TaxTMI 
TaxTMI 
2026 (2) TMI 1265
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.... Tax Revision Nos. 617 of 2012, 527 of 2015, 383 of 2017, 410 of 2017, 47 of 2018, 528 of 2015, 529 of 2015, 7 of 2018, 8 of 2018, 9 of 2018, 457 of 2012, 458 of 2012, 459 of 2012, 460 of 2012, 461 of 2012, 462 of 2012, 464 of 2012, 465 of 2012, 466 of 2012, 467 of 2012, 468 of 2012 and 469 of 2012, whereby the High Court dismissed the revisions preferred by the appellant and affirmed the order of the Commercial Tax Tribunal, Ghaziabad ["Tribunal"] holding that the appellant's product "Sharbat Rooh Afza" was liable to Sales Tax / Value Added Tax at the rate of 12.5% under the residuary entry contained in Schedule V of the Uttar Pradesh Value Added Tax Act, 2008 ["UPVAT Act"]. 2.1. The connected appeal has been filed against the judgment and order dated 03.08.2022 passed by the High Court in Sales / Trade Tax Revision Defective No. 38 of 2022, wherein the High Court, following its earlier judgment dated 02.07.2018 in the aforesaid revisions, dismissed the revision and held that the appellant's product "Sharbat Rooh Afza" does not qualify as a fruit drink and is exigible to Value Added Tax at the rate of 12.5% under the residuary entry. 3. The dispute pertains to the period fro....
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....Fruit Products Order, 1955 as a fruit product / sharbat containing the prescribed minimum fruit juice content. 5.2. The learned senior counsel submitted that since the inception of the UPVAT, the appellant, maintaining uniformity in classification, sought to bring the product within Entry 103, namely, "processed or preserved vegetables and fruits including fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice (whether in sealed containers or otherwise). 5.3. It was urged that Entry 103 is an inclusive and umbrella entry intended to cover all products having a substantial nexus with fruits and fruit-based beverages. 5.4. It was further submitted that the High Court by the impugned judgments, erroneously accepted the contention of the Revenue by applying the common parlance test and holding the product to be a miscellaneous preparation exigible to tax under the residuary entry, also observing that in the absence of the word "sharbat" in Entry 103, the product must necessarily fall outside the said entry. According to the learned senior counsel, the High Court failed to consider that the product was clearly recognised and defined under the relevant statu....
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..... 5.9. Reference was also made to the Constitution Bench judgment in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company and Others (2018) 9 SCC 1, wherein it was held that taxing statutes must be interpreted strictly and literally, and the other tools of interpretation namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. It was urged that the High Court departed from these settled principles by resorting to assumptions and the common parlance test rather than applying the plain language of Entry 103. 5.10. Reliance was placed on the order dated 11.04.2022 passed by the Delhi VAT Appellate Tribunal in Appeal Nos. 1109-1110 of 2013 [Hamdard Dawakhana (Wakf) v. Commissioner of Trade & Taxes, Delhi] wherein it was held that "Rooh Afza" merits classification as a "fruit drink". It was submitted that the said order has attained finality. 5.11. The learned senior counsel submitted that "Rooh Afza" is classified as a fruit drink taxable at the lower rate in all other States across the country, except Uttar Pradesh and Haryana. 5.12. In view of the above, it ....
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...." in Clause 11 renders the provision mandatory, leaving no discretion to the manufacturer or the authorities, and any deviation from the same would defeat the object of the Fruit Products Order, which is to protect consumers from being misled. 6.4. It is a well-settled principle that in interpreting entries in Excise or Sales Tax statutes, the meaning as understood in common or commercial parlance must prevail, unless the statute provides a specific definition. Reliance in this regard was placed on CST v. Jaswant Singh Charan Singh 1967 SCC OnLine SC 154, Indo International Industries v. CST (1981) 2 SCC 528, and Deputy Commissioner v G.S. Pai (1980) 1 SCC 142. 6.5. The learned counsel contended that applying the common parlance test, a beverage such as "Sharbat Rooh Afza", containing only 10% fruit juice and being marketed and labelled as a non-fruit syrup, cannot be regarded by consumers or traders as a "Fruit Drink". 6.6. It was submitted that merely because the product contains some quantity of fruit extract, it does not automatically qualify as a fruit drink within the meaning of Entry 103, especially when statutory restrictions prohibit the appellant from marketing i....
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....03 does not expressly include "Sharbat" or "Fruit Product" within its ambit and hence, the commodity falls under the residuary entry of Schedule V, taxable at 12.5% as an unclassified item. 11. At the outset, it would be appropriate to briefly trace the evolution of the statutory regime governing levy of sales tax / VAT on the commodity in question. Pre-VAT Regime: UP Trade Tax Act, 1948 Prior to the introduction of VAT, the levy of tax on sale and purchase of goods in Uttar Pradesh was governed by the Uttar Pradesh Trade Tax Act, 1948. The said Act provided for levy of tax either at the first stage of sale/purchase or at the last stage of sale on specified goods. Under Notification No. ST-11-7421/X*10(1)/80-U.P. Act XV /48-Order-81, dt. 26.10.1981, the product "Sharbat Rooh Afza" fell under the following entry: S. No. Description Rate of Rax 63 Soda water, lemonade and other soft beverages and syrups, squashes, jams and jellies. 12% This position finds support in the decision in M/s. Hamdard (Wakf) Laboratories, Ghaziabad v. Commissioner of Sales Tax, U.P., Lucknow, 2005 NTN (Vol. 27)-35 [Convenience Compilation-II, Pg. 38-42.], wherein the product....
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....onfined to its classification under Entry 103 of Part A of Schedule II vis-à-vis the residuary entry in Schedule V of the UPVAT Act. 12. Notably, the appellant was granted Licence No. 2782/1 in the year 1972, which has been periodically renewed. The authorisation permitted manufacture of, inter alia, fruits syrups and squashes from purchased fruit juice/ pulp, and non-fruit syrups / sharbat under the regulatory regime then in force, including the FPO and the framework of the Prevention of Food Adulteration Act, 1954. 13. The product "Sharbat Rooh Afza" admittedly contains 10% fruit juice (8% pineapple juice and 2% orange juice) along with invert sugar syrup and certain herbal distillates. The label of the product discloses the following composition: Ingredient Volume (in 100 ml) Percentage Invert Sugar Syrup 80 ml 80% Pineapple Juice 8 ml 8% Orange Juice 2 ml 2% Distillate of Keora 3.5 ml 3.5% Distillate of Citrus Medica 0.8 ml 0.08% Distillate of Rose Damascena 0.6 ml 0.06% Permissible Food Colours 0.6 ml 0.06% Distilled Extract (Dhania, Gajar, Khurfa, Tarbooj, Palak, Pudina, Hara Ghia, Kasni, ....
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....nical syringes" could not be considered as "glassware" merely because they are made of glass, as commercial understanding must prevail over technical or dictionary meaning. Similarly, in A. Nagaraju Bros v. State of Andhra Pradesh 1994 Supp (3) SCC 122, emphasising that commercial understanding outweighs technical meaning, this Court observed: "5. ... there is no one single universal test in these matters. The several decided cases drive home this truth quite eloquently. It is for this reason probably that the common parlance test or commercial usage test, as it is called, is treated as the more appropriate test, though not the only one. There may be cases, particularly in the case of new products, where this test may not be appropriate. In such cases, other tests like the test of predominance, either by weight of value or on some other basis may have to be applied. It is indeed not possible, nor desirable, to lay down any hard-and-fast rules of universal application.". 18. Further, as clarified in CCE v. Connaught Plaza Restaurant (P) Ltd (2012) 13 SCC 639, marketing nomenclature is not decisive; and consumer perception must be established by objective material. In tha....
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....ast definition of a culinary product like "ice-cream" that has seen constant evolution and transformation, in our view, is untenable... .. 41. On the basis of the authorities cited on behalf of the assessee, it cannot be said that "ice-cream" ought to contain more than 10% milk fat content and must be served only frozen and hard. Besides, even if we were to assume for the sake of argument that there is one standard scientific definition of "ice-cream" that distinguishes it from other products like "soft-serve", we do not see why such a definition must be resorted to in construing excise statutes. Fiscal statutes are framed at a point of time and meant to apply for significant periods of time thereafter; they cannot be expected to keep up with nuances and niceties of the gastronomical world. The terms of the statutes must be adapted to developments of contemporary times rather than being held entirely inapplicable. It is for precisely this reason that this Court has repeatedly applied the "common parlance test" every time parties have attempted to differentiate their products on the basis of subtle and finer characteristics; it has tried understanding a good in the....
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....lassification of a product. For the purposes of classification, the relevant factors inter alia are statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to (sic produced), the end use to which the product is put to, cannot determine the classification of that product." 39. In our view, as we have already stated, the combined factors that require to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the user to which the product is put. However, the miniscule quantity of the prophylactic ingredient is not a relevant factor. In the instant case, it is not in dispute that this is used by the surgeons for the purpose of cleaning or degerming their hands and scrubbing the surface of the skin of the patient before that portion is operated upon. The purpose is to prevent the infection or disease. Therefore, the product in question can be safely classified as a "medicament" which would fall under Chapter Sub-Heading 3003 which is a specific entry and not under Chapt....
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....he assessee, it must adduce proper and cogent evidence and discharge its burden. Mere assertion is insufficient. The following passage is apposite: "28. This apart, classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue. On the one hand, from the trade and market enquiries made by the Department, from the report of the Chemical Examiner, CRCL and from HSN, it is quite clear that the goods are classifiable as "denatured salt" falling under Chapter Heading 25.01. The Department has not shown that the subject product is not bought or sold or is not known or is dealt with in the market as denatured salt. The Department's own Chemical Examiner after examining the chemical composition has not said that it is not denatured salt. On the other hand, after examining the chemical composition has opined that the subject-matter is....
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....Revenue has failed to discharge the burden cast upon it in law. 23. The appellant has also urged the applicability of the essential character test for determining the classification of the subject product as a "fruit drink". In our considered opinion, this submission merits serious consideration. 24. The test of essential character as embodied by Rule 3(b) of the HSN Explanatory Notes and applied by this Court in Kemrock Industries and Exports Ltd. v. Commissioner of Central Excise 2007 (210) E.L.T. 497 (S.C.) requires the identification of that component which imparts to the finished product its distinctive identity and functional utility. Quantitative predominance of a particular ingredient is not decisive if such ingredient merely performs a facilitating role in formulation, preservation or dilution. Rule 3(b) mandates that composite goods are to be classified according to the material or component which gives them their "essential character". The following paragraph from the said decision is pertinent: "It is not in dispute that the item in question is a composite item. However, as found by the Department, in the above process, the glass fibre mat when impregnate....
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....n and consumption. 27. Entry 103 of Schedule II, Part A of the UPVAT Act is couched in inclusive terms. It covers "processed or preserved vegetables and fruits including fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice." The Entry does not prescribe any minimum threshold of fruit content. The use of the expression "including" expands the scope of the entry and indicates the legislative intent to encompass a broad category of fruit-based preparations. In the absence of any quantitative stipulation, it would not be appropriate to read into the entry a rigid percentage requirement that the Legislature has consciously not provided. 28. In Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd. (1987) 1 SCC 424 approving Dilworth v. Stamps Commissioners, this Court elucidated the scope and function of 'inclusive definitions' in statutory interpretation. The relevant paragraph reads as follows: "32. We do not think it necessary to launch into a discussion of either Dilworth case [Dilworth v. Stamps Commissioners, 1899 AC 99 : (1895-99) All ER Rep Ext 1576 (PC)] or any of the other cases cited. All that is necessary for us to say i....
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....e presumed that it was intended to exclude from Entry 66 "rice", which at any rate, had not so changed its identity as not to be describable as "rice" at all. "Muramaralu" was after all rice even though it was puffed. "Atukulu" even though parched was still called rice. We must also remember that the schedule which we have to interpret is in the English language where the term rice is still found in the rendering or description of "pelalu" as well as that of "muramaralu" in the English language. And, in any case, if two interpretations of a provision are possible, we think that we ought to, in such a case, apply the principle that the interpretation which favours the assessee should be preferred." 32. Thus, once it is demonstrated that the product is a fruit-based beverage preparation intended for dilution and consumption, it bears a reasonable and substantial claim to classification as a "fruit drink" within Entry 103. It cannot be relegated to the residuary entry merely because it is marketed as a "sharbat". The nomenclature adopted by the parties, or the description of the product as a "non-fruit syrup" under the licensing statute, is not determinative for the purposes of cla....
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....% Andhra Pradesh Entry 107 of Schedule IV of the Andhra Pradesh VAT Act, 2005 [107. (a) Preserved fruits, vegetables, meat, poultry, sea foods and fish sold in sealed containers or in a frozen state. Fruits jams, jelly, fruit squash, [Fruit pulp] fruit juices and fruit drinks but excluding aerated fruit drinks; Cottage cheese (paneer), pickles, sauces, porridge, marmalade, honey;] 5% 34. The material placed on record, including tax invoices evidencing payment of VAT at 5% in several States namely Delhi, Gujarat, West Bengal, Madhya Pradesh, and Andhra Pradesh demonstrates that the trade and tax authorities in those jurisdictions have consistently treated the product as falling within fruit-based beverage entries. 35. It is no doubt true that VAT is a State subject under Entry 54 of List II of the Seventh Schedule to the Constitution and classifications adopted by one State are not binding upon another. However, they are not wholly irrelevant. Where similarly worded entries across multiple jurisdictions have been construed in a particular manner, such uniformity assumes evidentiary value in determini....