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of <h1>Court Upholds Tax Classification for 'Bakery Shortening' as per Clarification Authority, Emphasizes HSN Codes</h1> <h3>M/s. Parisons Foods Pvt. Ltd. Versus Joint Commissioner of Commercial Taxes Department of Commercial Taxes, Thiruvananthapuram, Kerala</h3> M/s. Parisons Foods Pvt. Ltd. Versus Joint Commissioner of Commercial Taxes Department of Commercial Taxes, Thiruvananthapuram, Kerala - 2018 (11) G. S. ... Issues Involved:1. Tax rate applicable to 'bakery shortening' under the Kerala Value Added Tax Act, 2003 (KVAT Act).2. Classification of 'bakery shortening' under the Harmonised System of Nomenclature (HSN) Code.3. Reliance on dictionary definitions versus statutory definitions.4. Interpretation of entries and rules under the KVAT Act and Customs Tariff Act.Issue-wise Detailed Analysis:1. Tax Rate Applicable to 'Bakery Shortening':The appellant/dealer sought clarification on the applicable tax rate for 'bakery shortening', arguing it falls under Entry 38 of the Third Schedule of the KVAT Act, taxable at 5%. The Department contended that 'bakery shortening' does not fall under Entry 38 due to its specific HSN Code and should be taxed under the residual entry in S.R.O. 82 of 2006 at a higher rate (12.5/13.5/14.5% for various periods). The Authority for Clarification upheld the Department's view, classifying 'bakery shortening' under the residual entry.2. Classification of 'Bakery Shortening' under HSN Code:The appellant argued that 'bakery shortening' should be classified under HSN Code 1516.20.91 as 'vanaspati', a hydrogenated vegetable oil, and thus taxable at 5%. The Department countered that 'bakery shortening' is a mixture of hydrogenated vegetable oils and undergoes further preparation, thus falling under HSN Code 1517, which pertains to mixtures or preparations of animal or vegetable fats or oils. The court analyzed the HSN Codes and concluded that 'bakery shortening', being a preparation of hydrogenated vegetable oils, falls under HSN Code 1517 and not 1516.3. Reliance on Dictionary Definitions versus Statutory Definitions:The appellant criticized the reliance on dictionary definitions by the Clarification Authority, arguing that statutory definitions under the Food Safety and Standards Act, 2006 (FSS Act) should prevail. The court noted that the FSS Regulations and the Vegetable Oil Order define 'bakery shortening' as 'vanaspati' but treated them as distinct products due to their different uses and characteristics. The court held that reliance on dictionary definitions is permissible when there is no statutory definition in the taxing statute.4. Interpretation of Entries and Rules under the KVAT Act and Customs Tariff Act:The court emphasized the importance of the HSN Codes for classification under the KVAT Act. It referred to the Rules of Interpretation of Schedules under the KVAT Act, which mandate that commodities with an eight-digit HSN number should be interpreted strictly according to that number. The court concluded that 'bakery shortening', being a prepared product, does not fall under HSN Code 1516 but under 1517, which is not included in the Third Schedule of the KVAT Act and thus falls under the residual entry.Conclusion:The court upheld the Clarification Authority's order, classifying 'bakery shortening' under the residual entry of S.R.O. No. 82/2006, taxable at higher rates. The appeal was dismissed, affirming that 'bakery shortening' does not fall under Entry 38 of the Third Schedule of the KVAT Act. The court emphasized the adherence to HSN Codes and statutory definitions in determining tax classifications.
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