Broad VAT classification for processed vegetable products brings tomato sauce within the lower tax entry.

Tomato sauce was held to fall within the broad inclusive entry for processed and preserved vegetables and fruits under Schedule II(B) of the Uttarakhand VAT Act, because it is a product derived from tomato and the entry contains no express exclusion for sauces. The Court applied ordinary commercial understanding and the rule that, where two views are possible in a taxing entry, the interpretation favourable to the assessee must be adopted. The result was that tomato sauce remained taxable at 4%, and the higher VAT levy at 12.5% was unsustainable.

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Issues: Whether tomato sauce falls within entry 6 of Schedule II(B) of the Uttarakhand VAT Act, 2005 as processed and preserved vegetables and fruits, and is therefore taxable at 4% instead of 12.5%.

Analysis: Entry 6 of Schedule II(B) covers all processed and preserved vegetables and fruits, including fruit jams, jellies, fruit squash, paste, fruit drinks and fruit juices. Tomato sauce is a product manufactured from tomato and is a processed food item derived from fruit or vegetable material. The entry contains no exclusion of sauces, and where the Legislature intended exclusion of particular items it did so expressly. The Court also relied on the ordinary commercial understanding of processed fruit and vegetable products and the principle that, if two views are possible, the view favourable to the assessee should be adopted.

Conclusion: Tomato sauce is covered by entry 6 of Schedule II(B) and is taxable at 4%. The levy of VAT at 12.5% on tomato sauce is unsustainable.

Final Conclusion: The challenge to the classification succeeded, and the impugned tax treatment of tomato sauce was set aside in favour of the assessee.

Ratio Decidendi: A product derived from fruits or vegetables falls within an inclusive taxing entry for processed and preserved vegetables and fruits where the entry is broad, contains no express exclusion, and the interpretation favourable to the assessee must be adopted if competing views are possible.

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