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of <h1>Court classifies 'Potato Chips' as 'Processed Vegetables' for 4% VAT rate, rejecting Tax Board's misclassification.</h1> <h3>PEPSICO INDIA HOLDINGS PVT. LTD. Versus DEPUTY COMMERCIAL (APPEALS) IV, COMMERCIAL TAXES, JAIPUR</h3> PEPSICO INDIA HOLDINGS PVT. LTD. Versus DEPUTY COMMERCIAL (APPEALS) IV, COMMERCIAL TAXES, JAIPUR - [2018] 1 GSTL (VAT) 124 (Raj), 2018 50 G S.T.R. 199, ... Issues Involved:1. Classification of 'Potato Chips' under the relevant VAT schedule.2. Consideration of evidence by the Tax Board.3. Levy of differential tax, interest, and penalty.Detailed Analysis:1. Classification of 'Potato Chips' under the relevant VAT schedule:The primary issue was whether 'Potato Chips' should be classified as 'Processed Vegetables' under entry 107 of Schedule IV, attracting a 4% VAT rate, or under the Residuary Schedule V, attracting a 12.5% VAT rate. The petitioner argued that 'Potato Chips' are made from potatoes, which are vegetables, and thus should be classified as 'Processed Vegetables'. The Tax Board, however, classified 'Potato Chips' under the Residuary Schedule V.The court analyzed similar entries and judicial precedents from other states. It referred to the Gauhati High Court, Madras High Court, and Punjab & Haryana High Court judgments, which held that 'Potato Chips' fall under 'Processed Vegetables'. The court emphasized that 'Potato Chips' retain the characteristics of potatoes and should be classified under entry 107. The court also noted that the Ministry of Food Processing Industries and the Central Excise Tariff Act classify 'Potato Chips' as vegetable products.2. Consideration of evidence by the Tax Board:The petitioner contended that the Tax Board ignored substantial evidence from various government bodies and institutions in the fruits and vegetable processing sector. The court agreed, stating that the Tax Board should have considered the evidence presented by the petitioner, including the classification of 'Potato Chips' by the Ministry of Food Processing Industries and the Central Excise Tariff Act.3. Levy of differential tax, interest, and penalty:The Assessing Officer (AO) levied a 12.5% tax rate on 'Potato Chips', resulting in a differential tax, along with interest and penalty. The court held that since 'Potato Chips' should be classified under entry 107 with a 4% tax rate, the differential tax, interest, and penalty were not justified. The court emphasized that the petitioner had reasonably paid the 4% tax rate, and there was no intention of tax evasion.Conclusion:The court concluded that 'Potato Chips' fall under entry 107 of Schedule IV as 'Processed Vegetables' and should be taxed at 4%. The court also held that the Tax Board erred in ignoring relevant evidence and that the levy of differential tax, interest, and penalty was unjustified. The petitions were allowed, and the questions were answered in favor of the petitioner, with no order as to costs.
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