was a 'Fruit Juice Based Drink' containing fruit juice to an extent of more than 10% and that it had been assessed as a 'Fruit Juice Based Drink' till the Finance Act of 2007 amended Section 6(1)(a) of the Act by specifying that aerated branded soft drinks excluding soda would be liable to tax @ 20% at all points of sale within the State. The list of goods taxable at the rate of 12.5% notified by SRO 82/200 .....

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f Sub-section (1) of Section 6 are mutually exclusive of the products classified under Clause (a) of Subsection (1) of Section 6. Aggrieved thereby, the assessee has come in appeal. 4.Heard Sri.Arshad Hidayathullah, learned Senior Counsel for the appellant and Sri.George Mecheril, learned Special Government Pleader for the State Revenue. It is the contention of the counsel for the appellant that the authority constituted under Section 94 erred in limiting itself by the findings of a Division Ben .....

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should have applied its mind to the questions raised before it, especially in view of the binding judgment of a Division Bench of this Court in W.A.No.2418/2015, wherein the question of clarification was directed to be decided on its merits. It is further urged that the product had been classified as a 'Fruit Juice Based Drink' with HSN Code No.2202.90.20 under the Excise Tariff Act. It is contended that the classification of the product as a 'Fruit Juice Based Drink' had been u .....

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ble to tax at higher rate. It is also contended that the provisions of a taxing statute are to be strictly construed and the burden of proof lay heavily on the revenue to prove that the product, which had been classified and taxed as a 'Fruit Juice Based Drink', was now liable to tax as 'aerated branded soft drink' at higher rate. The learned Senior Counsel relies on the decisions of the Hon'ble Supreme Court of India in Hindustan Ferodo v. Union of India (1997 (89) ELT 16), .....

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he contentions raised by the appellant, it is clear that the appellant failed in proving before the committee that the product in question was not an 'aerated branded soft drink' which was specifically included as taxable at 20% at all points of sale within the State. It is contended that the classification of the product under the Fruit Products Order or the Central Excise Tariff Act or Customs Act can have no application in view of the specific entry contained in the KVAT Act. The orde .....

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l opinions regarding nature of the product has only limited relevance, it is urged. It is also stated that the appellant itself has no consistent case about the nature of its product and the same product, which was found to contain 27% fruit juice by the CESTAT, is labelled by the appellant as containing 12.7% fruit juice content in the instant case. 6. It is true that the committee constituted for the purpose of Section 94 of the Act had relied almost entirely on the findings of a Division Benc .....

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uct in question is a soft drink. It is alleged that it had been earlier subjected to tax at 12.5% (later 13.5% and 14.5%) on the basis of its classification as a Fruit Juice Based Drink. Before the amendment of the list, going by the provisions contained in SRO 82/2006, the Entry 71 originally reads as follows:- Non-alcoholic beverages and their powders, concentrates and tablets including (i) aerated water, soda water, mineral water, water sold in sealed containers or pouches (ii) fruit juice, f .....

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nd vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter. 2009 (4) Fruit pulp or fruit juice based drinks 2202.90.20 (5)Soft drink concentrates (a) Sharbat 2106.90.11 (b) Other 2106.90.19 (6) Beverages containing milk 2202.90.30 8. It is pertinent to note that Section 6(1)(a), as it stood prior to the amendment brought about by the Finance Act of 2006, did not contain any reference to aerated soft drinks. By the Finance Ac .....

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brought about by the Finance Act of 2007 and the substitution of Entry 71 by SRO No.119 of 2008, the Entry 71 was completely substituted. Entry 71 as substituted by SRO No.119 of 2008 reads as follows:- 71.Non-alcoholic beverages and their powders, concentrates and tablets in any form including; (1) aerated water, soda water, mineral water, water sold in sealed containers or pouches (2) fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp and fruit cordial (3) soft drinks other th .....

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of common parlance or commercial parlance. 10. No HSN codes are mentioned in respect of any of the entries in the KVAT Act. Therefore, the nature of the product is to be decided on common parlance or commercial parlance. The learned Senior Counsel for the appellant contends that a wealth of material, including orders of the authority under the Excise regime, which was affirmed by the Apex Court as well as certifications issued by competent technical authorities, had been placed before the author .....

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h of this Court, which is of a limited scope, is liable to be set aside. 11. We have considered the rival contentions. The only question to be decided is whether the product is an aerated branded soft drink which would make it liable to tax at a higher rate. The findings of the authorities under the fruit, labelling and excise regime to the effect that the product is a 'Fruit Juice Based Drink', would be completely irrelevant in case the product falls within the ambit of the Entry aerate .....

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75. However, there are certain entries in the schedules for which HSN Numbers are not given. Those commodities which are given with HSN Numbers 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 between the meaning of a commodity without HSN Number and the meaning of a c .....

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