2023 (1) TMI 1439 - HC - VAT / Sales Tax

Rajasthan HC Classifies Potato Chips as 'Processed Vegetable' Under VAT Act, Imposing 4% Tax Rate, No Penalties.

Commercial Taxes Officer, Anti-Envision-I, Rajasthan Jaipur, Assistant Commissioner, Commercial Taxes Department Jaipur Versus M/s Pepsico India Holding Pvt. Ltd., M/s Khandelwal Marketing

The Rajasthan HC ruled that 'Potato Chips' should be classified as a 'processed vegetable' under entry 107 of Schedule IV of the Rajasthan VAT Act, 2003, ... Classification of goods - whether Tax Board was justified in holding that “Potato Chips” are classified as “processed vegetable” under entry 107 of Schedule IV and liable to tax @ 4% instead of 12.5% in residual entry, as mentioned in Schedule V of Rajasthan VAT Act, 2003? - HELD THAT:- Coordinate Bench of this Court in STR No. 199/2009 decided on 31.03.2017 [2017 (3) TMI 1695 - RAJASTHAN HIGH COURT], has decided in favour of the assessee and against the Revenue and it was held 'Potato Chips would fall in the category of entry 107 to be charged with tax @ 4%, and once rate of 4% has been held to be well reasoned and justified, which was claimed by the petitioner, then question of levy of interest does not arise, so also once the claim of the assessee is well reasoned and justified, question of imposition of penalty under Section 61 automatically goes. Even otherwise, it is a case of classification of entries and no case can be made out of evasion of tax.' All revision petitions are dismissed. The Rajasthan High Court, presided over by Hon'ble Mr. Justice Sameer Jain, addressed the issue of whether 'Potato Chips' should be classified as 'processed vegetable' under entry 107 of Schedule IV of the Rajasthan VAT Act, 2003, attracting a tax rate of 4%, instead of being taxed at 12.5% under the residual entry in Schedule V. The Revenue's counsel acknowledged that the legal question of classification is no longer res integra, referencing a prior judgment by the Coordinate Bench in STR No. 199/2009, dated March 31, 2017. In that case, it was determined that 'Potato Chips' fall under entry 107, justifying the 4% tax rate. The court also noted that this classification negates the imposition of interest and penalties under Section 61, as it does not constitute tax evasion. Although an SLP titled Deputy Commissioner Vs. Pepsico India Holdings Pvt. Ltd. has been filed against the previous order, it has been admitted without interim relief. Adhering to judicial discipline, the court dismissed the present revision petitions and all pending applications.