2016 (12) TMI 1740 - HC - VAT and Sales Tax

Classification of goods - potato chips, kurkure and cheetos masala balls and other flavours known as namkins - claim of assessee is that it falls within a specific heading Deshi sweetmeats, kulfi, ice-cream and namkins irrespective of use of preservative, and was liable for a rate of 6%, whereas the claim of Revenue has been that it falls under a generic entry preserved food articles , and was liable to be taxed @ 12%. Whether product of the appellant-company viz. kurkure , potato chips and cheetos fall in the category of Entry 78 of Notification dated 25.10.2000 and does not come within the ambit of Entry 150 of the said Notification? Held that - I do concur with the arguments of the learned counsel for the Revenue that the product in which the assessee is dealing, though technically can be said to be namkin but taking into consideration the specific entry under the Act, it can only be placed in the category of preserved food article because the assessee for whatever reasons adds number of preservatives and nitrogen gas may be for purposes that it lasts longer, but adding preservatives and nitrogen is sufficient to hold that it may fall within category of entry 150 of preserved food article . Common parlance understanding - Held that - The Apex court time and again has observed that in cases like this, test of common parlance is to be applied and taking into consideration, if we apply the common parlance test, if a consumer goes to market and asks for namkin, normally the shopkeeper who may be selling both locally made namkin bikaneri bhujia, chana dal, chewra etc. as also the product of assessee, will immediately provide bikaneri bhujia, chana dal, chewra etc. and only if one specifically asks for potato chips, kurkure and cheetos etc., then the shopkeeper may give such items otherwise the product of namkin like sev, bikaneri bhujia, mogar etc. would immediately be given by the shopkeeper. Even normal ordinary meaning of namkin in my view is bikaneri bhujia, chana dal, chewra or a similar product. Thus, potato chips, kurkure and cheetos can clearly be said to be food articles and though may be that it may taste like a namkin, but cannot really be said to be pure and simple namkin, it can only be classified to be falling in the category of food articles - the question of law is required to be answered against the assessee and in favour of the Revenue - petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Classification of products (potato chips, kurkure, cheetos) under tax entries.
2. Validity of reopening assessments.
3. Applicability of common parlance test.
4. Relevance of previous judgments and certificates.

Detailed Analysis:

1. Classification of Products:
The primary issue revolves around whether the products (potato chips, kurkure, cheetos) fall under the specific entry "Deshi sweetmeats, kulfi, ice-cream and namkins" (taxed at 6%) or under the generic entry "preserved food articles" (taxed at 12%). The Assessing Officer (AO) determined that due to the use of preservatives and nitrogen gas in the packaging to retain freshness, these products should be classified under "preserved food articles" and taxed at 12%. The Tax Board upheld this view, stating that the products do not fall within the category of namkin but rather as preserved food articles.

2. Validity of Reopening Assessments:
The petitioner argued against the reopening of assessments, asserting that the original assessments considered all relevant facts and materials. However, the court noted that the question of law framed was restricted to the merits of the case and did not address the reopening of assessments. Therefore, the court refrained from answering this issue, emphasizing its limited jurisdiction in a revision petition to address only the questions of law that emerge from the facts found.

3. Applicability of Common Parlance Test:
The court applied the "common parlance" test, which is frequently used to determine the classification of products based on how they are understood by the general public. It was observed that in common parlance, when a consumer asks for namkin, they typically expect products like bikaneri bhujia, chana dal, chewra, etc., and not the petitioner's products. The court concluded that despite the technical classification as namkin, the products in question, due to their preservation methods and packaging, should be classified as "preserved food articles."

4. Relevance of Previous Judgments and Certificates:
The petitioner referenced previous judgments, including the case of Uncle Chips, where similar products were classified as namkin. However, the court noted that these judgments were based on Excise laws, which differ from Sales Tax/Commercial/VAT laws. The court also dismissed the relevance of certificates provided by similar producers/associations, labeling them as self-serving and not sufficient to support the petitioner's claim. The court emphasized that the specific entries under the relevant tax laws must be considered independently.

Conclusion:
The court concluded that the products in question, due to their preservation methods and packaging, fall under the category of "preserved food articles" and are taxable at 12%. The petitions were dismissed, and the question of law was answered in favor of the Revenue and against the assessee. The court emphasized the importance of the common parlance test and the specific entries under the relevant tax laws in determining the classification of products.