2014 (3) TMI 821 - SC - VAT and Sales Tax

Reduction of Rate of Tax - Whether food colours and food essences used in the manufacturing of foodstuffs and food products would fall under Entry 56 of the Notification No. ST-2-7218/10/6(43)/77, dated 30.09.1977 - Held that - The words food and foodstuff are used interchangeably - Any reference to food in common parlance suggests a substance or composite preparation which constitutes a meal to satiate hunger - The two products are either chemically manufactured or processed after their islolation from a plant and therefore, available as retail products in their concentrated forms - Thus, the food colours and essences cannot be consumed as such and their addition to any foodstuff is basically to ornamentally improve the end-product by making it attractive and impressive - The purpose behind their addition is to aid appetite by pleasing ones olfactory and ocular senses - Insofar as food essence is concerned, it also aids in improvement of the taste of the food product - They have no relation to enhancing the nutritive value of food and only cosmetically aid in enhancing the aesthetic value of the food product. Food colours and food essences have not been considered to be foodstuff or a combination of the foodstuffs by either lexicographers or in common parlance and the two by no stretch of imagination would constitute foodstuff The claim of the assessee that food colours and food essences are foodstuffs within the meaning of the notification was rightly rejected by High Court - High Court has not committed any error Appeal dismissed Decided in favour of Revenue.

Issues Involved:
1. Whether food colours and food essences used in the manufacturing of foodstuffs and food products fall under Entry 56 of the Notification No. ST-2-7218/10/6(43)/77, dated 30.09.1977.

Issue-wise Detailed Analysis:

1. Interpretation of Entry 56 of the Notification:
The central issue revolves around the interpretation of Entry 56 of the Notification No. ST-2-7218/10/6(43)/77, dated 30.09.1977. Entry 56 includes "Milk powder, condensed milk, baby milk, baby food and all other foodstuffs or products, whether used as such or after mixing them with any other foodstuff or beverage, when sold in sealed or tinned containers." The appellant contends that food colours and food essences are foodstuffs within this entry, thus qualifying for a reduced tax rate.

2. Common Parlance Test:
The judgment emphasizes the "common parlance test" for interpreting fiscal statutes. It asserts that terms must be understood in their ordinary and natural meaning, as they are perceived in day-to-day affairs. The court refers to precedents (Sat Pal Gupta v. State of Haryana, ESI Corpn. v. TELCO, State of Orissa v. Titaghur Paper Mills Co. Ltd.) to underline that the term "foodstuffs" should be interpreted in its common, dictionary meaning.

3. Lexicographical Definitions:
The court examines various dictionary definitions of "foodstuff" to ascertain its common meaning. According to the Oxford Advanced Learner's Dictionary, "foodstuff" is "a substance suitable for consumption as food." The Collins English Dictionary defines it as "any material, substance, etc., that can be used as food," while the Macmillan English Dictionary for Advanced Learners describes it as "a type of food."

4. Examination of the Term "Food":
The judgment further delves into the term "food" to understand "foodstuffs." The Shorter Oxford English Dictionary defines "food" as "what one takes into the system to maintain life and growth." Webster's Third New International Dictionary describes it as "material consisting of carbohydrates, fats, proteins, and supplementary substances, taken into the body to sustain growth, repair, and vital processes."

5. Common Parlance of Food Colours and Essences:
The court asserts that food colours and essences are not consumed as such and are added to foodstuffs to enhance their aesthetic appeal and taste. They do not have nutritive value and are not considered foodstuffs in common parlance. The judgment refers to previous rulings (State of Bombay v. Virkumar Gulabchand Shah, Welcome Hotel v. State of A.P., CST v. S.N. Brothers) to support this interpretation.

6. High Court's Analysis:
The High Court had concluded that food colours and essences should be understood in their common parlance and not as foodstuffs. It reversed the Tribunal's decision, which had accepted the appellant's claim that these items were foodstuffs under Entry 56.

7. Supreme Court's Conclusion:
The Supreme Court agrees with the High Court's interpretation, stating that food colours and essences do not fall under the category of "foodstuffs" as defined in Entry 56 of the notification. The court emphasizes that these items are used to enhance the appearance and taste of food but do not contribute to its nutritive value.

Final Judgment:
The appeals were dismissed, and the High Court's decision was upheld. The Supreme Court found no error in the High Court's judgment, concluding that food colours and essences are not foodstuffs within the meaning of the notification. The appellant's claim for a reduced tax rate was rightly rejected.

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