Madras High Court
Chang Foods Pvt.Ltd vs The State Of Tamil Nadu on 14 March, 2014
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 14.03.2014 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice T.S.SIVAGNANAM Tax Case (Revision) Nos.57 to 60 of 2013 and connected MPs. --- Chang Foods Pvt.Ltd WR-1, Northern Avenue Ambattur Industrial Estate Chennai-600 058 ... Petitioner in all the above TC(Revisions) -vs- The State of Tamil Nadu Rep. By the Deputy Commissioner (CT) Chennai (South) Division Chennai-600 108 ... Respondent in all the above TC(Revisions) Tax Case Revisions filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959 against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench) Chennai-104 in S.T.A.Nos.149, 151, 150 and 585 of 2006 dated 13.12.2012. For petitioner : Mr.N.Sriprakash For respondent : Mr.P.H.Aravind Pandian, Additional Advocate General Assisted by Mr.N.Cibivishnu, AGP (Taxes) Mr.Manokaran Sundaram, AGP (Taxes) Mr.V.Haribabu, AGP (Taxes) COMMON ORDER
(The Judgment of the Court was made by CHITRA VENKATARAMAN, J.) The assessee is on revision as against the common order of the Sales Tax Appellate Tribunal for the assessment years 1998-99, 1999-2000, 2000-01 and 2001-02. Following are the questions of law raised in the above Tax Case (Revisions) relating to the above said assessment years:-
Tax Case (Revision).No.57/2013:-
" 1. Whether the Hon'ble Tribunal has committed an error of law in holding that the sales of food items effected by the petitioners was taxable under Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 read with Serial No.4 (iii) of Part E of the First Schedule to the TNGST Act instead of Section 8 of the Tamil Nadu General Sales Tax Act, 1959 read with Serial No.48(iii) of Part-B of the Third Schedule to that Act?
2. Whether the finding of the Hon'ble Tribunal that the petitioners had sold branded food items is perverse and vitiated by taking into account irrelevant facts and the omission to take into account relevant facts on record before it ?"
Tax Case (Revision).Nos.58, 59 and 60 of 2013:-
" 1. Whether the Hon'ble Tribunal has committed an error of law in holding that the sales of food items effected by the petitioners was taxable under Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 read with Serial No.4(iii) of Part E of the First Schedule to the TNGST Act instead of Section 3-D of that Act?
2. Whether the finding of the Hon'ble Tribunal that the petitioners had sold branded food items is perverse and vitiated by taking into account irrelevant facts and the omission to take into account relevant facts on record before it ?"
2. The assessee herein is a manufacturer and dealer in food preparation. It is stated that the assessee has a kitchen facility at Ambattur Industrial Estate, where, they prepared raw puffs, freeze them and transports the same to the premises of M/s.Food World Super Market Limited.
3. It is stated that the raw puffs were stored in its own freezer and whenever the customers approached M/s.Food World Super Market Limited, the frozen puffs were fried and delivered. Considering the doubt as to the rate of tax applicable to the puffs sold as well as certain other bakery products, the assessee sought for clarification under Section 28-A of the Tamil Nadu General Sales Tax Act, 1959 before the Special Commissioner, Commercial Taxes Department. The Special Commissioner, Commercial Taxes Department, under proceedings dated 20.12.2001 in D.Dis Acts Cell-II/62350/2001 in Clarification No.392/2001, gave the clarification. He viewed that as far as Vegetable Puff was concerned, in respect of unbranded puff, they would be taxed at 8% falling under Entry 12(iii), Part-C of the First Schedule to the TNGST Act, 1959; for branded items, whether or not registered under the Trade and Merchandise Marks Act, 1959, the relevant entry would be 4(iii) in Part-E of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 taxable at 16%.
4. The assessee sought for reclarification through its letter dated 18.06.2002, wherein, it was specifically pointed out that their products were sold through marketing agents under "Cafe" outlets, wherein, they were allotted a portion to keep their kitchen equipments; their staff prepared, dressed and supplied the puffs to consumers across the counter; along with the food stuff, ketchup, water, paper napkins are supplied and served; the consumer collected the voucher from the cash counter and surrendered the same at their counter; the staff at their counter prepared, dressed and supplied the food products. In that context, the assessee submitted that the same took place in a restaurant or eating place and unsold items were taken to its factory. Thus, the assessee sought for reclarification before the Commissioner.
5. By proceedings dated 02.05.2003 in D.Dis Acts Cell-II/43262/2002, Clarification No.92/2003, the Special Commissioner and Commissioner of Commercial Taxes reiterated his view that the petitioner was not eligible to be assessed under Section 3-D of the Tamil Nadu General Sales Tax Act, 1959 as they sold under a brand name "Old Chang Kee R1", which was a registered trade mark. Thus, the request of the assessee was rejected.
6. Confronted by this, the assessee seems to have made a further representation. Taking note of the nature of transaction, the Assessing Officer issued a pre-assessment notice for the assessment year 1998-99 that the claim for exemption under Section 3-D of the Tamil Nadu General Sales Tax Act, 1959 was not sustainable; that the assessee had not disclosed the items of food sold by them; in the absence, they would be dealt with under Part E of the First Schedule taxable at 16%. Thus, the assessee is stated to have produced a certificate from M/s.Food World Super Market Limited as to the nature of transaction done by the assessee; that the assessee fried and sold various types of curry puffs from 31st March 2002; the assessee stored the frozen curry puffs in their own freezer; the assessee had its own display cabinets and fryer at the outlets; their own staff did the process of frying their curry puffs in oil using their own fryer and served on their own paper plate, napkins and sauce for consumption by the customer at the outlet. In continuation of the certificate issued dated 25.08.2004, M/s.Food World Super Market Limited by letter dated 15th June, 2005 pointed out that the assessee supplied unbranded curry puffs in their outlets.
7. After receipt of the notice, the assessee objected to the proposal stating that the puffs were sold not under brand name and 99% of the sales were for consumption in the premises of M/s.Food World Super Market Limited; the invoice raised on M/s.Food World Super Market Limited would bear testimony to the fact that the sale by the assessee were only unbranded puffs; consequently, the assessee contended that the turnover being less than 25 lakhs, the benefit of Sl.No.48 of Part B to the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959 would be available to the assessee; in other words, the sales were exempted from the provisions of the Act.
8. The Assessing Officer, however, rejected the contention and referred to the clarification issued by the Special Commissioner and Commissioner of Commercial Taxes that the items sold were branded items. He further pointed out that the retail outlet were not place of the business of the assessee as contended by them; consequently, the question of considering the exemption favourably did not arise. For the other assessment years viz., 1999-2000, 2000-01 and 2001-02, the only distinct feature is that, apart from sale of puffs, the assessee also sold bakery items. This however does not affect the decision herein that we may have to take.
9. In the appeal preferred before the First Appellate Authority, the assessee reiterated their contentions as it had taken before the Assessing Officer.
10. The First Appellate Authority held that the Commissioner had decided the issue on the basis of certain documents of the foreign partner, viz., one of the shareholders of the company, who owned a mark in Singapore, "Old Chang kee" which was not registered in India. He pointed out that the Commissioner had issued a clarification solely based on the letter-head mark of the assessee, in which the representation for clarification was made. He further pointed out that on verification of the invoice and other records, it was clear that the curry puffs sold by the assessee were nothing but unbranded variety; the premises of M/s.Food World Super Market Limited were used for selling their products; curry puffs were sold in paper plate with sauce as required by the customers directly. In the circumstances, based on the above reasoning, the First Appellate Authority held that the Department had not proved that the assessee had been selling branded items; consequently, the adoption of higher rate of tax at 16% was not sustainable.
11. As regards the applicability of Section 3-D of the Tamil Nadu General Sales Tax Act, 1959, the assessee had reported a turnover of Rs.18,42,342/- for the assessment year 1998-99; this was not taken into consideration by the Assessing Officer; in the circumstances, the First Appellate Authority directed the Assessing Officer to arrive at a total turnover after taking into consideration the purchase turnover and levy 2% tax if the total turnover exceeded Rs.25 lakhs. Thus, he remitted the matter back to the Assessing Officer. As far as assessment years 1999-2000 and 2000-01 was concerned, the assessments were set aside and remanded back to the Assessing Officer to levy tax under Section 3-D of the Tamil Nadu General Sales Tax Act, 1959. Aggrieved by this, the Revenue went on appeal before the Sales Tax Appellate Tribunal.
12. The Sales Tax Appellate Tribunal pointed out that the assessee had prepared vegetable and chicken puffs and other food items under the name "Old Chang Kee" and their registered place is at Ambattur Industrial Estate and no details of the retail outlets were furnished by the assessee. The food products were sold entirely to M/s.Food World Super Market Limited and not directly to the ultimate consumers; that the food items were served immediately after frying to the customers who consumed the same at the retail outlets of M/s.Food World Super Market Limited.
13. Going through Section 3-D of the Tamil Nadu General Sales Tax Act, as it existed prior to 01.04.2002, when the products were sold by the assessee to the outlets of the M/s.Food World Super Market Limited, the licence of M/s.Food World Super Market Limited could not be utilised by the assessee treating it as eating house to fall under Section 3-D of the Tamil Nadu General Sales Tax Act; thus, the claim for exemption was negatived.
14. As regards the contention of the assessee that the food products were unbranded, the Sales Tax Appellate Tribunal pointed out to the typed set filed by the assessee that the items sold relating to various items of bakery products were under the name "Old Change Kee", the products were not sold in any plain polythene bags or plain paper bundle as is normally done by street hawkers and vendors.
15. After referring to the Special Commissioner's clarification and the nature of activity, the Sales Tax Appellate Tribunal came to the conclusion that the assessee had sold the products through outlet of M/s.Food World Super Market Limited and not directly. The food products sold by the assessee could be termed as unbranded items and the assesees activity did not fall under "eating houses". In the light of the above, the Sales Tax Appellate Tribunal rejected the case of the assessee for assessment under Section 3-D(1) of the Tamil Nadu General Sales Tax Act, 1959.
16. In the light of the view taken, the Sales Tax Appellate Tribunal pointed out that the food items sold by the assessee irrespective of the brand name being registered under Trade and Merchandise Mark Act, 1959, would be taxable at 16% under Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 and under Entry 4(iii) of Part E of First Schedule of the Tamil Nadu General Sales Tax Act, 1959 from 01.07.1996. Thus, the order passed by the Appellate Assistant Commissioner was set aside and the Revenue's appeals were allowed. Aggrieved by the same, the present Tax Case Revisions are preferred at the instance of the assessee.
17. Learned counsel appearing for the assessee/Revision petitioner took us through the provisions of Section 3-D of the Tamil Nadu General Sales Tax Act as well as the Entries in the I Schedule and submitted that the Revenue does not deny the fact that for the assessment year 1998-99, its turnover was less than Rs.25 lakhs; being unbranded food items and sold in M/s.Food World Super Market Limited outlet, the same would satisfy that the item falling within the meaning of expression "any other eating house" as appear in Section 3-D(1) of the Tamil Nadu General Sales Tax Act; consequently, the rate of tax that the assessee would have to pay has to be in consonance with Section 3D(1) and the rate specified under Part A of the Ninth Schedule of the Tamil Nadu General Sales Tax Act.
18. He further took us through Part-C, Entry 12 Sub-clause (iii) relating to the food including preparations of vegetables, fruits, milk, cereals, flour (other than bread and bakery products) starch, birds-eggs, meat offals, animal blood, fish crustaceans and molluses sold without brand name attracting 8% and Part E Entry 4 dealing with food attracting rate at 16% and submitted that except for using the letter-head, which is a house name, there is hardly any material to show that the products sold by the assessee carried brand name. He submitted that the assessee prepared raw puff, their staff fried in the outlet in the Food World Super Market Limited and sold to the consumers therein and going by the product and that the Commissioner had drawn a wrong conclusion based on the letter-head alone; the item in question being unbranded, the same would attract 8% and not 16% as had been done by the Assessing Officer and as confirmed by the Sales Tax Appellate Tribunal.
19. Thus, emphasising on the alternate contention, he submitted that in the background of the certificate issued by M/s.Food World Super Market Limited, the understanding as to whether the product has a branded name has to be seen in the context of the consumer; Thus the claim of the Revenue that what had been sold by the assessee was a branded one is totally unsustainable; there were no materials to uphold that the items could be brought under Part E of the First Schedule of the Act.
20. Learned counsel for the assessee placed reliance on the decision reported in (2005) 141 STC 277 in the case of Tamil Nadu Co-operative Milk Producers' Federation Ltd., Vs. State of Tamil Nadu and another, particularly, paragraph 4 of the judgment and submitted that the mere fact of the invoice carrying the name of the assessee would not by itself make the products a branded one; consequently, the assessment was liable to be set aside.
21. Learned Additional Advocate General took us through the order of the Sales Tax Appellate Tribunal and the materials placed by the assessee and contended that the order of the Sales Tax Appellate Tribunal to be sustained.
22. Heard Mr.N.Sriprakash, learned counsel appearing for the assessee and Mr.P.H.Aravind Pandian, learned Additional Advocate General appearing for the respondent/State and perused the materials placed on record.
23. As is evident from the reading of the materials placed before this Court, the assessee prepared raw puff in its kitchen and sold the same to M/s.Food World Super Market Limited, which is evident from the copy of the invoice kept in the paper book. The invoice gives the number of puffs sold on any particular date. The assessee's contention however is that these puffs were sold in the retail outlet to consumers; that whenever there was a demand from a consumer, raw puff was fried by the staff of the assessee in the outlet and the customer is given the ready to eat puff. The assessee admitted that the puff was served with specially made sauce and napkin were also provided by the assessee.
24. It is an admitted fact that the price for the puff is collected only from M/s.Food World Super Market Limited and not from the ultimate consumer. The assessee, in its letter dated 18.06.2002 addressed to the Special Commissioner and Commissioner of Commercial Taxes, stated that the consumer collected the voucher from the cash counter and surrendered the same at their counter, the staff at their counter prepared, dressed and supplied the food products. From the materials available, we hold that the fact that the sale had taken place in the premises of M/s.Food World Super Market Limited outlet does not mean that the sale was in a eating house to fall under Section 3-D of the Tamil Nadu General Sales Tax Act.
25. We do not find any justifiable ground to accept the submission of the assessee that the sale in the outlet would be a sale in the eating house for the reason that the assessee did not dispute the fact that it did not sell the puffs directly to the consumer; on the other hand, as already pointed out, the sale was directly only to M/s.Food World Super Market Limited, which provided the facility for the customer to eat the puff therein. The fact that the assessee had its frying unit therein, however, does not make the outlet as its eating house to sell puff directly to the consumer. As it is stated in the letter addressed to the Special Commissioner, all that the assessee did was collecting the voucher from the cash counter of M/s.Food World Super Market Limited and thus based on the payment made by the customer to M/s.Food World Super Market Limited, the assessee merely supplied the food products to the ultimate consumer. Thus, the materials placed before us clearly pointed out that it was an outright sale by the assessee to M/s.Food World Super Market Limited and this was not "sale" by the assessee to the ultimate consumer in the retail place, and above all in a eating house to attract Section 3-D of the Tamil Nadu General Sales Tax Act, 1959.
26. A reading of Section 3-D shows that every dealer whose total turnover is not less than twenty five lakhs of rupees for the year on the sale of food and drinks in hotels, restaurants, sweet stalls and any other eating houses other than those falling under item 20 of Part-C of the First Schedule, shall pay tax at the rate specified in Part-A of the Ninth Schedule.
27. Admittedly, the items sold were not hotels, restaurants, sweet stalls, hence, the assessee seeks to bring the transaction as falling within the expression "any other eating houses". When the facts clearly pointed out that the puffs were sold by the assessee only to M/s.Food World Super Market Limited and not in any other eating house of the assessee, viz., supply to the consumer, so that, the assessee could be termed as "any other eating house" to bring the case of the assessee within four corners of Section 3-D(1) of the Tamil Nadu General Sales Tax Act, 1959, we straight away reject the case pleaded based on Section 3-D of the Act.
28. As regards the alternate contention of learned counsel for the assessee that the assessee is entitled to concessional rate of tax falling under Part C of the First Schedule to the Tamil Nadu General Sales Tax Act or would attract 16% of the tax as had been contended by the Revenue bringing the case of the assessee under Part E, Entry 4 (iii) of First Schedule of the Tamil Nadu General Sales Tax Act, 1959, here too, we find that the Sales Tax Appellate Tribunal had clearly pointed out that the assessee was selling its products under the name and style of "Old Chang Kee". The assessee pointed out that the mere fact of said brand being under the letter-head of assessee would not make the product being sold under the branded name. He pointed out that the said mark referred to the house name alone, hence, the Department committed serious error in stating that the item in question was sold under the brand name. Quite apart M/s.Food World Super Market Limited issued a certificate that the items sold were unbranded. As far as the reliance placed on certificate issued by M/s.Food World Super Market Limited is concerned, we do not find any justification to attach importance to the certificate, who are the purchasers from the assessee.
29. As far as the contention regarding the invoice or letter-head carrying name, hence, could not confer the items with any brand name is concerned, as is evident from the reading of the Entry in Part E of First Schedule, any food item or a preparation sold under the brand name, whether or not registered under the Trade and Merchandise Mark Act, would fall for consideration under the said entry. It is an admitted fact that what was sold by the assessee in the retail outlet to M/s.Food World Super Market Limited were of preparations, which had the mark of the assessee, which was a distinct one from what one would find otherwise in the case of food fried with stuff sold either in street or in any other outlet of a similar nature. The assessee admitted that the puff prepared by them had their own dressing done by the staff, served with ketchup, paper napkin etc. The assessee does not deny the fact that by its letter dated 26.12.2003, it pointed out that the puffs supplied were with specially made sauce and napkin, which were also provided to the customers consumed therein. It is not the case of the assessee that what was sold by the assessee had no character or distinctiveness of the assessee's preparation to identify this with the assessee; thus, when what were sold had the mark of it being a assessee's product, the mere fact of the name not being registered or imprinted on the product, by itself would not come to the aid of the assessee to contend that assessment would not fall for consideration under Part E of the First Schedule.
30. Whatever be the little effect of the bill carrying the name as "Old Chang Kee" providing its distinctiveness attached to the preparation, in the background of the facts stated in its letter, we do not find any justifiable ground to accept the case of the assessee that the turnover would fall under consideration specified in Part-A of the Ninth Schedule and not under Part E of First Schedule.
31. As far as the reliance placed on the decision of this Court reported in (2005) 141 STC 277 (Tamil Nadu Co-operative Milk Producers' Federation Ltd., Vs. State of Tamil Nadu and others) is concerned, it related to the sale of branded items as well as some of the other unbranded items at the AAVIN outlets. After referring to the provisions of Trade and Merchandise Mark Act and Entry 103 of the I Schedule as it then stood during the relevant assessment year 1983-84 to 1985-86, this Court held that the mere fact that the petitioner had sold the goods without brand name in the same bunk or same premises where other goods with brand name were sold, could be held that the petitioner had infringed its own trade mark; the mere fact that the goods were sold in the same place where other goods with brand name were sold or the invoices of the petitioner or trade mark were not material to attract Entry 103 of the First Schedule to the Tamil Nadu General Sales Tax Act, as Entry 103 of I Schedule was intended to cover the goods which were sold under any brand name and it did not apply to the sale of goods without brand name in the same place in which other goods with the brand name were sold. Thus, the place in which other goods sold would not be of relevance for the purpose of considering whether the item in question carried brand name.
32. As far as the decision (cited supra) relied on by the assessee is concerned, we do not find that the judgment would be of any assistance to the assessee herein for the reason that the decision rested on the wordings under Entry 103 of the I Schedule as it existed therein.
33. In the context of the facts available before this Court as stated in its representation before the Special Commissioner and as found by the Tribunal, we do not find any justifiable ground to extend the benefit of the judgment referred to reported in (2005) 141 STC 277 (Tamil Nadu Co-operative Milk Producers' Federation Ltd., Vs. State of Tamil Nadu and others) to the facts of this case.
34. Learned counsel for the assessee/revision petitioner submitted that the Authorities below had tacitly accepted the clarification issued by the Commissioner.
35. We may point out that the assessee, who went before the Special Commissioner seeking clarification, after receiving the clarification, left it at that stage itself. However, it may be added herein that the decision of this Court, however, does not, rests on the clarification issued by the Special Commissioner, but on the facts herein and the provisions of the Act.
36. We may point out that Section 3-D of the Tamil Nadu General Sales Tax Act had undergone certain amendments during the assessment year 2000-01 and yet, on facts found, the assessee's case does not fall for consideration under the provisions of Section 3-D of the Tamil Nadu General Sales Tax Act and for the reasons that we have stated already in the preceding paragraphs, we do not find any need to deal with the amended Section 3-D of the Tamil Nadu General Sales Tax Act, even to consider the assessee's case for the assessment year post the amended Section.
37. In the circumstances, we confirm the order of the Sales Tax Appellate Tribunal and reject the Tax Case (Revisions) preferred by the assessee. No costs. Consequently, connected MPs are closed.
Index:Yes (C.V.,J) (T.S.S.,J)
Internet:Yes 14.03.2014
nvsri
To
1. The Deputy Commissioner (CT)
Chennai (South) Division
Chennai-600 108
2.The Appellate Assistant Commissioner (CT) VI
Kuralagam Annex, VI Floor, Chennai-600 108
3.Tamil Nadu Sales Tax Appellate Tribunal
Main Bench, Chennai-104.
CHITRA VENKATARAMAN, J.
and
T.S.SIVAGNANAM, J.
nvsri
Tax Case(Revision) Nos.57 to 60 of 2013
14.03.2014