2009 (4) TMI 1018 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of 'potato chips' under the Assam Value Added Tax Act, 2003.
2. Interpretation of Entry 80 of Part A of the Second Schedule.
3. Application of common parlance test vs. special meaning in statutory interpretation.

Summary:

Issue 1: Classification of 'potato chips' under the Assam Value Added Tax Act, 2003

The core issue is whether 'potato chips' manufactured and sold by the petitioner Company under the brand names Lays and Uncle Chips fall under Entry 80 of Part A of the Second Schedule to the Assam Value Added Tax Act, 2003 (the Act) or under the residuary entry in the Fifth Schedule. The petitioner Company had classified 'potato chips' under Entry 80 and paid VAT at 4%, but the Commissioner of Taxes, Assam, classified it under the Fifth Schedule, attracting a 12.5% tax rate. The petitioner filed a revision petition u/s 81 of the Act against this order.

Issue 2: Interpretation of Entry 80 of Part A of the Second Schedule

Entry 80 of Part A of the Second Schedule has undergone several amendments. Initially, it included "Processed or preserved vegetables & fruits." From 8.8.2005 to 4.12.2005, it excluded items like jam, jelly, pickle, etc. From 5.12.2005 to 15.10.2008, these items were included again. Finally, from 16.10.2008, 'potato chips' and other items were explicitly excluded. The petitioner argued that the inclusive definition of processed or preserved vegetables and fruits should cover 'potato chips' until the specific exclusion in 2008. The respondents argued that 'potato chips' are a snack item and not a processed vegetable, relying on the common parlance test and various judicial precedents.

Issue 3: Application of common parlance test vs. special meaning in statutory interpretation

The Court considered whether 'potato chips' should be understood in its ordinary sense or if a special meaning should be applied. The Court noted that items like jam, jelly, and pickles, which are not ordinarily considered processed vegetables or fruits, were included in Entry 80, indicating a special or technical meaning. The Court also considered the Government of India's classification of 'potato chips' as a vegetable product under the Central Excise Tariff Act. The Court concluded that 'potato chips' should be included under Entry 80 of Part A of the Second Schedule until the specific exclusion in 2008.

Conclusion:

The Court held that 'potato chips' manufactured and sold by the petitioner Company fall under Entry 80 of Part A of Schedule II to the Assam Value Added Tax Act, 2003, and not under the residuary item in the Fifth Schedule. The revision petition was allowed, and the impugned order dated 10.9.2007 by the Commissioner of Taxes was set aside and quashed.