1990 (1) TMI 298 - HC - VAT and Sales Tax

Issues Involved:

1. Classification of "Bru" for sales tax purposes.
2. Applicability of specific entries under the Kerala General Sales Tax Act, 1963.
3. Period-wise tax assessment for the years 1980-81, 1981-82, and 1982-83.
4. Interpretation of statutory entries in the context of popular and commercial understanding.

Issue-wise Detailed Analysis:

1. Classification of "Bru" for sales tax purposes:

The primary issue revolves around the classification of "Bru," an instant coffee-chicory blend, for the purpose of levying sales tax under the Kerala General Sales Tax Act, 1963. The assessee, Brooke Bond India Limited, argued that "Bru," consisting of 70% coffee and 30% chicory, should be classified as a form of coffee, thus attracting a lower tax rate. The process of manufacturing "Bru" involves mixing coffee and chicory powders, suspending them in water, extracting the liquor, and dehydrating it by spray drying, resulting in a fine powder marketed under the brand name "Bru."

2. Applicability of specific entries under the Kerala General Sales Tax Act, 1963:

The court had to determine the appropriate tax entry for "Bru" under the First Schedule to the Act. Initially, separate entries existed for coffee and chicory (Items 37 and 38), both taxable at 6%. From September 16, 1980, the petitioner treated "Bru" under entry 21, which included coffee, tea, spices, and their manufactures, also taxable at 6%. However, the Deputy Commissioner reassessed the turnover under item 25P (non-alcoholic drinks and beverages, bottled or canned, sold under a brand name) and item 33 (non-alcoholic drinks, squashes, sauces, and beverages, bottled or canned, sold under a brand name), both taxable at 10%.

3. Period-wise tax assessment for the years 1980-81, 1981-82, and 1982-83:

For the assessment year 1980-81, the court considered two periods: up to September 16, 1980, and from September 16, 1980, to the end of the year. The Tribunal held that "Bru" should be taxed under entry 25P for the first period and entry 33 for the second. For the assessment years 1981-82 and 1982-83, the question was whether to tax "Bru" under entry 21 or 33. The Tribunal had upheld the Deputy Commissioner's order, taxing "Bru" at 10% under entry 33 for these periods.

4. Interpretation of statutory entries in the context of popular and commercial understanding:

The court emphasized interpreting statutory entries based on their popular and commercial sense rather than strict or technical meanings. The court cited several precedents, including the Supreme Court's ruling in Commissioner of Sales Tax v. Jaswant Singh Charan Singh, which held that items in sales tax statutes should be interpreted according to their popular meaning or the meaning attached by those dealing in them. Applying this principle, the court concluded that "Bru," being an instant coffee blend, should be classified under entry 21, which covers coffee in any form, rather than under the more general entry 33 for non-alcoholic drinks and beverages.

Conclusion:

The court set aside the common order of the Appellate Tribunal and allowed the tax revision cases. It held that "Bru" should be taxed under entry 21, applicable to coffee and its forms, at a rate of 6%, rather than under entries 25P or 33, which imposed a higher tax rate of 10%. The court's decision was based on the popular and commercial understanding of "Bru" as a form of coffee, aligning with the principle that specific entries should prevail over general ones in tax statutes.

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