Case Law Details
M/s. Parisons Foods Pvt. Ltd. Vs. Joint Commissioner Of Commercial Taxes (Kerala High Court)
The appeal arises from a Clarification Order issued under Section 94 of the Kerala Value Added Tax Act, 2003 (‘KVAT Act’ for short). The appellant/dealer, inter alia, is engaged in the manufacture of ‘bakery shortening’. The clarification sought for was the tax rate applicable to ‘bakery shortening’, which according to the appellant falls under Entry 38 of the Third Schedule of the KVAT Act exigible to tax @ 5%. The clarification sought was in the context of the Department having the opinion that it would not fall under Entry 38, for reason of the product not being covered under the specific Harmonized System of Nomenclature (HSN) Code shown against Entry 38(18) (d): ‘Others including vanaspati’.
2. The Department maintains that the product not being an animal or vegetable fat or oil, or a hydrogenated vegetable oil; under which later classification, ‘vanaspati’ falls, has to be taxed under the residual entry in S.R.O. 82 of 2006. The applicant, before the Authority for Clarification contended that ‘bakery shortening’ falls under HSN Code 1516, specifically under sub-heading 1516.20.91, being ‘vanaspati’ a hydrogenated vegetable oil, which is exigible to tax @ 5% under the Third Schedule. The Authority for Clarification found that ‘bakery shortening’ is exigible to tax @ 12.5/13.5/14.5% (for various periods) under the residual entry of S.R.O No. 82/2006.
3. The learned Counsel for the appellant argued in tune with the contention taken by the assessee before the Clarification Authority. Reference is made to Entry 38(18)(d) to contend that, if at all, it is not vanaspati, it would fall under the ‘other’ category, as mentioned in the Entry, again, exigible to tax only @ 5%. The Clarification Order is challenged on the ground that it has relied on the judgment of the Customs Excise and Service Tax Appellate Tribunal (CESTAT), which had ignored the decision of a co-ordinate Bench of the same Tribunal, taking a contrary stand with respect to the clarification of ‘bakery shortening’. It is also argued that M/s Shree Gopal Vanaspati Ltd. v. C.C.(ICD), New Delhi – 2014 (4) ECS (224) (Tri-Del.), the decision relied on by the Tribunal, has relied on the dictionary definition, when there was a statutory definition available under the Food Safety and Standards Act, 2006 (‘FSS Act’ for short). It is also submitted that the explanatory notes to the HSN numbers, as extracted in M/s Shree Gopal Vanaspathy Ltd. is not available in any text, despite fervent search having been carried out. M/s.Adani Wilmar Limited v. Commissioner of Customs, Kandla [Appeal No.C/1115 of 2006] the earlier decision of the CE STAT, is more to the point, holding that ‘bakery shortening’ would fall under HSN Code 1516 and not 1517, is the submission.
4. The learned Counsel for the appellant took us through the definition of ‘vanaspati’ under the FSS Act, to contend that ‘bakery shortening’ is ‘vanaspati’. Encyclopaedic Law Lexicon (Volume 2) also defines ‘bakery shortening’ as ‘vanaspati’, meant for use as a shortening or leavening agent in the manufacture of bakery products. The said definition has been imported from the Vegetable Oil Products (Regulation) Order, 1998. ‘Bakery shortening’ having not been specifically included in any of the entries under S.R.O No. 82/2006 and the essential nature of the product being that of ‘vanaspati’, there is no reason why taxation should be on a classification made under the residual entry of S.R.O. No. 82/2006. Garware Nylons Limited – 1996 (87) ELT 12 (SC), which was relied on in M/s. Adani Wilmar Limited is put across to buttress the contention. Reliance is also placed on the “General Rules For The Interpretation Of This Schedule” under “The First Schedule – Import Tariff” as available under the Customs Tariff Act, 1975, (‘Customs Act’ for short). Pointed reference is made to Clause 3(b); wherein with respect to mixtures consisting of different materials or made up of different components, classification has to be made on the basis of the essential character of the material or component of the goods. The argument raised is that ‘bakery shortening’ is made up of ‘vanaspati’ and retains its essential character though it has increased leavening and shortening characteristics, making it more suitable for use in the manufacture of bakery products.
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