2009 (11) TMI 848 - HC - VAT and Sales Tax

Whether garam masala, curry powder, sambar powder and rasam powder falling under section 4(1)(b) of the Act are liable to tax at 12.5 per cent for the period April 1, 2005 to March 31, 2006 and does it fall under entry 89 of the Third Schedule? Held that - The Legislature by its wisdom under entry 89 prior to Act of 4 of 2006 has not included masala powder or instant mixes and other mixtures containing one spice or a spice with any other material. However, we are of the view that under the Act 4 of 2006 which has come into effect from April 1, 2006 in order to clarify the doubts the Legislature thought it fit to clarify the position to hold that masala is not included in entry 89 which attracts the tax at 12.5 per cent considering entries 61 and 89 as stood prior to Karnataka Act No. 4 of 2006, we are of the view that the word masala powder is not included therein and therefore, it is clear that masala powder come under the residuary clause traceable to section 4 of the Karnataka Value Added Tax Act, 2003. Thus answer the substantial question of law in favour of the Revenue and against the assessee.

Summary

Issues:
1. Interpretation of entry 89 of the Third Schedule to the Karnataka Value Added Tax Act, 2003.
2. Classification of products like garam masala, curry powder, sambar powder, and rasam powder for taxation purposes.
3. Determination of whether masala powder falls under entry 89 of the Third Schedule.

Analysis:
1. The judgment concerns the challenge to the order passed by the Advance Ruling Committee regarding the interpretation of entry 89 of the Third Schedule to the Karnataka Value Added Tax Act, 2003. The appellant sought clarification on the duty collected on various spice products from April 1, 2005, to March 31, 2006. The dispute revolved around whether entry 89 included masala powder, instant mixes, or other mixtures containing multiple spices. The appellant argued that entry 89 encompassed such products from April 1, 2006, onwards. However, the Advance Ruling Committee concluded that these products were not covered under entry 89 for the period in question, attracting a tax rate of 12.5%. The appellant challenged this decision, citing legal precedents to support their interpretation.

2. The court considered the arguments presented by both parties, focusing on the classification of products like garam masala, curry powder, sambar powder, and rasam powder for taxation purposes. The appellant contended that these products should fall under entry 89 of the Third Schedule, attracting a tax rate of 12.5%. On the other hand, the Revenue argued that masala powder was a distinct product separate from spices, as established in legal precedents. The court analyzed the relevant provisions of the Act and previous judgments to determine the correct classification of these products.

3. The key issue addressed was whether masala powder should be considered under entry 89 of the Third Schedule. The court examined the language of entry 89 and entry 61, noting that neither explicitly included masala powder, instant mixes, or other mixtures containing multiple spices. It was observed that masala powder was a unique product created by combining different spices, distinct from individual spices listed in the entries. The court interpreted that prior to the enactment of Act 4 of 2006, masala powder was not specifically included under entry 89. Referring to legal precedents and legislative intent, the court concluded that masala powder fell under the residuary clause of the Act, subject to a tax rate of 12.5%. The judgment upheld the decision of the Advance Ruling Committee, ruling in favor of the Revenue and dismissing the appeal.