2013 (5) TMI 768 - HC - VAT and Sales Tax

Madhusudhan brand milk powder containing added sugar and fat - whether not skimmed milk powder and hence not covered by entry 60 of Part A of the Second Schedule to the Act, providing for lower rate of tax? Held that - Mere averment that in common parlance a product was known as skimmed milk powder is not enough if contents of such milk powder belie such label. The Commissioner of Taxes has rightly held that in common parlance skimmed milk powder meant milk powder which had less fat. Merely because the dealer had used the label of skimmed milk powder could not be conclusive of the contents thereof. In the earlier order of the Commissioner dated September 4, 2010, reference was made to the criteria laid down in the Prevention of Food Adulteration (PFA) Rules, 1955 and standard prescribed by the Bureau of Indian Standards to the effect that skimmed milk powder should not contain more than 1.5 per cent milk fat and more than five per cent moisture. The product of the petitioner contained 10 per cent fat. While the standard prescribed need not always be conclusive if it is patently against common understanding, such standard could certainly be taken into account to ascertain common sense meaning of a product. There is no material to indicate that milk powder containing 10 per cent fat was to be treated as skimmed milk powder as per understanding of common man. Thus, by applying the common parlance test, the impugned order is not liable to be interfered with. W.P. dismissed.

Summary

Issues:
1. Interpretation of the term "skimmed milk powder" under the Assam Value Added Tax Act, 2003.

Analysis:
The judgment by the High Court of Gauhati dealt with the interpretation of the term "skimmed milk powder" under the Assam Value Added Tax Act, 2003. The petitioner, engaged in the sale of a product labeled as "Madhusudhan brand milk powder," claimed that it should be considered as skimmed milk powder and taxed at a lower rate of five percent. The Commissioner of Taxes, however, declared that the product was not skimmed milk powder as it contained added sugar and fat, therefore attracting a higher tax rate of 13.5 percent. The petitioner argued that the common parlance understanding of skimmed milk powder should prevail, irrespective of the fat content. The court acknowledged the common parlance principle but emphasized that the contents of the product must align with its label. The Commissioner's decision was upheld based on the understanding that skimmed milk powder, in common parlance, should have less fat content, typically not exceeding 1.5 percent as per standards set by the Bureau of Indian Standards.

The court highlighted that while common parlance meaning prevails in interpreting fiscal statutes, the actual content of the product is crucial. The petitioner's product, containing 10 percent fat, did not meet the standard fat content expected in skimmed milk powder. The judgment emphasized that standards set by relevant authorities, such as the Bureau of Indian Standards, could be considered to determine the common sense meaning of a product. In this case, the product's fat content exceeded the common understanding of skimmed milk powder, justifying the Commissioner's decision to tax it at the higher rate of 13.5 percent. The court concluded that there was no basis to interfere with the Commissioner's view, ultimately dismissing the writ petition.

In summary, the judgment clarified that the common parlance understanding of skimmed milk powder as a product with low fat content guided the interpretation under the Assam Value Added Tax Act, 2003. The court upheld the Commissioner's decision to tax the petitioner's product at 13.5 percent due to its fat content exceeding the common understanding of skimmed milk powder, as per established standards and common parlance principles.