2015 (9) TMI 1087 - HC - VAT and Sales Tax

Applicable rate of VAT on Margarine - 4% or 12.5% - Classification of Margarine - Kerala Value Added Tax Act, 2003 - Held that - all the subjects of enumeration should constitute a class or category and that there should be no indication of a different legislative intent. In the present instance, however, it is very clear that HSN Code Nos. 1516 and 1517 have their own distinctive enumerations. As it could be seen from the above ratio, the principle of ejusdem generis can be applied to a particular class or category, but not across the classes or categories. No interpretation, however appealing it is, can be permitted by doing violence to the plain language of the statute. The aids of interpretation are meant to steer clear of statutory ambiguities, but not to create one in the place of none. Margarine is shown with HSN Code No. 1517 and it has not even remote mention in HSN Code No. 1516. Just because supposedly similar products are listed in 1516, we cannot deracinate and transport Margarine from 1517 to 1516. At best the controversy could be confined to one aspect With the exclusion of Liquid Margarine , can we presume that margarine, sans liquid margarine includes every other category, or is there anything left so that it can be classified along with other analogous products, going by their technical analysis of its constituent elements? Hon ble Supreme Court has already disapproved the technical analysis of products to extricate them from the tax net. Further, it is, again, a well established cannon of statutory interpretation that if a genus comprises many species and only one or a few of the species have been excluded for a particular purpose, the inexorable indication of such an arrangement is that all the rest of species have been included under the genus. Moving from abstract to the concrete, we can say Margarine is a generic produce having sub-classifications, among which Liquid Margarine stands excluded. Essentially what follows is that the rest of varieties are included or at least have not been separately dealt with. Classifiable with HSN Code No. 1517 - liable to be tax @12.5% - Decided against the assessee.

Summary

Issues Involved:
1. Classification of Industrial Margarine or Bakery Margarine under the Kerala Value Added Tax Act, 2003.
2. Applicability of the Harmonised System of Nomenclature (HSN) codes to Margarine.
3. Interpretation of statutory provisions and the application of the ejusdem generis principle.
4. Validity of Exhibits P1 and P1(a) issued under Section 94 of the KVAT Act.

Detailed Analysis:

1. Classification of Industrial Margarine or Bakery Margarine:
The primary issue was whether Industrial Margarine or Bakery Margarine should be treated as an edible oil under Entry 38(19)(d) of the III Schedule, taxable at 4%, or as Margarine per se under Entry 64 of SRO 82/2006, taxable at 12.5%. The court concluded that Margarine, including Industrial or Bakery Margarine, falls under Entry 64 of SRO 82/2006 and is taxable at 12.5%. The court emphasized that Margarine is a distinct product with its own classification under HSN Code 1517.10, and it should not be classified under the general category of edible oils.

2. Applicability of HSN Codes:
The appellant argued that Bakery Margarine should be classified under HSN Code 1516, which includes hydrogenated vegetable oils. However, the court noted that HSN Code 1517 specifically includes Margarine, excluding liquid margarine, and thus, Margarine should be classified under this code. The court rejected the argument that Bakery Margarine should fall under HSN Code 1516, emphasizing that Margarine has a specific classification under HSN Code 1517.10.

3. Interpretation of Statutory Provisions:
The court discussed the principles of statutory interpretation, including the ejusdem generis principle. It highlighted that the principle applies when general words follow specific words in a statute, and the general words should be interpreted in the context of the specific words. However, in this case, the court found that HSN Codes 1516 and 1517 have distinct enumerations, and Margarine is explicitly classified under HSN Code 1517.10. The court emphasized that interpretative aids should not create ambiguities where none exist and that the plain language of the statute should prevail.

4. Validity of Exhibits P1 and P1(a):
The appellant challenged Exhibits P1 and P1(a) issued under Section 94 of the KVAT Act, arguing that they were ultra vires the issuing authority. The court, however, did not find it necessary to delve into the validity of these exhibits, as the primary issue of classification was resolved based on the statutory provisions and HSN codes.

Conclusion:
The court dismissed the writ appeal, affirming that Industrial or Bakery Margarine is taxable at 12.5% under Entry 64 of SRO 82/2006, as it falls under HSN Code 1517.10. The court emphasized the importance of adhering to the specific classifications provided in the statutory provisions and HSN codes, and rejected the appellant's arguments for reclassification under a different entry.