TaxTMI 
TaxTMI 
2018 (1) TMI 1195
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....red under the specific Harmonised System of Nomenclature (HSN) Code shown against Entry 38(18) (d): 'Others including vanaspati'. 2. The Department maintains that the product not being an animal or vegetable fat or oil, or a hydrogenated vegetable oil; under which later classification, 'vanaspati' falls, has to be taxed under the residual entry in S.R.O. 82 of 2006. The applicant, before the Authority for Clarification contended that 'bakery shortening' falls under HSN Code 1516, specifically under sub-heading 1516.20.91, being 'vanaspati' a hydrogenated vegetable oil, which is exigible to tax @ 5% under the Third Schedule. The Authority for Clarification found that 'bakery shortening' is exigible to tax @ 12.5/13.5/14.5% (for various periods) under the residual entry of S.R.O No. 82/2006. 3. The learned Counsel for the appellant argued in tune with the contention taken by the assessee before the Clarification Authority. Reference is made to Entry 38(18)(d) to contend that, if at all, it is not vanaspati, it would fall under the 'other' category, as mentioned in the Entry, again, exigible to tax only @ 5%. The Clarification Orde....
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.... the material or component of the goods. The argument raised is that 'bakery shortening' is made up of 'vanaspati' and retains its essential character though it has increased leavening and shortening characteristics, making it more suitable for use in the manufacture of bakery products. 5. M.P. Agencies v. State of Kerala - 2015 (7) SCC 102 is relied on, to contend that when there is inconsistency as to the classification of a commodity, with and without HSN number, the commodity without HSN number should be interpreted by including the same in that entry which has been given HSN number. In the present case, under the Third Schedule, Entry 38(18)(d) dealing with 'vanaspati', shows as against the entry, the specific HSN number of 1516.20.91 and there is no scope for inclusion of the product having the essential characteristics of 'vanaspati' in the residual entry under S.R.O. No.82/2006. It is also argued that when two interpretations are possible, the one favouring the assessee should be adopted. 6. The learned Government Pleader would, however, specifically refer to the Rules of Interpretation under the Customs Act, to contend that Section 3(b....
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....lable in the Customs Act. 8. The Entries under the KVAT Act, HSN and the respective relevant Rules of Interpretation are as follows: (i) Entry 38 of the Third Schedule of the KVAT Act 'edible oils' includes different oils from item nos. (1) to (17) and item no.(18) is as follows: "(18) Other partly or wholly hydrogenated vegetable oils: (a) Cottonseed oil 1516.20.11 (b) Groundnut oil 1516.20.21 (c) Castor oil 1516.20.31 (d) Others including Vanaspati 1516.20.91" (ii) HSN Codes 1516 and 1517 of the Customs Tariff Act, 1975 are extracted here under: "1516 Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, reesterified or elaidinised, whether or not refined, but not further prepared 1516 10 00 - Animal fats and oils and their fractions 1516 20 - Vegetable fats and oils and their fractions: --- Cotton Seed Oil: 1516 20 11 ---- Edible grade 1516 20 19 ---- Other --- Groundnut oil: 1516 20 21 ---- Edible grade 1516 20 29 ---- Other --- Hydrogenated castor oil (opal-wax): 1516 20 31 ---- Edibl....
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....) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. 9. From the decisions cited at the Bar the law discernible is thus : (i). M/s.Adani Wilmar Ltd was concerned with the import of 'bakery shortening' and the exemption claimed classifying the goods under Chapt....
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....item, against which is indicated a HSN Code, to be interpreted on the basis of the HSN Code assigned and also the judgments applicable to the Customs Tariff Act. CCE Vs. Wood Craft Products 1995 (3) SCC 454 was also noticed, wherein the Statement of Objects and Reasons of the Central Excise Tariff Act, 1985 was referred, to hold that Harmonised System of Nomenclature (HSN) is an internationally accepted nomenclature formulated to 'reduce disputes on account of tariff classification'. In resolving a dispute relating tariff classification, HSN was found to be the foremost, best and the safest guide. The ISI Glossary of Terms in that context was found to be for a different purpose and when there is any conflict, the meaning of the item as available from the HSN was to be preferred. The subject goods were found to be diluted AVP & PVA as the test reports indicated that the chemical composition remained unaltered by the dilution. The description of goods being as identical to the HSN classification, the user test was irrelevant, as held in CCE Vs. Mannampalakkal Rubber Latex Works 2015 (7) SCC 124. The Court categorically held that there was hence no scope to consign the classif....
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....n in paragraph 43 that "Different tests are laid down for interpretation of an entry in taxing statue namely dictionary meaning, technical meaning, users point of view, popular meaning etc" (sic). It cannot normally be used for the purpose of interpreting a taxing statute or classification of a product viz-a-viz an entry in statute. But, a dictionary meaning can always be relied on as an aid of interpretation - Whether that is required is the discretion of the Court looking at the language employed in the Statute. 12. The Hon'ble Supreme Court held that a dictionary meaning would not be relevant when there is a definition in the Statute itself. In Ponds India Limited the question was as to taxation of petroleum jelly, whether it be a drug or cosmetic within the meaning of the provisions of the U.P. Trade Tax Act. The word 'drug' or 'cosmetic' had to be understood under the provisions of the Drugs and Cosmetics Act, 1940 and the statutory definition therein was specifically referred to by the Hon'ble Supreme Court. We cannot understand the dictum as laying down that the definition from a totally unconnected statute should be taken for the purpose of unders....
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....ition of 'bakery shortening' under the Vegetable Oil Order is also similar to that available under the FSS Regulations. The Order was one brought out to regulate the production of vegetable oil products, ensuring certain standards of quality and also to prohibit sale in containers made of second hand tin sheets. Vanaspati and bakery shortening are separately defined under clause 2(n) and 2(b) of the Vegetable Oil Order. Clause 2A also mentions them separately and clause 6 of the Order provides different schedules prescribing the standards of quality. The definition only indicates that for the purposes of regulation intended by the Vegetable Oil Order, the products are treated as similar. This does not necessarily bring out the identity of the products. We do not find any assistance from the definitions in the FSS Regulations or the Vegetable Oil Order. We are also of the opinion that we need not look at the dictionary meaning since, as has been held in Ponds India Limited, reference to the dictionary meaning, technical meaning, users' point of view and popular meaning etc has to be resorted to only if there is an ambiguity in the definition as per the taxing statute. ....
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....' alone which is a hydrogenated vegetable oil. Though the inclusion of vanaspati does not restrict the more general commodities included in the entry; there cannot be a further expansion or enlargement inferred. In so construing the Entry this Court draws support from the following passage in 'Bennion on Statutory Interpretation- Fifth Edition' which refers to other authoritative texts also: "Section 384. Ejusdem generis principle: general words followed by narrower genusdescribing terms The ejusdem generis principle is presumed not to apply where apparently general words are followed by narrower words suggesting a genus more limited than the initial general words, if taken by themselves, would indicate. The question is however, as always, one of the legislator's intention. COMMENT ON CODE S 384 Where apparently wide words are followed by terms indicating a narrower genus, this may suggest an intention to curtail the width of the initial words. Nevertheless the courts have been reluctant to treat this as an instance of the ejusdem generis principle. Craies goes so far as to state that 'There cannot be an inverse application of....
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....ly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised animal or vegetable fats and oils, whether or not refined, but not further prepared. Under the chapter heading, vegetable fats and oils are given six digit HSN number as 1516.20. Eight digit number 1516.20.91, speaks of edible grade vegetable fats and oils and vanaspati being an edible hydrogenated vegetable oil, definitely falls under that eight digit HSN code. However, when any hydrogenated animal or vegetable fats and oils are further prepared, it goes out of the Chapter heading 1516, even if it retains the quality and characteristics of a hydrogenated vegetable oil. The aspect of preparation excludes the commodity from the chapter heading and merely because it contains vanaspati, bakery shortening cannot be included under chapter heading 1516. 20. In this context the manufacturing process of 'bakery shortening' as detailed by the petitioner himself and extracted in Annexure 6 Order is relevant, which is as follows: "The first step in the making of bakery shortening is blending of various hydrogenated vegetable oils (vanaspati) and liquid refined vegetable oils to some proportions in a ....
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.... the booklet at page 27. "Shortenings are fats used in the preparation of many foods. In the past, lard and other animal fats were the principal edible fats used in shortenings in this country, but during the last third of the nineteenth century they were replaced by cottonseed oil, a by-product of the cotton industry. Many types of vegetable oils including soybean, cottonseed, corn, sunflower, and palm can be used in shortening products. Oils used in the production of these products are generally partially hydrogenated and often two or more stocks are blended in order to deliver the required performance characteristics including storage stability, creamy consistency over a wide temperature range and the ability to incorporate and hold air. Lard and other animal fats and mixtures of animal and vegetable fats also are used in shortenings." The procedure extracted herein above is similar to that admitted by the petitioner. 23. We also see from the order in M/s.Adani Wilmar Limited that the adjudicating authority has found so: "Therefore, it is clear that as per explanatory notes the goods bakery shortening will fall under 1517 only and not 1516 as it has under....