2008 (5) TMI 394 - SC - VAT and Sales Tax

Whether toffee is sweetmeat as contemplated by the exemption notification? Whether chewing gum be treated as confectionery ? Held that - The High Court, therefore, should have applied the test of popular parlance by finding out how toffee is understood in the country and more particularly in the State of U.P. No evidence was led by the State to substantiate its case that toffee is considered as sweetmeat either by the dealers in toffees or by the consumers. In order to give meaning to the notification issued by the State of Uttar Pradesh this court has laid great emphasis on the common parlance test. The court gave an apt illustration of a toffee. Toffee in the country of origin may be considered as sweetmeat but it cannot be considered as mithai in this part of the country (Uttar Pradesh). Similarly, by no stretch of imagination, can bubble gum be considered as mithai in the State of Uttar Pradesh. Consequently, bubble gum is taxable as an unclassified goods.

Issues Involved:
1. Limitation and Condonation of Delay in Filing Appeal
2. Tax Classification of "Bubble Gum"
3. Tax Classification of "Swad" Tablets

Detailed Analysis:

1. Limitation and Condonation of Delay in Filing Appeal:
The appellant argued that the appeal filed before the Tribunal was barred by limitation and should have been dismissed due to the absence of an application for condonation of delay. The Tribunal initially registered the appeal as defective due to late filing but later registered it as a regular appeal after the defect was removed. The court concluded that even if the appeal was filed beyond the limitation period, the delay must have been condoned before registering it as a regular appeal. Therefore, the judgment and order of the Tribunal could not be challenged on the ground of limitation.

2. Tax Classification of "Bubble Gum":
- Assessing Authority's Decision: The assessing authority for the assessment year 1994-95 treated "bubble gum" as an unclassified item and levied a tax rate of 10%.
- Deputy Commissioner's Decision: The Deputy Commissioner (Appeals) accepted the assessee's claim that "bubble gum" was a confectionery item, taxable at a lower rate.
- Tribunal's Decision: The Tribunal reversed the Deputy Commissioner's decision, holding that "bubble gum" was not a confectionery item but an unclassified item subject to a 10% tax rate.
- High Court's Decision: The High Court concluded that "bubble gum" is a confectionery item and should be taxed at 6.25%. The High Court emphasized the common parlance test, stating that "bubble gum" is not considered a sweetmeat (mithai) in Uttar Pradesh. The court also noted that bubble gum is used as a mouth freshener and not primarily for eating.
- Supreme Court's Decision: The Supreme Court upheld the High Court's finding that "bubble gum" is not a sweetmeat but disagreed with its classification as a confectionery item. The court emphasized that bubble gum should be taxed as an unclassified item due to its unique nature and common usage.

3. Tax Classification of "Swad" Tablets:
- Assessing Authority's Decision: The assessing authority treated "Swad" tablets as unclassified items and levied a tax rate of 10%.
- Deputy Commissioner's Decision: The Deputy Commissioner (Appeals) accepted the assessee's claim that "Swad" tablets were ayurvedic medicines, taxable at a lower rate.
- Tribunal's Decision: The Tribunal reversed the Deputy Commissioner's decision, holding that "Swad" tablets were unclassified items subject to a 10% tax rate. The Tribunal relied on the ingredients and common usage of "Swad" tablets, noting that they were not prescribed by physicians for curing diseases and did not follow any authoritative medical text.
- High Court's Decision: The High Court agreed with the Tribunal's decision, stating that "Swad" tablets were not ayurvedic medicines but confectionery items. The court noted that the true character of a product cannot be ascertained solely from its description in advertisements or labels.
- Supreme Court's Decision: The Supreme Court did not explicitly address the classification of "Swad" tablets in the provided text, focusing primarily on the classification of "bubble gum."

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's judgment and restoring the Tribunal's decision that "bubble gum" should be taxed as an unclassified item. The court emphasized the importance of the common parlance test in determining the proper tax classification of goods. The decision underscored that "bubble gum" and similar items should be assessed based on their common usage and perception rather than their ingredients alone.

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