Chattisgarh High Court
State Of Chhattisgarh vs M/S Saj Food Product (P) Ltd. 101 ... on 18 February, 2019
Author: Ajay Kumar Tripathi
Bench: Ajay Kumar Tripathi
1
AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
WA No. 760 of 2018
1. State Of Chhattisgarh Through The Secretary, Government Of Chhattisgarh,
Commercial Tax Department, Mahanadi Bhawan, Mantralaya, Atal Nagar,
Raipur, Chhattisgarh
2. Commissioner Commercial Tax, Chhattisgarh, Civil Lines, Raipur, Chhattisgarh
---- Appellants
Versus
M/s Saj Food Product (P) Ltd. Through Its General Manager- Legal And
Corporate Affairs, Sri Debasish Bhattacharya S/o Shri Sukhdev Bhattacharya,
Aged About 45 Years, Having Office At Ring Road No. 2, Rawabhata, Raipur,
District- Raipur, Chhattisgarh.
---- Respondent
With WA No. 764 of 2018
1. State Of Chhattisgarh Through The Secretary, Government Of Chhattisgarh, Commercial Tax Department, Mahanadi Bhawan, Mantralaya, Atal Nagar, Raipur District Raipur Chhattisgarh
2. Commissioner Commercial Tax, Chhattisgarh Civil Lines Raipur Chhattisgarh
---- Appellants Versus M/s Saj Food Product P Ltd Through Its General Manager, Legal And Corporate Affairs, Shri Debasish Bhattacharya, S/o Shri Sukhdrv Bhattacharya, Aged About 45 Years, Having Office At Ring Road No. 2, Rawabhata, Raipur District Raipur Chhattisgarh, District : Raipur, Chhattisgarh
---- Respondent with WA No. 766 of 2018
1. State Of Chhattisgarh Through The Secretary, Government Of Chhattisgarh, Commercial Tax Department, Mahanadi Bhawan, Mantralaya, Atal Nagar, Raipur Chhattisgarh
2. Commissioner Through Commercial Taxes Chhattisgarh, Civil Lines, Raipur Chhattisgarh
---- Appellants Versus 2 M/s Saj Product (P) Ltd. Through Its General Manager Legal And Corporate Affairs Sri Debasish Bhattacharya, S/o Of Shri Sukhdev Bhattacharya, Aged About 45 Years Having Office Ring Road No. 2, Rawabhata, Raipur District- Raipur, Chhattisgarh
--- Respondents With WA No. 782 of 2018
1. Commissioner Of Commercial Tax through Commissioner Of Commercial Tax, Vanijyik Kar Bhawan, Raipur, District Raipur, Chhattisgarh.
2. Commercial Tax Officer Circle-9, Raipur, District Raipur, (C.G.)
---- Appellants Versus M/s Saj Food Product (P) Ltd. A Company Duly Incorporated Under The Companies Act, 1956, Having Its Offices At Purana Bhaban, 5/1, A. J. C. Bose Road, Kolkata- 700020 (W. B.) India, Through Its Authorized Signatory And General Manager (Commercial), Debashish Bhattacharya, Aged About 42 Years, S/o Sukdev Bhattacharya, R/o Bhanjipur, P. S. And P. O. Hoogly, District Hoogly, (W. B.) With WA No. 783 of 2018
1. State Of Chhattisgarh Through The Secretary, Government Of Chhattisgarh, Commercial Tax Department, Mahanadi Bhawan, Mantralaya, Atal Nagar, Raipur Chhattisgarh, District : Raipur, Chhattisgarh
2. Commissioner Commercial Tax, Raipur, Chhattisgarh.
3. Assistant Commissioner Commercial Tax Bilaspur, Division No. II, District - Bilaspur, Chhattisgarh.
---- Appellants Versus Kesharwani Enterprises A Proprietorship Firm, Through Its Proprietor, Shri Mukesh Gupta S/o Shri Koshori Lal Gupta, Aged About 44 Years, R/o Torwa, Guru Nanak Chowk, Bilaspur Chhattisgarh, District : Bilaspur, Chhattisgarh For the Appellants/State :-Shri Rajneesh Singh Baghel, Deputy Advocate General For the Respondents :-Shri Anup Majumdar and Shri Neelabh Dubey, Advocates _____________________________________________________________________ 3 Hon'ble Shri Ajay Kumar Tripathi, Chief Justice & Hon'ble Smt. Vimla Singh Kapoor, J Judgment on Board By Per Shri Ajay Kumar Tripathi, Chief Justice 18.02.2019
1. The batch of writ appeals arose out of common order and judgment dated 05.03.2018 passed by the Learned Single Judge who clubbed all the writ applications together, heard the same and allowed the writ applications by the impugned order which is under challenge on behalf of the State.
2. The issue before the Learned Single Judge was whether Rusk/Toast would fall under Entry 7 under the head "Bread" under Schedule I of the Chhattisgarh Value Added Tax Act, 2005 (hereinafter referred to as 'the VAT Act, 2005') or whether those items would be required to be dragged into residuary entry under Part IV of Schedule II of the said Act.
3. An effort was made by the Assessing Authorities of the Sales Tax Department to levy and assess tax under the VAT Act, 2005 upon two items namely, Rusk/Toast which were either being produced or marketed by the writ petitioners. The Schedule I of the Act deals with goods which are treated as tax free goods. The rate of taxation, therefore, is zero percent on the items notified in the said Schedule. There is a long list of 63 items which the Taxing Authorities have decided not to levy tax on, Schedule II of the VAT Act, 2005 have 4 parts. The goods notified under different parts are clubbed on the basis of rate of taxation which is leviable upon them. In Part IV of Schedule II there is an entry which reads:- " All other goods not included in schedule I and in part II and part III of this Schedule" which is being referred to as the residuary entry.
4. The arguments on behalf of the writ petitioners who are respondents now, before the Learned Single Judge was that the rusk and toast are also bread and 4 are made-up of the same ingredients and method of manufacture. It is ultimately the moisture content which makes the distinction between bread or toast or rusk. Since the Taxing Authorities have not notified Toast/Rusk as separate items for taxation in any of the schedule or part thereof then the thumb rule of interpretation would be required to be applied. All these items which are akin to bread will have to be read and they did not read under the broad head of 'Bread' and no duties will be chargeable on the same. Nothing prevented the Taxing Authorities to sub classify products which have their origin from bakery and tax them separately on the basis of their commercial use or common parlance by which such products are known as. But when no such effort has been made by the State Authorities in the notification issued under the VAT Act, 2005 then such items will have to be interpreted under the broad head of Bread and since bread carries zero percent duty Rusk/Toast cannot be charged by bringing them under the residuary head.
5. An effort was made on behalf of the State, before the Learned Single Judge to urge and argue that the two items should be read into the residuary entry. The assessment or demand so made therefore, based on such an interpretation by Sales Tax Authority should be sustained. The Learned Single Judge while considering such a submission did not agree with such stand of the State, keeping in mind the judicial precedents. He had this to say on this question.
"23. In 2008 (5) SCC 680 in case of Mauri Yeast India Pvt. Ltd.
Vs. State of Uttar Pradesh and Another, Supreme Court in paragraphs 34, 48 and 56 held as under:
"34. It is now a well settled principle of law that in interpreting different entries, attempts shall be made to find out as to whether the same answers the description of the contents of the basic entry and only in the event it is not possible to do so, recourse to the residuary entry should be taken by way of last resort.
(emphasis supplied)
48. There cannot be any quarrel with the proposition that construction of the word is to be adopted to the 5 fitness of the matter of the statute. But for determining the said question, several factors which would be relevant are required to be gone into. The trade or commercial meaning or the end user context would, thus, be a relevant factor.
56. We, therefore, are of the opinion that if there is a conflict between two entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred."
24. In 1990 (1) SCC 532, in case of M/s Bharat Forge and Press Industries (P) Ltd. Vs. Collector of Central Excise, Baroda, Gujarat, the Supreme Court in paragraph 4 has held that only such goods which cannot be brought under the various specific entries in the tariff schedule should be attempted to be brought under the residuary entry. In other words, unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort can be had to the residuary item.
(emphasis supplied)
25. It is also well settled principle of law that when two views are possible, one which favours the assessee should be adopted."
6. In absence of ambiguity, therefore, as to what goods can be brought under the residuary item. The Learned Single Judge held and opined that rusk and toast cannot be governed by residuary clause and they have to be understood and read in the broader entry of bread.
7. To shed some more clarity on the issue, the Learned Single Judge took note of various decisions of different High Courts dealing with the similar matters including the Hon'ble Apex Court, details of which have been noted in the impugned order and are being extracted from the impugned order as under :
"26. So far as, whether the Toast or Rusk would fall under the residuary entry under part-IV, the burden of proof is on the State Government and the onus also lies on them to first establish conclusively that by no conceivable process of reasoning can the said product be brought under any of the tariff items and hence the product was being brought under the residuary item.
27. So far as the issue of bringing an item under the residuary entry, it is the primary and paramount responsibility of the State to first convincingly prove and establish that the item 6 under no circumstances can be brought under any of the tariff items under the schedule of the VAT Act. Only then could the Government claim a particular product to be one which would come under the residuary entry. The Hon'ble Supreme Court in this regard dealing on the classification of goods and the onus of proof in the case of "Commissioner of Central Excise, Calcutta v. Sharma Chemical Works", reported in (2003) 5 SCC 60, in paragraph No.12 has held as under:
"12. We have heard the parties and considered the submissions made by them. We have also read the opinion of the majority Bench and the minority opinion of the Technical Member. It is a settled law that the onus or burden to show that a product fall within a particular Tariff Item is always on the revenue. Mere fact that a product is sold across the counters and not under a Doctors prescription does not by itself lead to the conclusion that it is not a medicament. We are also in agreement with the submission of Mr. Lakshmikumaran that merely because the percentage of medicament in a product is less does not ipso facto mean that the product is not a medicament. Generally the percentage or dosage of the medicament will be such as can be absorbed by the human body. The medicament would necessarily be covered by fillers/vehicles in order to make the product usable. It could not be denied that all the ingredients used in Banphool Oil are those which are set out in the Ayurveda text Books. Of course the formula may not be as per the text books but a medicament can also be under a patented or proprietary formula. The main criteria for determining classification is normally the use it is put to by the customers who use it. The burden of proving that Banphool Oil is understood by the customers as an hair oil was on the revenue. This burden is not discharged as no such proof is adduced. On the contrary we find that the oil can be used for treatment of headache, eye problem, night blindness reeling head weak memory, hysteria amnesia blood pressure, insomnia etc. The dosages required are also set out on the label. The product is registered with Drug Controller and is being manufactured under a drug licence."
"It is settled law that the onus or burden to show that a product falls within a particular tariff item is always on the revenue."7
28. A similar view further also taken by the Hon'ble Supreme Court in yet another decision in the case of "Puma Ayurvedic Herbal (P) Ltd. v. Commissioner, Central Excise, Nagpur" reported in (2006) 3 SCC 266, wherein paragraph No.8 has reiterated the aforesaid principle and held that:
"It is settled law that the burden of showing correct classification lies on the revenue."
If we look at the facts of the instant case there does not appear to have been any strong evidence led by the revenue before the authorities to establish the fact that the matter would not fall within the entry item "bread" as is reflected under schedule-1, entry-7 of the VAT Act."
29. In 1953, the High Court of Hyderabad dealing with a similar issue in a matter which is reported in 1953 (4) STC 387 in the case of "Kayani and Co. vs. Commissioner of Sales Tax", while considering the definition of bread under the provisions of Hyderabad General Sales Tax Act in paragraph No.2 held as under:-
"When the Legislature uses a term relating to any article of food, we must construe it in the sense in which it is understood in this country and not elsewhere. In fact bread which is commonly lebelled as a loaf of bread in Europeon countries has a particular name in this country and is called a "double roti" thereby distinguishing it from ordinary "roti" which is synonymous with a loaf of bread. In this country, it is not unusual for a descriptive prefix to cannote the kind of bread such as "Jawari-ki-roti, Bajre-ki-roti, Makai-ki-roti, Gheon-ki-roti" etc. In our view the intention of the Legislature is to include all kinds of bread which are consumed by the citizens of India, whether prepared in different ways or called by 12 different names. There is no justification for limiting the scope of the term bread to a particular kind, such as "double roti" as contended by the learned Advocate for the Commissioner of Sales Tax. The intention of the Legislature is further made clear in the amended Schedule I which was substituted by Act XXVIII of 1952, where the term "bread" in item 3 thereof includes "double roti, chapathi, kulcha and shirmal". This inclusive definition of the word "bread"
negatives the contention of the learned Advocate that by "bread" is only meant "double roti", and no other kind of roti. If his contention was right, there was nothing to prevent the word "double roti" for the 8 word "bread" nor can we justifiably infer that the exemption is only meant for the very limited class of citizens who consume "double roti" while levying the tax on vast majority of citizens who do not consume that article of food. We are, therefore, not impressed by the contention that articles for which exemption is claimed were not included in the word "bread". In our view, "bread" includes and should include all forms or kinds of bread which are prepared by moistening, kneading, baking, frying or roasting meal or flour with or without the addition of yeast, leaven or any other substance for puffing or lightening the article."
30. Again a similar matter came up for consideration before the Division Bench of Kerala High Court in a matter which is reported in 1993 (88) STC 9 (KER) in the case of "Modern Food Industries (India) Ltd. v. Assistant Commissioner (Assessment), Sales Tax Special Circle and Others"
wherein again in a dispute between "Bun" and "Bread", the Division Bench of Kerala High Court dealing with the issue in paragraphs No. 9 to 11 held as under:-
9. It is emphasised that bread is manufactured and marketed in different names and forms to suit the tastes and requirements of the consumers.
10. Further factual details about the components and the process have been given in the additional affidavit dated July 30, 1990. It is stated:
"The ingredients of bread and bun are maida, sugar, salt, fat, yeast, glycerine mono stala, vitamin premix, potassium bromate, acetic acid and calcium propionate. The manufacturing process is also the same. The flour is sifted and the raw materials are mixed with water to form a dough. It is then fermented and remixed. The remixed dough is allowed a short resting period before it is divided to form each bread or bun. It is then founded, moulded, panned, pruned to the required volume and baked. The baked bread is cooled to room temperature and sliced and packed. The cooled bun is directly packed without slicing. In 9 bun the percentage of yeast is more than bread."
11. The variety of the breads made and sold by the petitioners is reflected in the enumeration: "White bread, sweet bread, Kairali special, milk bread and fruity". The ingredients are virtually the same with marginal difference in their percentage.
Bun contains more of yeast. Additional ingredients are there in milk bread and in fruity. A document daily production and raw material control report-has been produced along with the affidavit to demonstrate the ingredients of each variety of bread and bun. That statement confirms the correctness of the allegations of the petitioner."
31. Recently, the Division Bench of the High Court of Punjab & Haryana in the case of "M/s. S.R. Foils and Tissue Limited v. The State of Haryana and Another" decided in VATAP No. 73 of 2011 (O&M) on 27th of October, 2016 in paragraph No. 23 has held as under:
"23. If the case of the appellant is considered in the light of enunciation of law, as referred to above, Entry 57 in Schedule 'C' only prescribes 'paper', 'paper board' and 'newsprint'. It does not provide for any inclusions or exclusions. It further does not provide for any user test. The word 'paper' used in the Entry is in generic form, which will include all types of paper, which has its essential characteristics. It is not in dispute that even the tissue paper, napkin, toilet paper rolls etc. retain the essential characteristics of paper. It is only that it is in different strength and is used for different purposes. There is no competing entry to find out whether product falls in entry 'A' or 'B'. The residuary entry is to be invoked in case with liberal construction to the specific entry, the product could not be found to be forming part thereof."
32. Yet another recent decision of the Division Bench of Delhi High Court in the matter of "Samsung India Electronics Private Limited v. Government of NCT of Delhi and Ors." reported in 2017 (97) VST 417 (Delhi) in paragraphs No. 41 to 44 has held as under:
"41. In Commissioner of Sales Tax v. Agarwal & Co. 1983 (12) ELT 116 (Bom), the question was whether 'milk' occurring in Entry 36 of Schedule A of the Bombay 10 Sales Tax Act, 1959 includes 'milk powder' as well. It was held that milk would not only include milk in liquid form but all types of milk. It was held that while looking at the words of an Entry in the Sales Tax legislation, it was permissible to examine the legislative history of the said Entry. It was pointed out that "while interpreting a general term used for describing any commodity in any fiscal legislation, the general term so used covers that commodity or item or article in all its forms and varieties". It was accordingly observed that milk in powder form can be looked upon as a result of this continually evolving technology. There is no reason why it should be excluded from the generic term 'milk'.
42. In Dunlop India Ltd. v. Union of India, reported in 1983 (13) ELT 1566, it was reiterated that "when an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the percentage and consign it to an orphanage of the residuary clause".
43. In HPL Chemicals Ltd. v.
Commissioner of Central Excise reported in 2006(197) ELT 324 (SC), the question was of classification of 'denatured salt'. The Court disagreed with the Department of Excise in that case that the said product was classifiable under the residuary Heading No.38.23 and not Heading 25.01 of the Central Excise Tariff Act, 1985 which was a specific heading.
The Court observed as under:
"This apart, classification of goods in 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 11 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 No. 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. 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 to be treated as Sodium Chloride."
44. In Sun Export Corporation v. Collector of Customs, Bombay reported in 1997 (93) ELT 641 (SC), the Supreme Court reiterated the well settled principle that if in a matter of classification of goods two views were possible, the one favouring the Assessee has to be preferred."
33. Given the aforesaid decisions by the various High Courts as well as by the Hon'ble Supreme Court when we compare the principles laid down in the aforesaid judgments and compare them with the definition of Bread"
and definition of "Toast and Rusk" and further also taking into consideration the ingredients required for the preparation of the two products, this Court has no hesitation in reaching to the conclusion that there is substantially no change in the basic physical properties used for manufacturing of Bread as well as Toast and Rusk. It is only the manufacturing process and too restricted to the time required for baking of the two products everything else is the same.
34. Under the factual circumstances, this Court is also of the opinion that the term 'Bread' under schedule-1, entry-7 has to be construed as a generic entry made and it has to be given the widest interpretation that could be given, subject to the condition that the ingredients being substantially the same. Thus, this Court holds that Rusk and Toast also would fall within entry-7 of schedule-1 of the VAT Act and it cannot be considered to be one which would come under the residuary entry."
8. The State is aggrieved by the decision so taken by the Learned Single Judge and, therefore, these appeals have been preferred on their behalf. Again since 12 these appeals arise out of a common order dated 05.03.2018 and the issue raised before us are identical in nature which was urged before the Learned Single Judge, therefore, after hearing the parties all these appeals were clubbed together and heard together.
9. Before us, the Deputy Advocate General representing the State reiterates his submission that since toast and rusk are understood as different goods in common parlance by different people, therefore, they should be treated as different goods and in absence of the same being specifically incorporated in any of the Schedule, the residuary clause i.e. entry in Part IV of Schedule II will come to the rescue of the revenue.
10. Such arguments have to be rejected keeping in mind the judicial precedents which the learned Single Judge had taken note of while interpreting different entries. The settled position in law is that attempts has to be made to find out as to whether the same answers to description of the contents of the basic entry and only in the event it is not possible to do so, recourse to the residuary entry has to be taken as a last resort.
11. Applying such a principle we cannot accept the arguments of the State that the Rusk and Toast should be dragged into the residuary item away from the broad head of Bread, which finds entry and is exempted from levy of any tax under the VAT Act.
12. The view so taken by the Learned Single Judge is well fortified and supported by the settled principles of law and binding precedents in relation to such interpretation, therefore, we are not enthused by the argument made on behalf of the State that the decision of the Learned Single Judge needs to be interfered with by treating Rusk and Toast as different items to be brought under residuary entry and allow the Taxing Authorities to assess such items as such and demand tax.
1313. All the appeals fail for the reason that the Learned Single Judge order does not suffer from any error which requires rectification in appeal.
Sd/- Sd/-
(Ajay Kumar Tripathi) (Vimla Singh Kapoor)
Chief Justice Judge
Rahul/ PAWAN