TaxTMI 
TaxTMI 
2017 (5) TMI 592
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....have been heard together and the appeals are being disposed of by this common judgment. 3. Civil Appeals arising out of SLP(C) Nos. 1469798 of 2016 are being treated as leading case, the facts of which case shall be noted in detail for deciding these cases. 4. Civil Appeals arising out of SLP(C) Nos. 1469798 of 2016 and SLP(C) No.9467 of 2016 are between the same parties whereas Civil Appeals arising out of SLP(C) Nos.2446061 of 2016 have been filed by different appellants. Civil Appeals arising out of SLP(C) Nos. 1469798 of 2016 5. The appellantM/ s. Parle Agro (P) Ltd. is a dealer engaged in fruit juice based drink known as 'Appy Fizz' which has obtained certificate of registration under Kerala Value Added Tax Act, 2003 (hereinafter referred to as "Act, 2003"). The appellant was classifying the product as fruit juice based drink under Entry 71 of the notification issued under Section 6(1)(d) of Act, 2003 till 2007 and was paying @ 12.5% VAT. One M/s. Trade Lines (a distributor of appellant Company) was assessed by the authorities under the Act, 2003 holding that M/s. Trade Lines is liable to pay tax @ 20% on the product. M/s. Trade Lines filed OT Revision No.114/2013 ....
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.... Division Bench dated 5th October, 2015, the Committee of Joint Commissioner passed the clarification order dated 6th November, 2015 classifying the product as 'aerated branded soft drinks', at the rate of 20%. Against the order passed under Section 94 of Act, 2003, the appellant filed O.T. Appeal No.7 of 2015 in the Kerala High Court. The Division Bench by its judgment and order dated 5th February, 2016 dismissed the appeal filed by the appellant upholding the order dated 6th November, 2015. A review application was also filed by the appellant to review the judgment dated 5th February, 2016 which has been dismissed on 23rd March, 2016. 7. Civil Appeals arising out of SLP(C)No.1469798 of 2016 have been filed against the aforesaid order dated 5th February, 2016 and the review order dated 23rd March, 2016 by the appellant. Civil Appeal arising out of SLP(C)No.9467 of 2016 8. The Assistant Commissioner (Assessment) and the Commissioner of Commercial Taxes have filed this appeal challenging the judgment dated 5th October, 2015 by which writ appeal filed by the Assistant Commissioner(Assessment) and another against the direction of the learned Single Judge dated 31st August....
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....nfined to the assessment order on the basis of facts on the record of that case. Prior to 2007 the product was covered under Entry 71. When in 2008 Entry 71 was amended, there was no amendment to the schedule under Section 6(1)(a). He submits that had the intention of the legislation was to pick up the certain products earlier covered under Entry 71 and place them in Schedule under Section 6, then entry 'aerated branded soft drinks, excluding soda' which earlier did not cover the said product, would also have been amended at the same time. He submits that if prior to 2007, 'Appy Fizz' could not be considered as an 'aerated branded soft drink' then there is no identifiable logic that the product would be so covered after 2007. Especially, there was no indication that the said product had been removed/ejected from Entry 71 after the amendment in 2007. 12. Further, he submits that common parlance test which has been applied by the High Court is not the correct test to determine the classification to include the product, as entries under the VAT Act are technical or scientific in nature. Soft drinks under Kerala VAT would be those drinks that are synthetic wh....
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....e, it is aerated drink. He submits that amendment of Entry 71 by S.R.O.No.119 of 2008 made the legislative intent clear and the High Court has rightly relying on the said amendment has held that product is not covered under Entry 71 and is liable to tax @ 20% under Section 6(1)(a). Learned counsel for the respondent, further, submits that CESTAT ruling has no relevance with regard to the classification under Act, 2003, since, the CESTAT ruling considered the different headings under Central Excise Tariff Act, 1975 which is not relevant. Learned counsel submitted that under the Rules of interpretation as contained in the Act, 2003, the product being not covered with any of HSN number common parlance or commercial parlance test has rightly been applied by the High Court. Under the common parlance even if the product contained more than 10% fruit concentrate it is a soft drink as commonly known and tax liability @ 20% has rightly been imposed. 16. Learned counsel for the parties have placed reliance on various cases which shall be referred to while considering the submissions in detail. 17. We have considered the submissions made by the learned counsel for the parties and peruse....
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....which is relevant for the present case as notified by the State as existing prior to amendment by the S.R.O.No.119 of 2008 is as follows: "71. Nonalcoholic beverages and their powders, concentrates and tablets including (I) aerated water, soda water, mineral water, water sold in sealed containers or pouches (ii) fruit juice, fruit concentrate, fruit squash, fruit syrup and fruit cordial [x x x] (v) other nonalcoholic beverages; not failing under any other entry in this List or in any of the Schedule. (1) Water not containing added sugar or other sweetening matter; [x x x] (b) Aerated water (2) Water containing added sugar or other sweetening matter. 2201.10.20 (3) Fruit juices and vegetables juices, unfermented and not containing added spirit, whether or not containing added sugar of other sweetening matter 2009 (4) Fruit pulp or fruit juice based drinks 2202.90.30 (5) Soft drink concentrates (a) Sharbat 2106.90.11; (b) other 2106.90.19 (6) Beverages containing milk 2202.90.30 20. The words "(iii) soft drinks of all varieties" omitted by S.R.O. No. 543/2007 dated 20607 published in....
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.... the Schedules of this Act shall apply to the interpretation of the HSN codes mentioned in this clause. xxx xxx xxx xxx (d) in the case of goods not falling under clause (a) or (c) at the rate of 14.5% at all points of sale of such goods within the State, Government may notify a list of goods taxable at the rate of 14.5%;" 22. A legislative history of Section 6(1)(a) clearly indicates that Section 6(1)(a) always covered 'aerated branded soft drinks' excluding soda' with tax liability of 20%. 23. By S.R.O.No.119 of 2008 Entry 71 has been substituted by another Entry. Entry 71 after amendment by S.R.O.No.119 of 2008 w.e.f. 1st April, 2007 is as follows: "NONALCOHOLIC BEVERAGES AND THEIR POWDERS, CONCENTRATES AND TABLETS IN ANY FORM INCLUDING; (1) Aerated water, soda water, Mineral water, water sold in sealed containers or pouches. (2) Fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp, and fruit cordial. (3) Soft drinks other that aerated branded soft drinks. (4) Health drinks of all varieties. (5) 'Similar other products not specifically mentioned under any other entry in t....
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....thin the State. Subclause (a) further provides that in the case of goods specified in subclause (a) tax liability shall be at rate of specified in column (4). Subclause (a) contains chart which includes Sl.No., Description of goods, HSN Code and Rate of tax in percentage. The rate of tax as mentioned in in Section 6(1)(a) is 20% or more. The goods enumerated in Section 6(1)(a) are tobacco based goods, pan masala, other manufactured tobacco and manufactured tobacco substitutes. Other category contains plastic goods and goods made of polypropylene, Chloride/ Polyethylene and other plastic sheets. All goods enumerated in Section 6(1)(a) by the Legislature itself indicates that higher rate of tax has been fixed for those goods which are harmful for environment and health. Aerated branded soft drinks, excluding soda is also in the company of the above goods described in Section 6(1)(a). Section 6(1)(a) also refers to Schedule I, Schedule II and Schedule III. Tax in Schedule I is exempted and rate in Schedule II is 1% whereas rate of tax in Schedule III is 5% in contrast to legislative policy in fastening tax liability at very high level on goods under Section 6(1)(a) is thus clear and c....
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....nks, there was no occasion for subordinate legislative authority, i.e., the State Government, to include such products in notification under Section 6(1)(d). 30. Now, we come to Entry 71 which was substituted by S.R.O. No.119 of 2008 dated 24.1.2008 w.e.f. 01.04.2007, which is to the following effect: "71. Nonalcoholic beverages and their powders, concentrates and tablets in any form including: (1) aerated water, soda water, mineral water, water sold in sealed containers or pouches; (2) Fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp and fruit cordial; (3) Soft drinks other than aerated branded soft drinks; (4) Health drinks of all varieties; (5) Similar other products not specifically mentioned under any other entry in this list or in any other Schedules." 31. A bare perusal of Entry 71 as above indicates that the Entry covers nonalcoholic beverages and their powders, concentrates and tablets in any form including Item No.2 contains fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp and fruit cordial. Soft drinks other than aerated branded soft drinks are included in Item No.3. Health ....
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....n 6(1)(a). The explanation to Section 6(1) (a) provides as follows: "Explanation: The 'Rules of Interpretation of the Schedules' appended to the Schedules of this Act shall apply to the interpretation of the HSN codes mentioned in this clause." 34. Although the above Explanation applies the Rules of Interpretation of the Schedules to the interpretation of the HSN codes mentioned in Section 6(1)(a) but Explanation does not say anything about the items where HSN code is not there. The Rules of Interpretation of the Schedules, thus, directly are not attracted with regard to the interpretation of the entry which does not mention with HSN code in Section 6(1)(a) although principle contained in such Rules of Interpretation may apply. Had the legislation intended the Rules of Interpretation of the Schedules should be made applicable both to the interpretation of the Schedules or those commodities which are not given with HSN code, the Rules of Interpretation of Schedules should have been in toto made applicable for interpretation of clause (a) of Section 6(1). Thus, common parlance test or commercial test which are to be applied on the commodities in the Sched....
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....nt specific gravity of 2.5 or more. Therefore, the word 'marble' has to be interpreted, in our considered opinion, in the scientific or technical sense and not in the sense as commercially understood or as meant in the trade parlance. There is no doubt that the general principle of interpretation of tariff entries occurring in a text (sic tax) statute is of a commercial nomenclature and understanding between persons in the trade but it is also a settled legal position that the said doctrine of commercial nomenclature or trade understanding should be departed from in a case where the statutory content in which the tariff entry appears, requires such a departure. In other words, in cases where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the said word was used then the said principle of interpretation should not be applied. Trade meaning or commercial nomenclature would be applicable if a particular product description occurs by itself in a tariff entry and there is no conflict between the tariff entry and any other entry requiring to reconcile and harmonise that tariff entry with any other entry. 37. In Union of ....
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....r scientific character then it must be construed according to that which is its primary meaning, namely, its technical or scientific meaning." Referring to the above decisions this Court held that: "[W]hile construing the word 'coal' in Entry I of Part III of Schedule II, the test that would be applied is what would be the meaning which persons dealing with coal and consumers purchasing it as fuel would give to that word. A sales tax statute being one levying a tax on goods must in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance." 42. This Court in K.V. Varkey v. Agricultural Income Tax and Rural Sales Tax Officer specifically declined to apply the popular or commercial meaning of 'Tea' occurring in the sales tax statute holding that the context of the statute required that the technical meaning of 'a product of plaint life' required to be applied and therefore green tea leaves were tea even though they might not be tea as known in the market. 43. In Cannanore Spinning and Weaving Mills Ltd. v. Collector of Customs and Central....
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....fic meaning of word. The appellant has rightly relied on the technical evidence brought on the record which indicate that use of carbon dioxide to the extent of 0.6 per cent was only for the purpose of preservative in packaging the commodities and the product was thermally processed and carbon dioxide was added to as the preservative. Issue No.4: Principle of 'Noscitur a Sociis' 40. The appellants before the Committee of Commissioners as well as High Court have pleaded that Entry 71 Item 5 mentioned "similar other products not specifically mentioned under any other entry in this list or any other schedule", was required to be considered in the light of commodities as included in other items mentioned in Entry 71. It was submitted that 'Appy Fizz' which a fruit juice based drink is more akin to other commodities included in the Entry 71 other than that which was included in Section 6(1)(a). In interpreting Item 5 of Entry 71 the doctrine of 'noscitur a sociis' is fully attracted. Justice G.P.Singh in 'Principles of Statutory Interpretation, 14th Edition, has explained the 'noscitur a sociis' in the following words: "(b)Noscitur a....
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....r that clause 5 of Entry 71 has to take colour and meaning from the other items included in Entry 71. Item 5 of Entry 71 uses the words "similar other products not specifically mentioned under any other entry in this list or any other schedule". Thus, the products which are to be covered under Item No.5 are similar other products. When Item No.2 of the Entry 71 that is fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp, and fruit cordial and item No.4 that is health drinks of all varieties, are kept in mind the fruit juice based drink shall fall in Item No.5. Both High Court and Committee of Commissioners overlooked this principle while interpreting item No.5 of Entry 71. Issue No.5 43. The appellant in application under Section 94 of the Act, 2003 filed several materials, expert opinions and pleadings for classifying the product in question. The Committee of Commissioners although in its order has noted several contentions raised by the appellant but the Committee of Commissioners mainly relying on the judgment of Division Bench of Kerala High Court in OT Revision No.114 of 2013M/ s. Trade Lines finalised the assessment by levying tax on the product 'App....
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....e the issue and the Committee of Commissioners was not absolved from its duty of deciding the same in accordance with the materials brought on the record by the appellant and although the Committee noticed all the pleadings and contentions but mainly relying on the ruling of M/s. Trade Lines dismissed the clarification application which cannot be sustained. Issue No.6. 45. Appellant had relied on the order of CESTAT dated 18.03.2008 reported in 2008 (226) ELT 194(TribunalDelhi) which was in appeal filed by the Commissioner of Central Excise, Bhopal against the M/s. Parle Agro Pvt. Ltd. regarding classification of the same product 'Appy Fizz' and the order passed by the Commissioner(Appeals) whereby it was held that product 'Appy Fizz' is classifiable under subheading No.22029020 of Central Excise Tariff on the ground that the product is fruit juice based drink. Revenue challenged the order on the ground that the same is classifiable under subheading No.22021010 of Central Excise Tariff as 'aerated water'. The Tribunal vide its judgment dated 18.03.2008 dismissed the appeal. The order in paragraph 5 has referred to relevant subheading No.220210 and 2202....
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....rt on 8th July, 2009 affirming the order of CESTAT. 49. The judgment of CESTAT and the order of the Supreme Court were specifically relied by the appellant before the High Court. The High Court without giving cogent reason has refused to rely on the said adjudication. It may be said that the adjudication by the CESTAT was with regard to the HSN Code which found place in Central Excise Tariff Act. The competent entry under which CESTAT authorities were to adjudicate regarding the product has already been extracted "Fruit pulp or Fruit juice based drink" on which CESTAT had ruled that product is not included in aerated water and was included in entry as fruit juice based drink. The product was not held to be aerated water was a relevant fact to be considered even though in the entries under the Act, 2003, now there are no HSN Codes mentioned. 50. Even though the order of CESTAT did not conclude the controversy in favour of the appellant but fact that the CESTAT did not hold the product to be under the "aerated water" was a factor which necessitated a more deeper consideration by the High Court to find out as to whether the product is 'aerated branded soft drink' or not.....
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.....03.2005 containing the "Subject : Opinion for the product as 'Appy Fizz'". In the letter the Government stated the following: "This is with reference to your letter No. KSDELPAL dated 4th March, 2005 on the above mentioned subject. There are three categories of products specified under the Fruit Products Order, 1955 which are relevant to your products. 1. Ready to serve beverages including aerated waters containing Fruit Juice. The product should contain a minimum of 10% of fruit juice. The product is commonly known as fruit drink. 2. Flavored sweetened aerated waters. The product which contains less than 10% of ..sic.. & vegetable extractives is included in this category. The product is commonly known as soft drink such as Pepsi Cola, Coca Coin etc. 3. Sweetened aerated mixtures containing fruit juice or bits. The product should contain a maximum of 10% of fruit juice or pulp or bits. This category of product technically is same as at serial no.1." 53. Thus, according to the Government of India, Ministry of Food Processing Industries the product containing 10% of fruit juice are commonly known as fruit drinks. The appellant has also ....
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.... the Committee of Joint Commissioners produced the technical certificates. The Food Safety and Standards (Food Products Standards & Food Additives) Regulations, 2011 in clause 2.3.10 deals with thermally processed fruit beverages/fruit drink ready to serve fruit beverages which has already been extracted above. The appellant has filed a certificate dated 11.06.2015 from the Institute of Chemical Technology. It is useful to refer to the above certificate which is to the following effect: "INSTITUTE OF CHEMICAL TECHNOLOGY ICT/FET/USA/1590 June 11, 2015 TO WHOMSOEVER IT MAY CONCERN Technical opinion on the product Appy Fizz manufactured by PARLE AGRO PVT LTD. Appy Fizz is a fruit product manufactured using apple juice concentrate as a fruit juice source. The ingredients declared on the label include Water, Sugar, Apple Juice concentrate, Carbon dioxide(290), malic acid, citric acid, preservatives(sodium benzoate, potassium metabisulphite and potassium, sorbate), ascorbic acid and added nature identical flavouring substances and natural colour. The juice content of APPY FIZZ is 12.7% m/m and Total solids content is 13%. The product is manufactured under FSSAI li....
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....d its use is allowed as per GMP. Carbon dioxide along with other preservatives help in extending the shelf life of the product as the product is filed in PET bottles/cans and is not filled aseptically. Conclusion: In view of the above mentioned points, I am of the opinion that the APPY FIZZ is a THERMALLY PROCESSED FRUIT BEVERAGE/READY TO SERVE FRUIT BEVERAGE complying with category 2.3.10 as per FSSAI Regulations, 2011 despite having carbon dioxide as an ingredient which is used for preservation purpose only. This opinion is purely based on scientific and technical information however ICT will not be part of any court conflicts. Sd/11.6.2015 Dr. Uday S. Annapure, Associate Professor, Dept. of Food Engineering & Technology, Institute of Chemical Technology Matunga, Mumbai400 019." 57. The above technical opinion clearly mentioned that carbon dioxide is used for preservation purpose only. Before the Committee of Commissioners the entire process of manufacture of the product was explained along with all relevant orders and certificates of Food Safety Authorities. It was stated that the Experts in their opinions and cer....
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....s been recognized by a legislative body of Kerala Government based on the white paper issued by empowered committed of state Finance Minister while introducing the White Paper on 17.01.2005 and has issued the Original Notification SRO 82 of 2006 dated 21.01.2006 and classified the product based on Central Excise Tariff which interalia is based on HSN at Entry no.71 Sr. No.4 as Fruit Juice Based Drink. Copy of the said Notification and White Paper is enclosed herewith as Exhibit M and Exhibit N Colly. (f) The said classification under Entry No.71 sr.No.4 of the product under Kerala VAT remained in Entry No.71 at Sr.5 despite the substitution brought by Notification SRO 119 of 2008 dated 24.01.2008. (Copy of the said Notification is enclosed herewith as Exhibit O) (g) The Kerala VAT dept. had raised an issue regarding the classification of the product Appy Fizz in 2009. However, the Company had explained the reason as to why the product Appy Fizz has been classified as a fruit juice based drink. The said explanation of the company has been accepted and no order has been passed by the KVAT Department, accepted assessment order passed by assessing officer Exhibit P. ....
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....he Tribunal was right in rejecting the evidence that was produced on behalf of the appellants, the appeal should, nonetheless, have been allowed." 62. We, thus, conclude that orders of Food Safety Authority and expert opinion regarding process of manufacture relied by the appellant were relevant materials and Clarification Authority and High Court erred in law in discarding these materials. Issue No.9 : CONCLUSION 63. While referring to Section 6(1)(a) and Section 6(1)(d) we have already noticed that the power of the State Government to issue notification under Section 6(1)(d) arises "in the case of goods not falling under clause (a) or (c)". After enactment of Act, 2003 Section 6(1)(a) from the very beginning included 'aerated branded soft drink'. The inclusion of fruit juice based drinks in Entry 71 clearly proved that fruit juice based drinks were never treated to be included in 'aerated branded soft drinks'. Had fruit juice based drinks were also included in 'aerated branded soft drinks', the State could not have exercised its power under Section 6(1)(d) to include such products in Entry 71. Whether after amendment of Entry 71 by S.R.O. No.119 o....
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....mended with tax liability at 12.5% after amendment by S.R.O. No.119 of 2008 (now at the rate of 14.5%). 64. Now, coming to the appeal arising out of SLP(C)No.9467 of 2016. The appeal has been filed by the Revenue challenging the judgment of learned Single Judge and Division Bench by which direction was issued to the Committee of the Commissioners to decide the application filed by the appellant under Section 94 of Act, 2003. Learned Single Judge has issued directions dated 31st August, 2015 directing the Commissioner of Commercial Taxes to pass orders on the clarification application. The appellant was also given liberty to produce all material, on which the appellants intend to place reliance to substantiate their contention with regard to the classification of the product in question. In writ petition filed by the Revenue before the Division Bench, the Division Bench affirmed the order and while referring to subsection (4) of Section 94 stated following: "Subsection( 4) of Section 94 states that where any question arises from any order already passed or any proceedings recorded under the KVAT Act, or any earlier law, no such question shall be entertained for determina....