TaxTMI 
TaxTMI 
2009 (3) TMI 935
X X X X Extracts X X X X
X X X X Extracts X X X X
.... chips). They are also a manufacturer and vendor of other products such as "Kurkure" and "Cheetos ". The Assistant Commissioner (Fast Track Assessment Circle I), Chennai 6, second respondent, is the assessing authority. The operation of the business is conducted in the following manner: the first petitioner, manufactures and sells potato chips to the distributor, viz., second petitioner, who in turn, sells the same to the retailer, the third petitioner, and from there it reaches the consumers. It is also the case of the petitioners that on the sale of Kurkure and Cheetos, the petitioners collect and pay VAT at the rate of 12.5 per cent, because the said products are manufactured by combining various ingredients, such as, grains, pulses, spices and condiments and that they do not fall in any entry of the First Schedule. The petitioner has further submitted that "potato chips" is a processed vegetable and the same would attract tax under entry 107 of Part B of the First Schedule to the TNVAT Act. According to them, on and from the introduction of the Act, they classified "potato chips" manufactured by the first petitioner under entry 107 of Part B of the First Schedule to the TNVA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entry of Part "C" of the First Schedule, without having regard to the specific entry 107 of Part "B" of the First Schedule. Inviting the attention of this court to the manufacture and sale of Kurkure and Cheetos, by collecting and paying VAT at the rate of 12.5 per cent per annum and the process involved in the manufacture of the abovesaid product, by combining various ingredients, such as, grains, pulses, spices and condiments, learned Senior Counsel for the petitioners further submitted that the abovesaid product undergoes a process of manufacture and in such circumstances, they do not fall in any entry of the First Schedule and therefore, the collection of VAT at the rate of 12.5 per cent per annum, is understandable. According to him, "potato chips" are made from potatoes, i.e., vegetables, by undergoing the following process as set out below: (i) De-stoning - Stones and other heavy particles are removed. (ii) Peeling - Peels are removed. (iii) Slicing - Potatoes are cut into slices (iv) Washing - Slices are washed (v) Frying - Slices are fried in oil (vi) Application of spices and condiments (vii) Quality check, and packing in retail packs. Assailing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. Ltd. v. Commissioner of Commercial Taxes reported in [2005] 140 STC 97 (Mad), learned Senior Counsel submitted that though there is no provision to issue the impugned clarification by the first respondent, the same when issued, would be binding on its subordinates as well as the petitioners to pay tax as per the provisions of the TNVAT Act. Mere issuance of clarification itself would create a duty on the petitioners to pay VAT at 12.5 per cent and therefore, the impugned clarification is ultra vires of entry 107 of the First Schedule to the TNVAT Act. Placing reliance on various decisions in Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. reported in [1989] 72 STC 280 (SC), Filterco v. Commissioner of Sales Tax [1986] 61 STC 318 (SC), Shanmuga Traders v. State of Tamil Nadu [1999] 114 STC 1 (SC), HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh [2006] 197 ELT 324 (SC), Bharat Forge & Press Industries (P.) Ltd. v. Collector of Central Excise [1992] 84 STC 414; [1990] 1 SCC 532, Union of India v. Tata Iron & Steel Co. Ltd. AIR 1975 SC 769, learned Senior Counsel for the petitioners submitted that "potato chips" can be classified only as "processed v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the attention of this court to paragraph 19 of the affidavit filed in support of the writ petition, explaining the process involved in the manufacture of chips marketed by the petitioners, i.e., by adding ingredients to make the chips, learned Additional Government Pleader submitted that it is not the case of mere preserving or processing, but frying of chips in oil, which would itself go to prove that they are no longer simply processed vegetables, but something cooked and made ready as savouries or eatables. Referring to the interpretation adopted in the Ministry of Food Processing Industry, learned Additional Government Pleader submitted that the same is related to development of food processing industry and it is nothing to do with the interpretation of an entry in the taxing statutes. Referring to the entry 51 of Part B of the First Schedule to the TNVAT Act and the specific language employed to bring in chips as savouries, he submitted that the Legislature had clearly intended to treat chips as savouries and not as processed vegetable, as claimed by the petitioners. He further submitted that there is no ambiguity in the entries, since chips whether made either from po....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case, it is necessary to extract the relevant provisions for adjudicating the dispute raised in this writ petition. Section 3(2) of the TNVAT Act is the charged provision and it reads as follows: "Subject to the provisions of sub-section (1), in the case of goods specified in Part B or Part C of the First Schedule, the tax under this Act shall be payable by a dealer on every sale made by him within the State at the rate specified therein." Entry 51 of Part B of the First Schedule to the TNVAT Act reads as follows: "Foods and food preparations and mixes including instant foods, coconut milk powder, pickles, sweets, cheese, confectionery, chocolates, toffees and savouries like chips and pop corn sold without a brand name other than those specified in the Fourth Schedule." Entry 107 of Part B of the First Schedule to the TNVAT Act is as follows: "Processed fruit and vegetables including fruit jam, jelly, pickle, fruit squash, paste fruit drink and fruit juice (whether in sealed containers or otherwise) other than specified in the Fourth Schedule." Part C of the First Schedule (sub-section (2) of section 3) reads as follows: "All goods other than those exempte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ording of the entries in the Central Excise Tariff Schedule is different from that of those found in the Tamil Nadu Value Added Tax Act, 2006 and no parallel line could be drawn between the two enactments. External aid can be taken for construction of a statute, only when there is any ambiguity in interpreting the meaning of the words used in a particular statute. Even assuming that if there is any ambiguity in interpreting the words used in the statute, courts have held that the theory of purposive construction should be applied. In the given case, the distinction is with reference to the goods marketed, with or without a specific brand name and the Legislature has clearly demarcated the difference in placing goods in appropriate entries for the purpose of levy of tax. If the intention of the Legislature was to treat "potato chips" as processed vegetable, then it could have been included in entry 107 of Part B of the First Schedule, as was done in the case of fruit jam, fruit squash, etc. When there is a specific exclusion of branded "potato chips" in the said entry, courts cannot add or insert the processed final product in the said entry, as it would be amounting to usurping the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nction of clarifying the rate of tax applicable to the goods under the TNVAT Act on the request made by the manufacturer or dealer. If the request of the petitioners that every manufacturer or dealer of goods, in the instant case, "potato chips", has to be given an opportunity before issuing a clarification, is accepted, then there will not be any end to the process of determination of the rate of tax applicable to any goods. It would only open the pandora's box and any clarification issued by the competent authority will not reach its finality. As long as the administrative decision is not unfair, arbitrary or irrational, the same cannot be held as ultra vires the statutory provisions. It is evident that the authority has issued the clarification with reference to the classification of the goods, occurring in various entries in the Schedule appended to the TNVAT Act. Therefore, the request of the petitioners to remit the matter for reconsideration, does not merit acceptance. The intention of the Legislature to levy a lesser rate of tax with reference to the usage of the product or goods in the market, cannot be said to be arbitrary or capricious. Neither the manufacturer no....