2013 (7) TMI 869 - HC - VAT and Sales Tax

Classification of cold coffee - rate of tax - whether cold coffee is coffee or it is a soft beverage - meaning of beverage - beverage will have water but it will not be pure water - It is not in dispute that coffee is added to water with milk sugar etc. and thereafter the temperature thereof is reduced before serving the same as cold coffee to the customers - can it be said that it is a beverage? - when beverage is also coffee in the sense hot or cold coffee can it be said that it is no longer coffee but it has become a beverage? - Held that - The real issues has not been decided either at the assessment stage or at the appellate stage or at the Tribunal stage. - Matter remanded back to the Assessing Authority - Decided in favor of Revenue.

Summary

Issues:
Interpretation of tax liability on cold coffee under the U.P. Trade Tax Act, 1948.

Analysis:
The case involved a dispute regarding the tax liability on cold coffee under the U.P. Trade Tax Act, 1948. The relevant provision, Section 3A(1)(d) of the Act, prescribed the rate of tax on turnover of specified goods. The Schedule to the Act listed various goods, including coffee and soft beverages, with different tax rates. A notification issued by the State Government specified tax rates for coffee and soft beverages at 10% and 15%, respectively.

The assessing officer considered cold coffee to be a soft drink without verifying its classification as a soft beverage. The Act defined beverages as drinks other than water, consumed for refreshment or nourishment, excluding alcoholic drinks. The court deliberated on whether cold coffee fell under the definition of coffee, a soft beverage, or other goods not specified in the Act. It questioned whether the presence of coffee in a beverage automatically classified it as a soft drink, distinct from the scheduled description of coffee.

The court emphasized that a beverage must contain water but not pure water, suggesting that any liquid for refreshment or nourishment, excluding water, qualifies as a beverage. The process of adding coffee, milk, sugar, etc., to water and serving it as cold coffee raised the fundamental issue of whether the beverage classification altered the nature of coffee itself. The court noted that the assessment authorities had not addressed this critical issue during the assessment, appellate, or tribunal stages.

Consequently, the court intervened, overturning the assessment, appellate, and tribunal orders. It directed the assessing authority to reevaluate the matter based on the unresolved questions regarding the classification of cold coffee as coffee, a soft beverage, or a different taxable item. The judgment concluded by remitting the case back to the assessing authority for a fresh determination based on the issues highlighted during the proceedings, thereby disposing of the revision application.