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2011 (7) TMI 1081 - HC - VAT and Sales TaxWhether garlic and ginger paste do not fall under entry No. 3 of the Third Schedule and is consequently liable to tax at 12.5 per cent in terms of section 4(1)(b)? Held that - Ginger and garlic paste come within the definition of vegetables . In these circumstances the fruits and vegetables coming within entry No. 3 of the Third Schedule necessarily have to include ginger and garlic paste. Under these circumstances, garlic paste and ginger paste have been rightly understood as falling within entry No. 3. The reasoning of the revisional authority that since garlic paste and ginger paste is close to masala paste and therefore the same should be read as masala product and consequently the tax at 12.5 per cent is applicable, cannot be accepted.
Issues:
1. Interpretation of entry No. 3 of the Third Schedule under the Karnataka Value Added Tax Act, 2003 regarding taxation of garlic and ginger paste. 2. Determination of whether garlic and ginger paste fall under the definition of "vegetables" for tax purposes. 3. Assessment of the applicable tax rate on garlic and ginger paste. Issue 1: Interpretation of Entry No. 3 of the Third Schedule The case involved a dispute regarding the correct interpretation of entry No. 3 of the Third Schedule under the Karnataka Value Added Tax Act, 2003 concerning the taxation of garlic and ginger paste. The appellate authority had initially ruled that garlic and ginger paste fell under entry No. 3 and should be taxed at four per cent. However, the revisional authority later argued that the paste should be taxed at 12.5 per cent as it was akin to masala paste, not covered by entry No. 3. Issue 2: Classification of Garlic and Ginger Paste as "Vegetables" The crux of the matter was whether garlic and ginger paste could be considered as falling within the definition of "vegetables" for tax purposes. The appellant contended that based on legal precedents, ginger should be construed as a vegetable, and therefore, ginger and garlic paste should be classified as vegetables. The argument relied on the interpretation of common parlance understanding and legal judgments supporting the inclusion of ginger within the category of vegetables. Issue 3: Applicable Tax Rate The primary contention revolved around the determination of the correct tax rate applicable to garlic and ginger paste. The revisional authority had justified the application of a 12.5 per cent tax rate based on the proximity of the paste to masala paste, which was taxed at a higher rate. However, the court disagreed with this reasoning, emphasizing that the classification should be based on the closest proximate entry, which, in this case, was entry No. 3 covering fruits and vegetables. The court held that the revisional authority's argument was flawed and confirmed that garlic and ginger paste should indeed be taxed at four per cent under entry No. 3. In conclusion, the High Court of Karnataka, in a detailed analysis, upheld the appellant's argument that garlic and ginger paste should be classified as vegetables falling under entry No. 3 of the Third Schedule. The court set aside the revisional authority's order and confirmed that the correct tax rate for garlic and ginger paste was four per cent. The judgment emphasized the common parlance understanding of vegetables and the precedence set by legal interpretations regarding the classification of ginger as a vegetable.
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