2020 (3) TMI 1050 - HC - VAT and Sales Tax

Classification of goods - Mango Drink under the brand name Slice - whether fall under Entry 100D of Schedule-C of the HVAT Act or not? - taxable @ 12.5% or 5%? - HELD THAT - An Entry similar to Entry 100-D came up for consideration before the Gauhati High Court in Pepsico India Holding Pvt. Ltd. v. State of Assam 2009 (4) TMI 853 - GAUHATI HIGH COURT . This was in the context of classifying 'Potato Chips' sold under the brand name 'Lays' and 'Uncle Chips' under the Entry 80 Part A of the Second Schedule to the Assam Value Added Tax Act, 2003 (Assam VAT Act) - It was held that potato chips manufactured and sold by the petitioner-company under the brand name Lays and Uncle Chips would be covered by entry 80 of Part A of the Second Schedule to the Assam Value Added Tax Act, 2003 during the relevant period. This Court is satisfied that both the RA and Tribunal erred in holding that product in question i.e. 'Slice' is not covered under Entry 100-D of Schedule C to the HVAT Act. The impugned orders of the RA as well as the Tribunal are accordingly set aside. The question of law framed is answered in the negative i.e. in favour of Appellant/Assessee and against the Respondent. Appeal allowed.

Issues Involved:
1. Classification of 'Slice' mango drink under the Haryana Value Added Tax Act, 2003 (HVAT Act).
2. Tax rate applicable to 'Slice' mango drink.
3. Interpretation of Entry 100-D of Schedule-C of the HVAT Act.
4. Legality of the orders passed by the Revisional Authority (RA) and the Tribunal.

Issue-wise Detailed Analysis:

1. Classification of 'Slice' Mango Drink:
The primary issue was whether the mango drink 'Slice' sold by the appellant falls under Entry 100-D of Schedule-C of the HVAT Act, which would make it taxable at 5%, or if it should be considered an unclassified item taxable at 12.5%.

2. Tax Rate Applicable:
The initial assessment by the Assessing Authority (AA) taxed 'Slice' at 5.25%. However, the Revisional Authority (RA) later reclassified it as an unclassified item, imposing a tax rate of 12.5% plus a 5% surcharge, creating an additional demand of ?3,59,505/-. The Tribunal upheld the RA's decision, leading to the appellant's appeal.

3. Interpretation of Entry 100-D of Schedule-C:
Entry 100-D of Schedule-C reads: "Processed or preserved fruits and vegetables including jam, jelly, pickle, squash, juice, drink, paste and powder, made of fruits/vegetables, whether sold in a sealed container or otherwise and wet dates." The appellant argued that 'Slice', being a fruit drink with mango pulp, water, and sugar, fits this entry. The court noted that the entry is broad and covers a wide range of products made from fruits, including drinks. It emphasized that a 'drink' made of fruit need not have a high percentage of fruit content to be classified under this entry.

4. Legality of the Orders Passed by RA and Tribunal:
The court found that both the RA and the Tribunal erred in their interpretation. The RA's decision to classify 'Slice' as an unclassified item was based on the argument that it only contained 17% mango pulp, with the rest being water, sugar, and other additives. The Tribunal supported this view, stating that for a drink to be classified under Entry 100-D, it must predominantly contain the fruit.

The court referred to several precedents, including Edward Keventer Pvt. Ltd. v. Bharat State of Agricultural Marketing Board and Parle Agro Pvt Ltd. v. Commissioner of Commercial Taxes, which supported a broader interpretation of such entries. It concluded that 'Slice' should be classified under Entry 100-D, as it is a drink made of fruit, even if the fruit content is 16%.

Conclusion:
The court set aside the orders of the RA and the Tribunal, ruling in favor of the appellant. It held that 'Slice' is covered under Entry 100-D of Schedule-C to the HVAT Act and should be taxed at 5%, not 12.5%. The authorities were directed to refund any excess tax paid by the appellant within four weeks. The appeal was allowed with no order as to costs.

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