2012 (6) TMI 765 - HC - VAT and Sales Tax

Circular dated May 30 2009 issued by the Commissioner of Taxes Uttarakhand directing not to treat sauces like tomato sauce etc. under entry 6 of Schedule IIB to the Uttarakhand Value Added Tax Act 2005 challenged - whether the learned single judge has rightly held that the tomato sauce is a processed vegetable? Held that - Merely for the reason that the word tomato sauce is not mentioned in entry 6 it cannot be said that the same is not included particularly when the word All is affixed with the expression processed and preserved vegetables in the entry. In Mauri Yeast India Pvt. Ltd. v. State of U.P. 2008 (4) TMI 101 - SUPREME COURT the apex court has opined that where two logical opinions are possible in respect of an item whether the same is covered under a specific entry or a residuary entry the former is to be preferred. As such the trial court has rightly held that tomato sauce being a processed and preserved vegetable is covered under entry 6 and circular letter dated May 30 2009 being against the spirit of entry 6 of Schedule IIB to the Value Added Tax Act is liable to be quashed. The impugned order passed by the learned single judge does not require any interference. Appeal dismissed.

Summary

Issues involved:
1. Interpretation of entry 6 of Schedule IIB to the Uttarakhand Value Added Tax Act, 2005 regarding taxation of tomato sauce.
2. Validity of circular letter dated May 30, 2009, issued by the Commissioner of Taxes, Uttarakhand, directing the treatment of sauces like tomato sauce under entry 6.

Detailed Analysis:
Issue 1: Interpretation of entry 6 of Schedule IIB
The case involved a dispute over whether tomato sauce should be classified as a processed vegetable under entry 6 of Schedule IIB to the Uttarakhand Value Added Tax Act, 2005. The assessing authority charged tax on tomato sauce at 12.5%, considering it an unclassified item based on a circular letter. The appellant argued that tomato sauce falls under the category of processed and preserved vegetables, which are taxed at a lower rate of four percent under entry 6. The court analyzed the definition of processed vegetables and highlighted that tomato sauce is a processed item made from tomatoes with various ingredients. It noted that while botanically a fruit, tomatoes are commonly traded as vegetables, especially in processed forms like sauces. The court emphasized that the word "All" prefixed to "processed and preserved vegetables" in entry 6 indicates a broad interpretation, covering items like tomato sauce.

Issue 2: Validity of circular letter
The circular letter dated May 30, 2009, directed the treatment of tomato sauce as an unclassified item for taxation purposes at 12.5%. The appellant contended that the circular was erroneous as tomato sauce should be considered a processed vegetable under entry 6, attracting a lower tax rate. The court agreed with the appellant's argument, citing precedents where specific entries were preferred over residuary entries for classification. Referring to relevant case laws, the court held that tomato sauce, being a processed and preserved vegetable, falls within the ambit of entry 6 of Schedule IIB. Consequently, the court upheld the decision of the learned single judge to quash the circular letter and ruled in favor of the appellant.

In conclusion, the court dismissed the appeal, affirming the judgment that tomato sauce should be classified as a processed vegetable under entry 6 of Schedule IIB. The decision highlighted the importance of interpreting tax entries in a manner that aligns with the nature of the goods in question, emphasizing specific categorizations over general residuary classifications.