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2010 (9) TMI 955 - HC - VAT and Sales TaxWhether potato chips would fall within the classification of processed vegetables in the Schedule under the Himachal Pradesh Value Added Tax Act, 2005? Held that - Whether there is manufacturing in the process of potato getting transformed into potato chips and whether that is branded or not in sale, in the context of the H.P. VAT Act, 2005, is not a conclusively or a wholly relevant and material factor for finding a place under the residuary entry since the legislative intent in not specifying potato chips, despite specifying other items and despite granting exemption to potato and in not providing concessional rate of tax at four per cent is otherwise very clear. Therefore, we do not find any merit in the contentions advanced by the petitioner. Though altogether for different reasons, we confirm the view taken by the Assessing Authority as well as the Commissioner of Tax that potato chips under the H.P. VAT Act, is liable to be taxed at 12.5 per cent under Part III, Schedule A-residuary entry and not under Schedule B at four per cent.
Issues Involved:
1. Classification of potato chips under the Himachal Pradesh Value Added Tax Act, 2005. 2. Interpretation of "processed vegetables" under the Act. 3. Applicability of residuary entry for potato chips. 4. Legislative intent and statutory interpretation principles. 5. Comparison with judgments from other High Courts. Detailed Analysis: 1. Classification of Potato Chips: The primary issue is whether potato chips fall under the classification of processed vegetables in Schedule A, Part II, taxable at four percent, or under the residuary entry in Schedule A, Part III, taxable at 12.5 percent under the Himachal Pradesh Value Added Tax Act, 2005. 2. Interpretation of "Processed Vegetables": The court examined the processes involved in making potato chips, which include slicing, frying, and adding salt or spices. Despite potato chips being technically processed potatoes, the court noted that the Legislature did not specifically include processed potatoes under the four percent tax category in Schedule A, Part II. The court emphasized that "processed vegetables" in common parlance typically do not include snack items like potato chips. 3. Applicability of Residuary Entry: The court highlighted that the residuary entry under Part III of Schedule A is intended for goods not specified in any other Schedules. Since processed potatoes are not specifically mentioned in Part II of Schedule A, they fall under the residuary entry, taxable at 12.5 percent. The court noted that the petitioner had initially paid tax at 12.5 percent from 2005 to 2008, indicating their understanding that potato chips were covered under the residuary entry. 4. Legislative Intent and Statutory Interpretation: The court applied the principle that entries in a fiscal statute should be construed in their normal, popular, and commercial parlance. It referenced several judgments, including Ganesh Trading Co. v. State of Haryana and Mukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh, emphasizing that words in a taxing statute should be understood in their popular sense. The court concluded that potato chips, commonly known as snacks, do not fit within the category of "processed vegetables" as intended by the Legislature. 5. Comparison with Judgments from Other High Courts: The court analyzed decisions from the High Courts of Gauhati, Punjab and Haryana, Madras, and Uttarakhand. It noted that the factual positions and legislative frameworks in those cases were different. For instance, the Assam VAT Act and the Punjab VAT Act had different expressions for residuary entries. The court disagreed with the Gauhati High Court's inclusive definition approach and emphasized that potato chips, as a snack item, could not be included in the category of processed vegetables. Conclusion: The court concluded that potato chips are not covered under the four percent tax category for processed vegetables in Schedule A, Part II, but fall under the residuary entry in Schedule A, Part III, taxable at 12.5 percent. The writ petition was dismissed, confirming the view of the Assessing Authority and the Commissioner of Tax.
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