2007 (5) TMI 582 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of coconut oil as vegetable oil or edible oil.
2. Validity of the amendment excluding coconut oil from vegetable oil.
3. Allegation of discrimination in tax treatment of coconut oil.

Detailed Analysis:

1. Classification of Coconut Oil as Vegetable Oil or Edible Oil:
The petitioner, a manufacturer of coconut oil, argued that coconut oil is both an edible oil and a vegetable oil. They relied on various certificates and definitions, including the National Test House's opinion that coconut oil is suitable for direct edible consumption and falls under the vegetable oil category. They also referenced the Edible Oils Packaging (Regulation) Order, 1998, which defines edible oils as vegetable oils and fats, and the West Bengal Agricultural Marketing Produce Act, 1972, which includes all vegetable oils under "oil." The petitioner contended that vegetable oil includes coconut oil and its exclusion from vegetable oil by the Legislature is discriminatory.

2. Validity of the Amendment Excluding Coconut Oil from Vegetable Oil:
The amendment to Entry 88 of Schedule C to the VAT Act, effective February 1, 2006, expressly excluded coconut oil from vegetable oil. The Tribunal noted that prior to this amendment, vegetable oil included coconut oil. The Tribunal also discussed the broader definition of vegetable oil, which encompasses oils extracted from plants and seeds, regardless of their use. However, it was observed that in West Bengal, coconut oil is not commonly used as an edible oil but rather as hair oil. The Tribunal concluded that the exclusion of coconut oil from vegetable oil was not arbitrary or discriminatory, given the Legislature's consistent treatment of coconut oil as a separate commodity.

3. Allegation of Discrimination in Tax Treatment of Coconut Oil:
The petitioner argued that the exclusion of coconut oil from vegetable oil and edible oil categories was discriminatory and violated Article 301 of the Constitution. They cited the Supreme Court's decision in Arya Vaidya Pharmacy v. State of Tamil Nadu, which held that there must be a rational basis for discriminating between commodities within the same class for tax purposes. However, the Tribunal found that the Legislature had a rational basis for excluding coconut oil from vegetable oil, considering its predominant use in West Bengal as hair oil. The Tribunal also referenced the Supreme Court's observation that the classification of goods for tax purposes should consider local consumption patterns and economic policy.

Conclusion:
The Tribunal held that:
I. Coconut oil is not an edible oil in West Bengal.
II. Coconut oil is a vegetable oil and fell within Entry 88 of Schedule C to the VAT Act from April 1, 2005, to January 31, 2006.
III. The amendment excluding coconut oil from vegetable oil (Notification No. 172 FT dated February 1, 2006) is not discriminatory and is legally valid.

Disposition:
Both petitions were disposed of by this common order, with no order as to costs.