High Court affirms 'Bakery Shortening' as Vanaspati under U.P. VAT Act, subject to 4% tax rate

The High Court upheld the classification of 'Bakery Shortening' as Vanaspati under the U.P. VAT Act, subject to a 4% tax rate. The court ruled in favor of the assessee, emphasizing the similarity in manufacturing processes and raw materials with Vanaspati. The decision was supported by expert opinions and government definitions. The court applied the principle favoring the assessee when two interpretations were possible, citing relevant precedents. The Revenue failed to disprove the classification, leading to the dismissal of the revision.

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Issues Involved:
1. Classification of 'Bakery Shortening' under the U.P. VAT Act.
2. Tax rate applicable to 'Bakery Shortening'.

Summary:

Issue 1: Classification of 'Bakery Shortening' under the U.P. VAT Act

The primary issue was whether 'Bakery Shortening' and Vanaspati (Hydrogenated Vegetable Oil) are the same commodity and thus taxable at 4% under Entry No. 130 of Schedule II, Part - A of the U.P. VAT Act, 2008. The Tribunal treated 'Bakery Shortening' and Vanaspati as the same commodity based on various certifications and expert opinions, including those from the Institute of Science & Technology for Advanced Studies & Research, Gujarat, and M/s Techno Chem International, Inc. The Tribunal noted that both products are manufactured from the same raw material, crude vegetable oil, and undergo the same process. The Tribunal also referenced the Government of India's definitions and notifications, which support the classification of 'Bakery Shortening' as Vanaspati.

Issue 2: Tax rate applicable to 'Bakery Shortening'

The Assessing Authority initially rejected the claim of 4% tax and levied a higher rate of 12.5%, treating 'Bakery Shortening' as an unclassified item. However, the Tribunal and the appellate authority overturned this decision, holding that 'Bakery Shortening' should be taxed at the same rate as Vanaspati, i.e., 4%. The Court upheld this view, citing the principle that when two views are possible, the one favoring the assessee should be adopted, as established in precedents like Mauri Yeast India Private Limited vs. State of U.P. & Others and Union of India & Others vs. Garware Nylons Limited & Others. The Court distinguished the Kerala High Court's judgment in M/s Parisons Food Private Limited, noting differences in the VAT Act entries and the absence of relevant notifications in that case.

Conclusion

The High Court dismissed the revision, affirming that 'Bakery Shortening' is to be classified and taxed as Vanaspati at 4% under the U.P. VAT Act. The question of law was answered in favor of the assessee, and the burden of proof was held to be on the Revenue to disprove the classification, which they failed to do.

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