Gujarat High Court
State Of Gujarat vs G M Chemicals....Opponent(S) on 8 January, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/1168/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 1168 of 2013
With
CIVIL APPLICATION NO. 759 of 2013
In
TAX APPEAL NO. 1168 of 2013
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STATE OF GUJARAT....Appellant(s)
Versus
G M CHEMICALS....Opponent(s)
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Appearance:
MR JAIMIN GANDHI, LD.ASST.GOVERNMENT PLEADER for the Appellant(s)
No. 1
MR PV PATADIYA, ADVOCATE for the Opponent(s) No. 1
MR JAYESH C PATEL, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL
KURESHI
and
HONOURABLE MS JUSTICE SONIA
GOKANI
Date : 08/01/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The State has preferred present appeal challenging the judgment of the Gujarat Value Added Tax Tribunal at Ahmedabad (hereinafter referred to as 'the Tribunal'). Following questions have been presented for our Page 1 of 9 O/TAXAP/1168/2013 ORDER consideration :
"(1) Whether in the light of above facts and circumstances of the case, the Honourable Tribunal had rightly interpreted entry 48 of ScheduleI and 51 of ScheduleII of the Gujarat Value Added Tax Act, 2003?
(2) Whether on the facts and circumstances of the case, the Honourable Tribunal had rightly hold that "ToxiwinES" is "Poultry Feed" falling under Entry 48 of Sch.I ?"
2. Simply put the issue is whether the product manufactured and marketed by the respondent assessee in the name of "ToxiwinES" would fall under Entry 48 Schedule I as a "Poultry Feed" or under Entry 51 Schedule II as "Minerals and Ores".
3. The Department holds a belief that since the mineral, namely, 'Zeolite' is the main ingredient in the product in question, the same should fall under Entry 51. The respondentassessee, however, contends that the product is a pure and simple poultry feed and even though 'Zeolite' is the basic ingredient; after putting the same through Page 2 of 9 O/TAXAP/1168/2013 ORDER a complex and sophisticated process to refine it, the other Feed Additives are added before the final product "ToxiwinES" comes into the market.
4. When the issue reached the Tribunal, the assessee explained the process of manufacturing the product as under :
"8.1 The material popularity known as Montmorillonite or Zeolite is collecting from mines by open cast mining. The said mining material once collected is to be spread in the open land for the purpose of solar dying and then after it is manually purifying by picking up impurities. Then after material is brought the factory premises and again impurities are separated by using screen separator or vibrating machine. Pure material brought to grinding department for pulverizing in roller mill. Then after said powdered material is fade to the Power Separating Machine for removing heavy particles present in the powder. In some cases other ingredients like Activated CharCoal, Organic Acids, M.O.S. (all feed additives) etc. are also mixed with Zeolite, Toxin Binder using blenders. Finally the material is packed for marketing as per the requirement of customers.Page 3 of 9
O/TAXAP/1168/2013 ORDER
8.2 The Toxin Binder so produced is
only for the animal feed grade and therefore exclusively used as cattle, Poultry and aqua feed supplements. The purpose of the use of the said Toxin Binder is to bind and adsorption of present mycotoxin like aflatoxin in live stocks and also works as a hepato protector, growth promoter and performance booster the quality and production efficiency by balancing all the nutrients required for obtaining the specific function from the animal ensuring the production capacity, weight gain or working capacity by supplying the additional nutritional value. Toxin Binder is used as regular feed to micro level in the daily use and hence it is recognized as feed additives as the preparation is made to provide animals with nutrient elements required to ensure rational and balance daily diet."
5. The product is also marketed in the brand name of "Toxin Binder". The assessee also produced a certificate of Director of Animal Husbandry, Gujarat State, Gandhinagar, which certified as under :
"Hydrated Sodium Calcium Alumino silicate Page 4 of 9 O/TAXAP/1168/2013 ORDER (HSCAS)MineralZeolite (Sodium Zeolite A) Toxin Binder is an Animal Feeds Supplement."
6. The assessee pointed out that in the basic ingredient of 'Zeolite' various feed additives, such as Enzymes, Probiotics, Prebiotics, Dietary Amino Acids, Toxin Binders, Minerals and Vitamins, Protein, Metabolic modifiers, etc. were added.
7. It was on the basis of such material placed on record, the Tribunal held that the product would fall under Entry 48 as a "Poultry Feed". In order to come to such a conclusion, the Tribunal observed as under :
"Observations and Conclusions
44. The Tribunal has considered the facts and circumstances of the case and also contention of the appellant as well as contention of the revenue in this behalf. The Tribunal has also considered the character of the commodity in question. The Tribunal has also considered the character of the commodity in question. The usage of the product as well as the description on Page 5 of 9 O/TAXAP/1168/2013 ORDER the label which have been produced by the appellant in this behalf. The necessary certificates are also produced by the appellant. According to the Tribunal, the product is composition of organic acids namely organic acids viz propionic acetic benzoic and sorbic acid, specially treated HSCAS (Hydrated Sodium Calcium Aluminum Solicate), MOS (Mannan oligosaccharide) and oxine copper. The broad future of the product is broad spectrum mold inhibitor, toxin binder and gut antibacterial.
45. The Tribunal is of the view that the Judgement cited by the appellant i.e. Judgement of the Hon'ble Supreme Court in the case of Sun Export Corporation (Supra), Judgement of Hon'ble Gujarat High Court in the case of Glaxo Laboratories (supra) and Judgement in the case of Glinder Ltd (Supra) squarely apply to the facts of the case. The Tribunal has also considered the Judgement of the Hon'ble Andhra Pradesh High Court in the case of State of Andhra Pradesh vs. Tirumalagiri Traders reported at 73 STC 237 (AP) and State of Andhra Pradesh vs. J.K. & Co reported at 890 STC 350 (AP) are also applicable to the facts of the case.
46. In Tribunal's view, the goods of the appellant in question is essential Page 6 of 9 O/TAXAP/1168/2013 ORDER supplement of cattle feed, poultry feed and aqua feed and same is covered entry 48 of Schedule I of the VAT Act. The Tribunal has also considered certificate issued by the Director of Animal Husbandry. The Tribunal has considered documents required to be furnished while asking for veterinary certificate about HSCAS used for manufacturing toxin binder which is to be exported. The product of the appellant satisfies the said standard. The Tribunal has also considered analysis certificate produced by the appellant. He has also produced detail about the feed additives from the Indian Animal Feed Industry.
47. In view of the same, the Tribunal has gone through the literature about the feed additives. In Tribunal's view, the product of the appellant is in question and satisfies the criteria laid down by and held that it is poultry falling under entry 48 of Schedule I of the Act not Entry 51 of the Schedule II of the Act.
48. The Tribunal has gone through the judgement cited by the appellant i.e. case of Hon.Supreme Court in Sun Export Corp., Hon.Gujarat High Court in Glaxo Laboratories (India) Ltd. and Judgement of Pfizer Ltd.
All these judgements support the say of the Page 7 of 9 O/TAXAP/1168/2013 ORDER appellant."
8. In view of the materials on record and the observations and conclusions of the Tribunal, we see no infirmity in the decision when the Tribunal held that the product in question was a 'poultry feed' and would fall under Entry 48 of Schedule I. It may be that one of the main ingredients of the product was 'Zeolite', which itself was an ore. Nevertheless, many processes were undertaken before the final product comes into existence and the same was prepared solely for the purpose of using the same as animal feed. This is clear from the voluminous record. As pointed out by the assessee, after extracting the 'Zeolite' from the mines, the same is subjected to detailed procedure for removing the impurities and separating the pure material. The same is also subjected to grinding and pulverizing and various additives such as Protein, Minerals, Vitamins, Amino acids, etc. are added. It is only then the product in the marketable form comes into existence. Significantly, even the Director of Animal Husbandry, Gujarat State, has certified Page 8 of 9 O/TAXAP/1168/2013 ORDER that the same is an animal feed supplement. By no stretch of imagination, it can be said that the product remained in original form of 'Zeolite', which by itself is an ore. An attempt on the part of the State to bring the product within Entry 51 as "Minerals and Ores" simply cannot be accepted.
9. In the result, the Tax Appeal is dismissed.
In view of disposal of the main appeal, the Civil Application for stay does not survive and the same stands disposed of accordingly.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Aakar Page 9 of 9