2023 (5) TMI 855 - HC - VAT and Sales Tax

Court classifies 'Pizza' & 'Sandwiches' as 'cooked foods,' exempt from VAT exceeding 5%. Sales Tax Revisions granted.

M/s. Devyani International Limited, M/s. A One Enterprises Versus The Additional Commissioner It Commercial Taxes, Rajasthan,

M/s. Devyani International Limited, M/s. A One Enterprises Versus The Additional Commissioner It Commercial Taxes, Rajasthan, - TMI Issues Involved:1. Whether 'Pizza' falls within the notification dated 09.03.2010 and is entitled to exemption of payment of VAT in excess of 5%.2. Whether sandwich is a cooked food as per notification dated 09.03.2010.3. Whether the sale of sandwich is a branded bakery product.4. Whether subsequent legislature amending the notification and the rate schedule can be used for interpretation of the earlier provisions of law.Summary:Issue 1: Classification of 'Pizza' under RVAT Act, 2003The court considered whether 'Pizza' qualifies as 'cooked food' under the notification dated 09.03.2010, which exempts from tax payable by a dealer to the extent the rate of tax exceeds 5% on the sale of food cooked by him and served in restaurants and hotels below three-star category. The petitioner-assessee argued that 'Pizza' is prepared by baking, a form of cooking, and provides valuable nutrients, thus qualifying as cooked food. The revenue, however, classified 'Pizza' as a branded bakery product, taxable at 14%, based on factors like the use of preservatives, preparation time, and common parlance understanding of 'Pizza' as a snack rather than a meal.Issue 2: Classification of 'Sandwich' under RVAT Act, 2003The court evaluated whether a sandwich qualifies as 'cooked food' under the same notification. The petitioner-assessee contended that sandwiches involve cooking processes like frying and heating and are complete meals with high nutritional value. The revenue classified sandwiches similarly to 'Pizza,' arguing they are branded bakery products and not cooked foods.Issue 3: Interpretation of Branded Bakery ProductsThe petitioner-assessee challenged the Tax Board's interpretation that 'Pizza' and 'Sandwich' are branded bakery products. They argued that the revenue failed to discharge its onus to prove this classification, relying instead on unsubstantiated factors and outdated definitions. The court noted that the burden of proof lies with the revenue to classify products under specific tariff items and found the revenue's reliance on Wikipedia definitions and extraneous factors erroneous.Issue 4: Use of Subsequent Legislation for InterpretationThe petitioner-assessee argued that subsequent notifications dated 14.07.2014 and 09.03.2015, which included 'Pizza' and 'Sandwich' as cooked food, should be used to interpret the earlier notification. The court agreed, stating that subsequent legislation can clarify the interpretation of earlier ambiguous provisions. The inclusion of 'Pizza' and 'Sandwich' in the category of cooked food in later notifications indicated the State Government's intent to treat them as such all along.Conclusion:The court held that 'Pizza' and 'Sandwiches' are 'cooked foods' under the notification dated 09.03.2010. The question(s) of law were answered in favor of the petitioner-assessee, and consequential relief was awarded within 90 days. All Sales Tax Revisions (STRs) were allowed, and pending applications were disposed of.