TaxTMI 
TaxTMI 
2011 (10) TMI 564
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.... by the revisionist but, instead of levying the tax on the sale of potato chips made by the revisionist at four per cent, has levied it at 12.5 per cent. 3. According to the revisionist, the tax could have only been levied at four per cent and not at 12.5 per cent. The revisionist, being aggrieved, filed an appeal before the Joint Commissioner (Appeals), Commercial Tax, Dehradun, which was dismissed by an order dated November 19, 2010. The Joint Commissioner (Appeals) held that the potato chips was not covered by entry No. 6 of Schedule II(B) of the Act and was consequently liable to tax at 12.5 per cent. The revisionist, being aggrieved, filed a second appeal under section 53 of the Act before the Commercial Tax Tribunal, Dehradun, which was also dismissed by an order dated May 9, 2011. The revisionist, being aggrieved by the aforesaid orders, has filed the present revision under section 55 of the Act. 4. The question, which has to be decided in the present revision is, whether potato chips is a processed vegetable or not, and consequently liable to be taxed at four per cent or at 12.5 per cent. 5. Under section 3 of the Act, the incidence of tax is levied and charg....
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....ruit juices and achar (whether in sealed containers or otherwise)" 7. A perusal of entry No. 6 of Schedule II(B) of the Act indicates that all processed and preserved vegetables would be taxed at four per cent. According to the revisionist, potato chips is nothing but a preserved vegetable. The learned counsel submitted that potato is a vegetable, which after processing is called a potato chip. According to the revisionist, potato chips belongs to the common genus of processed vegetable and, in common parlance, potato chips is also a vegetable product. 8. On the other hand, the contention of the respondent-Department is, that potato chips is not a processed vegetable, but is a snack item. The process of preparation of potato chips is, in fact, a manufacturing process and the end-product, i.e., potato chips is a new item, which in the market is treated as a snack item and not as a processed vegetable. The contention of the respondent is, that the identity of the potato changes and, in common parlance, potato chips cannot and could not be classified as a processed vegetable. 9. From a perusal of section 4(2)(b) of the Act, it is clear that in respect of goods specified in Schedule....
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.... view was reiterated in Mauri Yeast India Pvt. Ltd. v. State of U.P. [2008] 14 VST 259 (SC); [2008] UPTC 729. 11. In the light of the aforesaid, unless the Department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort cannot be had to the residuary category and if there is a conflict between entries, then, the residuary category should not be taken into consideration. 12. A similar matter came up before the Gauhati High Court in Pepsico India Holdings Pvt. Ltd. v. State of Assam [2009] 25 VST 41 (Gauhati). A Division Bench of the Gauhati High Court, by the judgment dated April 28, 2009, held that the sale of potato chips made by Pepsico India Holding Pvt. Ltd. is covered by entry 80 of Part A of Schedule II to the Assam Value Added Tax Act, 2003 which provided for processed or preserved fruits and vegetables and that the entry would take within its compass potato chips being a processed vegetable. 13. Similar view was held by the Madras High Court in its judgment dated November 10, 2009 passed in Pepsico India Holdings Pvt. Ltd. v. Commissioner of Commercial Taxes [2010] 29 VST 214 (Mad), whe....
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.... classifies vegetables on the basis of parts of the plant, such as, root, stem, tuber, i.e., used for food. Potato is a tuber and states about potatoes as under: "Potato. Potatoes should be smooth, shallow-eyed, and clean. Varieties differ as to shape, size, colour of skin, and cooking qualities. Suitability for processing requires such qualities as high dry matter content, good texture and colour, low sugar content, high degree of maturity, and low peeling loss. In the second half of the 20th century, both institutional eating establishments and homemakers used potatoes in various processed forms, particularly frozen French-fried and dehydrated, or instant, mashed types. Potato chips have long been established as a major processed product. Instant mashed potato, in both potato granules and potato flake form, sliced and diced potato, and potato flour comprises the principal dehydrated products now in commercial production. One of the principal uses for dehydrated potato dice is as an ingredient in the manufacture of canned meat products." 18. The Ministry of Food Processing Industry has understood processing of potato wafers or chips as a vegetable processing industry. Further, t....
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....s from a reading of entry No. 6 of Schedule II(B) of the Act to be an inclusive entry. The use of word "all" and "including" makes it apparently clear that it is an inclusive entry. The effect of the words "all" and the words "including fruit jams, jellies, fruit squash, paste, fruit drinks and fruit juices and achar (whether in sealed containers or otherwise)" under entry No. 6 of Schedule II(B) of the Act and the absence of any exclusion of potato chips within the said entry gives a clear legislative intent of inclusion of potato chips under entry No. 6 of Schedule II(B). To support this view of ours, the court finds that entries 10, 32, 40, 101 and 114 specifically excludes a particular product from being taxable at four per cent under Schedule II(B). For facility, the said entries are quoted hereunder: "10. Aluminium, aluminium alloy, their products (excluding extrusions). 32. Coir and coir products excluding coir mattress. 40. Declared goods as specified in section 14 of the Central Sales Tax Act, 1956 except coarse gain. 101. Silk fabrics excluding handloom silk unless covered by additional excise duty. 114. Toys excluding electronic toys." 23. A perusal of the aforesaid....