TaxTMI 
TaxTMI 
2026 (9) TMI 1836
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....) Whether the Gujarat Value Added Tax Tribunal was justified in holding that chewing gum is taxable as "sweet and sweetmeat" under entry 74A of Schedule-II of Gujarat Value Added Tax Act, 2003? (ii) Whether the Gujarat Value Added Tax Tribunal was justified in deleting levy of interest and penalty?" Facts: 4. Brief facts of the case are that the assessee is a registered dealer under the VAT Act as well as under the Central Sales Tax Act and is engaged in the business of manufacturing peppermint, sugar candy, sakariya and chewing gum. 5. The Commercial Tax Officer (2), Enforcement Division-2, Ahmedabad visited the premises of the assessee on 21.02.2007 and books of accounts were seized by the said authority. 6. After scrutiny and verification of the books, the assessee was issued notices under VAT Act and under CST Act. 7. The Assessing Officer passed the assessment order dated 31.03.2011 holding that assessee was liable to pay tax at 4% on sales of Sakariya which the assessee has sold as tax free goods and the sales of chewing cum are liable to tax at 12.5% instead of 4%. The Assessing Officer also levied interest under section 42(6) of the VAT Act and impos....
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....that the entry does not mention or bear the product "chewing gum" which reads as under: "74A Sweets and sweetmeats (including Chiiki and Revdi) Four paise in the rupee." 13. Learned AGP Ms. Ashar submitted that the Tribunal itself in Paragraph no. 12 of the impugned judgment has placed reliance upon Chapter 17 of the Tariff Act to hold that the tariff entry under the Excise Act wherein in Chapter 17 relating to Sugar and Sugar Confectionery, it is mentioned that tariff item is 1704 for Sugar Confectionery and includes Chewing Gum whether or not, sugar coated. By placing reliance on the Supplementary Notes of Chapter 21 of the Tariff Act, it was submitted that Sr. No. 6 of the Supplementary Notes prescribes that 'sweetmeats' commonly known as "Misthans" or "Mithai" or by any other name and also include products commonly known as "Namkeens", "mixtures", "Bhujia", "Chabena" or by any other name. However, Sr. No. 6 does not prescribe or define that 'sweetmeats' includes 'chewing gum' of any kind. It was therefore, submitted that the order of the Tribunal classifying chewing gum as 'sweets & sweetmeats' is erroneous. 14. Learned AGP Ms. Ashar placed reliance on the decisi....
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....eration of the order under challenge and a 'final order' has been noticed by the Apex Court. There is no quarrel to the said proposition but its applicability to the facts of the present case is altogether a different aspect. In the case on hand, the appeal has been allowed by the Apex Court and the interim order by fiction of law stood merged with the final order. Article 141 of the Constitution of India provides that the law declared by the Supreme Court shall be binding on all the courts within the territory of India. It is the duty of every court, High Court or subordinate courts and the authorities to follow the decision of the Apex Court. It would amount to judicial impropriety for the courts and the authorities below to the Apex Court, to ignore a well settled position of law as a result of judicial pronouncement of the Supreme Court and pass a judicial order contrary to it. See Dwarkesh Sugar industry Ltd. v. Prem Heavy Engineering Works Pvt. Ltd., (1997) 6 SCC 450 (para 32)." Submissions of the respondent: 17. On the other hand, learned Senior Advocate Mr. S.N. Soparkar with learned advocate Mr. Uchit Sheth appearing for the respondent submitted that the main....
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....o material change has occurred after the said period. xxx 76. If an entry had been interpreted consistently in a particular manner for several assessment years, ordinarily it would not be permissible for the Revenue to depart therefrom, unless there is any material change. (See Bharat Sanchar Nigam Ltd. and Another V/s. Union of India and Others, 2006 3 SCC 1.) xxx 78. In Bharat Sanchar Nigam Ltd. and Another V/s. Union of India and Others, 2006 3 SCC 1, with respect to the dominant intention test vis-a-vis the aspect theory, this Court held: "...The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to....
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....ing upon the parties unless either side has chosen to dispute such order in terms of appeal or revision provisions made under the Act. In other words, in relation to the same product, if some other dealer or manufacturer wishes to dispute the classification, the Department cannot cite the Determination Order in case of some other assessee. However, unless the Department has questioned the order of determination passed by the Commissioner, it would bind the Department in relation to other assessee also. It was therefore submitted that by series of Determination Orders the term "sweets and sweetmeats" has been given a wide interpretation by the department and the test that has been held out by the department is whether the product is sweet & capable of being eaten. In the present case, the Determination Orders will be binding on the department, and they are not entitled to argue that Chewing Gum will not fall under the heading 'sweets & sweetmeats'. Reliance was placed on the following paragraphs of the judgment: "7. During the course of assessment, the petitioners relied on such determination order. The Assessing Officer; as noted, distinguished it by recording that the pet....
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.... Electric Stores, in its decision dated 13th October 2006, rendered in the context of Section 62 of the Gujarat Sales Tax Act, 1969 which was a provision similar to Section 80 of the VAT Act, held and observed as under : "Section 62 of the Gujarat Sales Tax Act, 1969 relates to determination of disputed questions. For our purpose, Clause [e] of sub-section [1] of Section 62 would be material which reads as under: "62. Determination of disputed questions [1] If any question arises, otherwise than in proceedings before a Court, or proceedings under Section 41 or 44, whether for the purposes of this Act, (e) any tax is payable in respect of any particular [sale, specified sale or purchase], or if tax is payable the rate thereof, the Commissioner shall make an order determining such question." Under the Act, the final authority to determine the dispute is conferred upon the Commissioner or any of his authorized representatives. Such an order would be binding between the parties and if any of the parties are aggrieved by the order, then it has to challenge the said order before the appellate forum. Undisputedly, the above referred two orders still str....
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....f the Tribunal is correct. 23. Learned Senior Advocate Mr. Soparkar placed reliance on Circular dated 01.08.2011 of the Ministry of Health and Family Welfare (Pg.3 of compilation) issued under Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 and specifically Sr. No. 2.7.3 therein was referred to which deals with Chewing Gum and Bubble Gum and the ingredients/standard which the Chewing Gum and Bubble Gum shall conform to that is for Chewing Gum Reducing Sugar shall not be less than 4.5 per cent by weight and Sucrose shall not be more than 70 per cent by weight. It was therefore submitted that when in view of such circular, the department has been classifying the chewing gum as 'sweets and sweetmeats', it is not open for the department to change the classification that too when there is no modification in the product of the respondent. 24. Learned Senior Advocate Mr. Soparkar submitted that the case of the respondent is that the product falls within a specific Entry and not residuary entry and therefore the converse is not of competing entries but whether the product falls in a main entry or not. It was therefore submitted that law of int....
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....;, or 'sticks' made of sugar with fruit or other flavouring or filling". The Concise Oxford Dictionary defines "sweetmeat" as "shaped morsel of confectionery, usu., consisting chiefly of sugar or chocolate, a fruit preserved in sugar, bon bon, sugarplum, goody". It is undoubtedly true that a sweet, which is not a sweetmeat, and a sweetmeat both normally taste sweet, but all that tastes sweet is not and cannot be sweetmeat. It was therefore submitted that the product of the respondent i.e. chewing gum meets the standard of 'sweets and sweetmeats' as per the circular of the department dated 06.12.2012 which is not withdrawn and various determination orders and judgments of Hon'ble Apex Court and High Courts also supports the findings recorded by the Tribunal. 28. Learned Senior Advocate Mr. Soparkar placed reliance on the judgment of the Hon'ble Kerala High Court in the case of State of Kerala v. M. J. Joseph reported in (2012) 56 VST 356 wherein it was held that in order to identify the relevant entry under which tax is to be levied on a product, the product needs to be identified with reference to the ingredients used in the manufacture and the nature of use of the produ....
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....n two categories as per classification. However, when there is no conflict between two specified entries but there is a question whether the sale in question would fall within a specified entry or within the residuary entry, it is obvious that if any particular article falls within any specified entry, it can never fall in the residuary entry. It was therefore held that the correct test would be to find out whether the sale in question would fall within a specific entry and if it cannot fall in that entry, then necessarily on the facts and circumstances of the case, it would fall within the residuary entry. 30. Learned Senior Advocate Mr. Soparkar relied upon the judgment of Hon'ble Apex Court in the case of Associated Distributors (supra), which is being relied upon by the appellant and submitted that in the said judgement reliance is placed on the decision in the case of Collector of Central Excise v. Parle Exports (P.) Ltd. reported in (1989) 1 SCC 345 wherein it was held that the words used in the provision, imposing taxes or granting exemption should be understood in the same way for which they are understood in ordinary parlance in the area in which the law is in force or ....
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....de applicable to the facts of the present case. 33. Learned Senior Advocate Mr. Soparkar submitted that the reliance placed by the appellant on notes of Chapter 21 will hold no value as Heading of Chapter 21 is Miscellaneous Edible Preparations and heading of Chapter 17 is Sugar and Sugar Confectionery and therefore, when one items falls under chapter 17, it cannot be said to fall under chapter 21 and therefore notes of chapter 21 cannot be relied upon. 34. Learned Senior Advocate Mr. Soparkar with regard to substantial question of law No.2 placed reliance on the decision of the Hon'ble Apex Court in the case of Commissioner of Central Excise, Delhi v. Ishaan Research (P) Ltd. and others reported in 2008 13 SCC 349 (Para 44) to submit that penalty cannot be levied in the present case. Rejoinder: 35. In rejoinder, learned AGP Dr. Pooja Ashar submitted that amongst all the Determination Orders relied upon by the respondent only one determination order deals with bubble gum i.e. order dated 05.12.2007 passed under Section 80 of the VAT Act, 2003 in case of M/s. Kumar sweets and biscuit company wherein the product at Sr. No. 4 i.e. bubble gum was classified under residuary ....
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.... be classified under the entry relating to sweets and sweetmeats, its classification under the residuary entry is contrary to the decision of Hon'ble Apex Court in the case of Mayuri Yeast India Pvt. Ltd (supra). Learned AGP Ms. Ashar submitted that applying the common parlance test, trade parlance test and the decision of apex court in case of Associated Distributors Ltd (supra), United Offset Process (P) Ltd., it is clear that in no certain terms, chewing gum can be classified as 'sweets or sweetmeats'. Analysis: 39. Considering the submissions made by learned advocates for both the sides, the short question which arises for consideration is whether chewing gum is taxable as "sweets and sweetmeats" under entry 74A or under residuary Entry 87 of Schedule-II of the VAT Act. 40. It would therefore, be necessary to refer to relevant entries of Schedule II of the VAT Act which read as under: "74A. Sweets and sweetmeats (including Chiiki and Revdi) Four paise in the rupee. 87. All goods other than Twelve and a those specified in half paise in [Schedule I or III] and the rupee in the preceding entries of this schedule" &n....
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....Appendix A Provided further, if artificial sweetener has been added as provided in Regulation 3.1.2 (1), it shall be declared on the label as provided in Regulation 2.4.5 (24, 25, 26, 28 & 29) of Food Safety and Standards (Packaging and Labeling) Regulations, 2011. Provided also, that, if only artificial sweetener is added in the product as sweeteners the parameters namely, reducing sugars and sucrose prescribed in the table above shall not be applicable to such product." 42. From the above Food Regulation Standard, it appears that chewing gum and bubble gum are prepared from the chewing gum base, or bubble gum base, natural or synthetic, non-toxic, along with cane sugar and liquid glucose (corn syrup) under the specifications mentioned in the said clause having about 60 to 70% sucrose. 43. Under the Central Excise Tariff Act, Chapter-17 pertains to Sugar and Sugar Confectionery and Entry no. 1704 10 00 pertains to chewing gum whether or nor sugar coated under the Heading Sugar confectionery (including white chocolate), not containing cocoa as under: "1704 Sugar confectionery (including white chocolate), not containing cocoa. 1704 10 00 - C....
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....of Trade Tax, U.P. Lucknow reported in (1998) 7 SCC 228 wherein it is held that how the word "Mithai" - "sweetmeats" is defined. Reliance was also placed by the assessee on the decision in case of Collector of Central Excise Vs. Parle Exports (P) Ltd. (1989) 1 SCC 345 referred therein to submit that the provision imposing taxes or granting exemption should be understood in the same way in which they are understood in ordinary parlance in the area in which the law is in force. It was contended that in the State of Gujarat, bubble gum is considered as toffee and is sold in the market along with toffee and chocolate and once toffee and chocolate are considered as 'sweetmeats' then in the same manner, chewing gum is required to be considered as 'sweetmeats'. However, the Hon'ble Apex Court after considering the ratio laid down in case of Pappu Sweets and Biscuits (supra) has held as under: "9. If the ratio of the aforesaid judgment is properly comprehended then bubble gum in the common parlance cannot be construed a mithai (sweetmeat). When we apply common parlance test and in fact ask someone to bring the sweets from the market, he will never bring bubble gum. In common parla....
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....considered as mithai in the State of Uttar Pradesh. Consequently, "bubble gum" is taxable as an unclassified goods." 49. Considering the above dictum of law, the Hon'ble High Court of Allahabad in case of General De Confiteria India Ltd. (supra), applied the decision of Hon'ble Apex Court in case of Associated Distributors Ltd.(supra) holding that chewing gum and bubble gum are taxable as unclassified items and therefore, are liable to higher rate of duty. The department has considered toffee and chocolate as sweetmeat in its order passed for classifying the same under Entry 74A as it emerges from the record. However, there is no adjudication by the authority as towhether chewing gum would be considered at par with toffee/chocolate which are considered as sweetmeat and hence the contention raised on behalf of the respondent assessee that revenue cannot adopt different yardstick for not classifying 'chewing gum' as 'sweetmeats' is not tenable. 50. In view of ratio of the decision of the Apex Court in case of Associated Distributors Ltd.(supra), it emerges that test of common parlance is required to be applied to find out whether the chewing gum can be considered as 'sweetmeats....
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....is held by the Apex Court that chewing gum/bubble gum is not an eatable item, it would never become a 'sweetmeat' i.e. Mithai. Therefore, the decisions relied upon on behalf of the assessee in case of Godrej Consumer Product Ltd.(supra), M. J. Joseph (supra) and Mayuri Yeast India Private Limited (supra), would not be applicable in the facts of the case. 53. In view of above analysis and on perusal of the impugned order of the Tribunal, it appears that the Tribunal has committed an error in holding that chewing gum is consumed for the sweet juice in them and therefore, they qualify as sweets to be classified under Entry 74A by comparing chewing gum with chocolates and lollipops which are eatable items. It appears that the Tribunal has distinguished the decision of Pappu Sweets and Biscuits (supra) of Hon'ble Apex Court on the ground that it pertains to the notification granting incentives to new industries pertaining to sweetmeats and it was a case relating to an industry manufacturing toffees and there was no dispute of classification of bubble gum or chewing gum. The Tribunal has also committed an error in distinguishing the decision of the Hon'ble Apex Court in case of Associ....