2011 (3) TMI 311 - SC - VAT and Sales Tax

Jaljira - Appetizer or Masala - whether Jaljira which is a product manufactured by the respondent herein is only an appetizer and is not a masala and therefore liable to sales tax at the rate of 10% and not 16% - There is no doubt that Jaljira is a drink. The contents of Jaljira is put into water and taken as digestive drink - most of the items used in the manufacture of Jaljira are nothing else but spices - When spices are grinded and mixed, it gives rise to a new product, which is a mixed masala - Different ingredients are used in preparation of Masala after grinding and mixing several ingredients and when they are so grinded they lose their own identity and character and a new product separately known to the commercial world comes into existence - It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to the residuary entry - If from the records it is established that the product in question could be brought under a specific entry then there is no reason to take resort to the residuary entry - The clarificatory letter which was issued by the Department is also placed on record which specifically states that Packed Masala used in entry number 184 means, a Masala where two or more ingredients are mixed and sold in packed conditions and taxable 16% - Other products of the assessee such as Aachar Masala, Jaljeera powder, Anar Masala, Methi Chatani, Pudina, Lehsoon Chatni, Chat Masala, Kitchen Masala, Mangodi Masala, Sambhar Masala, Dal Masala, Kasuri Methi, Heena Powder, Shikkai Powder, Lahsoon powder, must be held to be Masala packed.

Summary

Issues Involved:
1. Whether Jaljira is an appetizer or a masala and the applicable sales tax rate.
2. Classification of various products under specific tax entries and their corresponding tax rates.

Detailed Analysis:

Issue 1: Classification of Jaljira and Applicable Sales Tax Rate
The primary issue in these appeals is the classification of Jaljira, a product manufactured by the respondent, and whether it should be taxed as an appetizer at 10% or as a masala at 16%. The respondent firm initially deposited sales tax at the rate of 10%, assuming Jaljira was not a masala and thus fell under the general rate of 10% as per residuary entry 199.

The assessing officer, however, classified Jaljira as a masala, arguing that it falls under Entry No. 184, which includes "packed masala" and is taxable at 16%. This decision was based on the product's packaging and the respondent's own description of Jaljira as a spice on its containers and in various official documents.

The High Court, however, held that Jaljira is not a masala but an edible preparation used for digestion, thus falling under the residuary clause and taxable at 10%. The High Court's decision was based on the ingredients of Jaljira, which include salt, kala namak, citric acid, sonth, kalimirch, pudina, hing, jira, and lalmirch, concluding that these ingredients do not constitute a masala but a digestive drink.

Upon appeal, the Supreme Court disagreed with the High Court's interpretation. It was held that Jaljira, being a mixture of different spices after grinding and mixing, qualifies as a "packed masala" under Entry No. 184 and should be taxed at 16%. The Court emphasized that when spices are mixed and ground, they form a new commercial commodity, which can be taxed separately.

Issue 2: Classification of Various Products and Tax Rates
The Supreme Court also examined the classification of other products manufactured by the respondent for different financial years, specifically 1999-2000 and 2001-2002. The Court held that products such as Aachar Masala, Jaljeera powder, Anar Masala, Methi Chatani, Pudina, Lehsoon Chatni, Chat Masala, Kitchen Masala, Mangodi Masala, Sambhar Masala, Dal Masala, Kasuri Methi, Heena Powder, and Shikkai Powder should be classified as "packed masala" under Entry No. 184 and thus taxable at 16%.

However, the Court made an exception for Idli Mix and Dosa Mix, stating that these products cannot be classified as masala and therefore should not be taxed under the same entry.

Conclusion
The appeals were allowed, and the judgment and order passed by the High Court were set aside. The Supreme Court restored the order dated 15-3-2004 passed by the Tax Assessment Officer, holding that Jaljira and other similar products are taxable at the rate of 16% as "packed masala" under Entry No. 184. The exception was made for Idli Mix and Dosa Mix, which were excluded from being assessed as masala.