TaxTMI 
TaxTMI 
2015 (9) TMI 1087
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....with the explanation submitted by the appellant through her reply dated 11.12.2013, the third respondent issued Exhibits P15 and P16 assessment proceedings. The third respondent, issued the said notices of demand ( Exhibits P15 and P16) in Form No. 12, requiring the appellant to pay 2,41,818/- and 2,06,844/- for the assessment years 2010-11 and 2011-12 respectively. 3. Challenging Exhibits P15 and P16 assessment orders issued by the third respondent, the appellant filed W.P.(C) No. 3850/2014. In the said writ petition, the appellant also impugned Exhibits P1 and P1(a) 'Clarification Orders' issued by the competent authority under Section 94 of the KVAT Act, declaring that Margarine is liable to attract a higher rate of tax, by virtue of Entry 64(8) of the relevant notification. 4. A learned single Judge of this Court took up the matter along with other connected matters and rendered a judgment dated 27.03.2014, rejecting the challenge of the assessment orders issued by the third respondent. Aggrieved thereby, the appellant has filed the present intra-court appeal. Submissions of the Petitioner: 5. Mr. Ganesh, the learned Senior Counsel, appearing for the appella....
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....e are excluded from HSN 1517. To fall out of the purview of HSN 1516, industrial margarine does not undergo any further preparation and mere emulsification does not amount to undergoing further process. Emulsification is similar to hydrogenation and by emulsification a product does not undergo a further preparation. Such an eventuality, according to the learned Senior Counsel, comes into picture only when new substance is added and thereby a different product has been obtained. 9. The learned Senior Counsel for the appellant has stressed what is otherwise well established by Cannon of statutory interpretation that taxing statutes are to be strictly construed and that in the event of any ambiguity, it shall be resolved in favour of the assessee. According to him, no tax liability can be imposed by reading into a statutory provision what has not been expressly stated therein. On the strength of the said submission, the learned Senior Counsel has contended that it is entirely untenable for the assessing authorities to conclude that all types of Margarine, except liquid Margarine, stand specifically included under HSN Code 1517.10. According to him, 'Margarine' mentioned und....
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....ted that the provisions of the KVAT Act are distinct and different from those of KGST Act. According to him, the "HSN Code" given under the Customs Tariff Act has also not fallen for consideration in that judgment. It is the contention of the learned Government Pleader that there is no inconsistency between SSD Oil Mills's case (supra) rendered by a learned Division Bench of this Court and Aluva Sugar Agency's case (supra) rendered by the Hon'ble Supreme Court. 15. Concerning the classification of the product or produce under HSN Code, the learned Government Pleader would contend that once there is a specific Entry prescribed for margarine, with a singular exclusion of liquid margarine, it does not lie in the mouth of the appellant to contend that margarine of a different description, save liquid margarine, ought to be taken under a residuary provision dealing with Vanaspati or other hydrogenated vegetable oil. In any event, it is the contention of the learned Government Pleader that placing margarine, without finer distinctions, under one particular category for the purpose of tax is essentially a policy decision, which is not liable to be interfered with. 16. To....
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....ne - a butter substitute made from animal or vegetable facts or oils. If oils are used they are 'hardened' into fats by the process of hydrogenation. Skim milk, water, salt, colouring matter, artificial flavours, lecithin, and small amounts of vitamins are usually added. By Federal Regulations [USA] at least 80 percent fat." (Italics supplied) 22. In the absence of any statutory definition, we will conclude our lexical foray with a reference to Dictionary of Food Science and Technology, (2nd Edn.), published by Wiley-Blackwell, which defines Margarine as follows:- "Margarines. Water in Oil emulsions usually composed of 80% animal fats or hydrogenated vegetable fats and 20% water, together with emulsifiers, colorants, Vitamin A, Vitamin D and flavourings. Usually sold at room temperature. Used as spreads, butter substitutes, in baking or as cooking fats. Low fat products may contain as little as 20% fat." (Italics supplied) 23. Industrial Margarine is an all-purpose margarine suitable for industrial uses related to baking; as such, it is also called Bakery Margarine. From the lexical definitions nowhere is it discernible th....
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.... entries concerning the animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes. 1516 Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, interesterified, re-esterified or elaidinised, whether or not refined, but not further prepared. 1516 10 Animal fats and oils and their fractions. 1516 20 Vegetable fats and oils and their fractions including vanaspati. 1517 Margarine; edible mixture or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, other than edible fats or oils or their fractions of heading 1516. 1517 10 Margarine, excluding liquid margarine. -Of animal origin -Of vegetable origin Types of Margarine: 27. HSN Code 1517 10 expressly specifies Margarine. Yet, it is the contention of the learned Senior Counsel for the appellant that Margarine is not a singular term of reference to a particular food product. Based on the manufacturing process and ingredients that go into the produce, Margarine has, according to the learned Senior Counsel, sub-classifications, though compendiously referred to as....
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.... Counsel that the same issue, as has fallen for consideration presently, stands squarely decided by the Hon'ble Supreme Court in that case. Continuing in the same vein, he submits that the SSD Oil Mills case (supra) decided by a learned Division Bench of this Court is per incuriam in the face of the ratio in Aluva Sugar Agency case (supra). Thus, it is necessary to examine Aluva Sugar Agency case (supra). 33. In Aluva Sugar Agency case (supra) the short question that has arisen for consideration is whether sale of margarine is to be taxed at 8% or 4% under the provisions of the Kerala General Sales Tax Act, 1963. Their Lordships have concluded that Margarine is an edible oil available for tax concession, essentially based on a Departmental Circular dated 19.02.1996, explaining the term "edible oil". Having found that it was the intention of the Government to give relief in tax to edible oils, and that, precisely for that purpose, the said circular had stated that edible oils would also include hydrogenated oils, such as ground nut oil, gingelly or till oil, refined oil and vanaspathi oil, it was ruled in favour of the assessee that margarine should be taxed at 4% as it is ed....
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....e similar to the provisions of the Act with reference to which the principles were evolved." Aluva Sugar Agency, SSD Oil Mills and the Present Case: 36. In the light of the above discussion on the principle of precedent or stare decisis, if we examine the statutory scheme governing the issue in Aluva Sugar Agency in contradistinction with the present case, it is evident that the Apex Court rendered the judgment in the former case while interpreting the provisions of the KGST Act, whereas in the latter, it is the provisions of the KVAT Act and Customs Tariff Act, that fall for consideration. Essentially, in the former case, the Rules of Interpretation of Schedules have not been invoked. In the face of the ratio in Khandelwal Metal and Engg. Works (infra), the whole issue shows itself in a different light. 37. Once we examine SSD Oil Mills (decided on 08.06.2010) in the light of the dictum laid down in Aluva Sugar Agency (decided on 07.09.2011), we fail to persuade ourselves to see any repugnancy in the ratio of SSD Oil Mills to brand it per incuriam. As we have already held, they have been decided under two different statutes. Furthermore, the Rules of Interpretation of Sch....
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....ream, a product under Schedule I. Briefly stated, the respondent assessee's case, as has been extracted in the judgment, is that "Soft Serve" is a product distinct and different from "ice-cream" since the world over ice-cream is commonly understood to have milk fat content above 8% whereas 'Soft Serve' does not contain more than 5% of the milk fat. It cannot be considered as "ice-cream" by common parlance understanding since it is marketed by the assessee the world over as 'soft serve'; "ice-cream" should be understood in its scientific and technical sense; and for these reasons, 'soft serve' is to be classified under heading 04.04 as "other dairy produce" and not under heading 21.05. On the other hand, Revenue claims that ice-cream has not been defined under heading 21.05 or in any of the chapter notes of Chapter 21; upon conducting enquiries it was found that 'Soft Serve' is known as "ice-cream" in common parlance; and hence, it must be classified in the category of "ice-cream" under heading 21.05 of the Tariff Act. 40. In fact, Chapter 4 of the Tariff Act deals, inter alia, with dairy produce. Since Heading 04.04 is applicable to "other dai....
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....ss. Much better is the position in Connaught Plaza, where 'Soft Serve' has not been enumerated, but the Revenue treated it as ice-cream. In the present instance, Margarine has been specified, but the distinction is sought purely on technical grounds. Precisely for that reason, the Supreme Court has adopted 'the Common Parlance Test' in that case. In that back drop, we can appreciate the ratio of Connaught Plaza. 44. Putting the issue in perspective, their Lordships in Connaught Plaza have observed thus:- "15. According to the rules of interpretation for the First Schedule to the Tariff Act, mentioned in Section 2 of the Tariff Act, classification of an excisable good shall be determined according to the terms of the headings and any corresponding chapter or section notes. Where these are not clearly determinative of classification, the same shall be effected according to Rules 3, 4 and 5 of the general rules of interpretation. However, it is also a well known principle that in the absence of any statutory definitions, excisable goods mentioned in tariff entries are construed according to the common parlance understanding of such goods." P....
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....e argument that since 'soft serve' is distinct from "ice-cream" due to a difference in its milk fat content, the same must be construed in the scientific sense for the purpose of classification. The statutory context of these entries is clear and does not demand a scientific interpretation of any of the headings. Therefore, in the absence of any statutory definition or technical description, we see no reason to deviate from the application of the common parlance principle in construing whether the term "ice-cream" under heading 21.05 is broad enough to include 'soft serve' within its import." Rules of Interpretation: 48. Coming to the Rules of Interpretation of Schedules, it is well established that the question of classification of goods under the "Import Tariff" cannot be decided by implications, when there are Rules of Interpretation which are specially framed to aid and assist the classification of goods under appropriate Headings. Those Rules must have precedence over other aids of interpretation. (Ref. Khandelwal Metal and Engg. Works v. Union of India ((1985) 3 SCC 620). 49. If we observe the Rules of Interpretation of Schedules, it is clear that the....
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.... given to it in HSN when there is no indication in the Indian tariff of a different intention. 52. Eventually, based on the facts of the case, the Supreme Court has held that when throughout the meaning given to the products in question not only by the Department itself but also by other Departments like the Drug Controller and the Central Sales Tax is that the product in question is a medicinal preparation, that view should be accepted. Regrettably, we do not any such situation obtaining here on facts. Accordingly, we hold that Muller may not improve the case of the appellant. Ejusdem Generis: 53. Clause (v) of the Rules of Interpretation speaks of taking aid of interpretative device, namely ejusdem generis. Indeed, the learned Senior Counsel for the petitioner, too, has laid much stress on this principle of interpretation. Ejusdem generis principle is a facet of the principle of noscitur a sociis. The Latin maxim noscitur a sociis contemplates that a statutory term is recognised by its associated words. The Latin word "sociis" means "society". Therefore, when general words are juxtaposed with specific words, general words cannot be read in isolation. Their colour and the....
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.... At best the controversy could be confined to one aspect: With the exclusion of 'Liquid Margarine', can we presume that margarine, sans liquid margarine includes every other category, or is there anything left so that it can be classified along with other analogous products, going by their technical analysis of its constituent elements? 58. To answer the above question, without repeating ourselves, we can say that the Hon'ble Supreme Court has already disapproved the technical analysis of products to extricate them from the tax net. Further, it is, again, a well established cannon of statutory interpretation that if a genus comprises many species and only one or a few of the species have been excluded for a particular purpose, the inexorable indication of such an arrangement is that all the rest of species have been included under the genus. Moving from abstract to the concrete, we can say Margarine is a generic produce having sub-classifications, among which Liquid Margarine stands excluded. Essentially what follows is that the rest of varieties are included or at least have not been separately dealt with. Notified List of Goods Taxable: 59. Another contention....