2014 (5) TMI 797 - HC - VAT and Sales Tax

Rate of Tax Classification of Masala powder Interpretation of Statute - Whether the sale of Masala Powder by the assessee should be treated as food item taxable under Entry 63 of Part D of First Schedule or as Item 1(ix) of Part E of the First Schedule Held that - Tribunal correctly found that even though Masala Powder is used as an accessory for making mouthwatering combination of curries and other preparations of food that itself cannot be food and applying commonsense interpretation the Tribunal found that there is no infirmity in the order of the AC(A) in holding that in respect of 3 assessment years Masala Powder is unclassified item and should be treated under residuary clause - This Court in State of Tamil Nadu v. A.K.Sundaram 1983 (3) TMI 233 - MADRAS HIGH COURT had observed that food must be something which must be taken to maintain life and growth and to supply nourishment - That being the basis, even as per the dictionary meaning of food which has got relationship to the maintenance of life and growth, by no stretch of imagination it can be held that Masala Powder is food by itself. Referring judgment in Ardeshir H. Bhiwandiwala v. State of Bombay, 1961 (1) TMI 70 - SUPREME COURT relied upon Commissioner of Income Tax, Tamil Nadu-III v. Engine Valves Ltd., 1980 (7) TMI 87 - MADRAS High Court and held that there is no reason to interfere with the order of Tribunal - Decided against the Revenue.

Summary

Issues:
1. Classification of Masala Powder for tax purposes under different entries of the First Schedule.

Analysis:
The High Court of Madras considered the revisions filed by the Revenue against the Sales Tax Appellate Tribunal's orders regarding the classification of Masala Powder for tax assessment. The main issue revolved around whether Masala Powder should be treated as a food item taxable under Entry 63 of Part D or as Item 1(ix) of Part E of the First Schedule. The Assessing Officer initially assessed Masala Powder as a food item under Item No.1(ix) of Part E, but the Appellate Assistant Commissioner categorized it as an unclassified item under Entry 63 of Part D. The Tribunal upheld this decision, stating that Masala Powder, although used in food preparation, cannot be considered food itself. The Revenue challenged this interpretation, arguing that Masala Powder should be treated as a food item since it is essential for food preparation.

Regarding the assessment years preceding the case, Masala Powder was treated as a residuary item by the authorities. The Revenue contended that Masala Powder should be considered a food item even without being mixed with food, citing legal precedents to support their argument. On the other hand, the assessee's counsel maintained that since Masala Powder was consistently treated as a residuary item in previous assessments, there was no justification for changing its classification. The Court analyzed the Tribunal's decision, emphasizing that Masala Powder, according to common sense and legal definitions of food, does not qualify as a food item on its own.

The Court referred to past judgments regarding the definition of food, highlighting that Masala Powder does not meet the criteria for being classified as food based on its relationship to nourishment and sustenance. Legal precedents cited by the Revenue, such as a Kerala High Court case concerning cooked food, were deemed irrelevant to the present case. Additionally, a Supreme Court judgment on turmeric as a foodstuff was found inapplicable to the tax assessment context. The Court concluded that the Tribunal's decision was sound, dismissing the Revenue's revisions and ruling in favor of the assessee. The judgment emphasized the need to interpret tax classifications independently of other legal definitions and upheld the Tribunal's decision to treat Masala Powder as a residuary item for taxation purposes.