2023 (5) TMI 855 - HC - VAT and Sales Tax

Classification of goods - Entitlement for exemption of payment of VAT in excess of 5% thereupon - Pizza - sandwich - falls within the notification dated 09.03.2010 or not - whether pizza and sandwich fall within the ambit of cooked food to claim benefit of exemption notification dated 09.03.2010? - HELD THAT - It appears that the Tax Board has not even determined pizza to be food in the common parlance, even though it is cooked and served in restaurants or hotels. The Tax Board has restricted the definition of food to those meals that are consumed at regular hours/intervals for satisfaction of hunger and for sustenance, like vegetables, chapatti/roti, rice, etc. - In the opinion of this Court, both the authorities below have relied on extraneous, unsound, specious, and ill-founded factors and have therefore reached a perverse conclusion. The burden to prove that a specific product falls within a particular tariff is always on the revenue, more so when the revenue is trying to classify products in the residual entry as against the specific entry. In the instant case, the revenue has utterly failed to adduce any evidence, technical or otherwise, to substantiate its claim that pizza and sandwich are not cooked food . The revenue has not brought on record any expert opinion, any scientific study or survey to prove that pizza and sandwich are in-fact not cooked food - Merely by stating that cooked food is necessarily prepared on gas burner, with aid of oil/ghee and spices, using exclusively fresh ingredients and then served with traditional cutlery, the Additional Commissioner arrived at the conclusion pizza or sandwich are not cooked food . If the revenue wanted to rely on these factors, it was the duty of the revenue to prove/establish that these factors are themselves true and that these factors are essential for determination of what construes as cooked food . Since the same was not done by the revenue, the Assistant Commissioner has wrongly relied upon the factors and wrongly accepted them on their face value. A bare perusal of the Notification No. S.O. 263 dated 09.03.2015 would reveal that the State Government had itself considered items like pizza and sandwich to be cooked food . As rightly submitted by learned counsels for the petitioner-assessee, it is a settled position of law that subsequent legislation can be looked at in order to see what is the proper interpretation to be put upon the earlier legislation when the earlier legislation is found to be obscure or ambiguous. Since the State Government has included pizza and sandwich in the broad category of cooked food in subsequent notifications dated 14.07.2014 and 09.03.2015, therefore the sale of pizza and sandwich would qualify as sale of cooked food under the notification dated 09.03.2010 as well. This Court holds that the question(s) of law framed above are answered in the favour of the petitioner-assessee and against the respondent-revenue. As a result, pizza and sandwiches are held to be cooked foods - Revision allowed.

Summary

Issues Involved:
1. Whether 'Pizza' falls within the notification dated 09.03.2010 and is entitled to exemption of payment of VAT in excess of 5%.
2. Whether sandwich is a cooked food as per notification dated 09.03.2010.
3. Whether the sale of sandwich is a branded bakery product.
4. Whether subsequent legislature amending the notification and the rate schedule can be used for interpretation of the earlier provisions of law.

Summary:

Issue 1: Classification of 'Pizza' under RVAT Act, 2003
The court considered whether 'Pizza' qualifies as "cooked food" under the notification dated 09.03.2010, which exempts from tax payable by a dealer to the extent the rate of tax exceeds 5% on the sale of food cooked by him and served in restaurants and hotels below three-star category. The petitioner-assessee argued that 'Pizza' is prepared by baking, a form of cooking, and provides valuable nutrients, thus qualifying as cooked food. The revenue, however, classified 'Pizza' as a branded bakery product, taxable at 14%, based on factors like the use of preservatives, preparation time, and common parlance understanding of 'Pizza' as a snack rather than a meal.

Issue 2: Classification of 'Sandwich' under RVAT Act, 2003
The court evaluated whether a sandwich qualifies as "cooked food" under the same notification. The petitioner-assessee contended that sandwiches involve cooking processes like frying and heating and are complete meals with high nutritional value. The revenue classified sandwiches similarly to 'Pizza,' arguing they are branded bakery products and not cooked foods.

Issue 3: Interpretation of Branded Bakery Products
The petitioner-assessee challenged the Tax Board's interpretation that 'Pizza' and 'Sandwich' are branded bakery products. They argued that the revenue failed to discharge its onus to prove this classification, relying instead on unsubstantiated factors and outdated definitions. The court noted that the burden of proof lies with the revenue to classify products under specific tariff items and found the revenue's reliance on Wikipedia definitions and extraneous factors erroneous.

Issue 4: Use of Subsequent Legislation for Interpretation
The petitioner-assessee argued that subsequent notifications dated 14.07.2014 and 09.03.2015, which included 'Pizza' and 'Sandwich' as cooked food, should be used to interpret the earlier notification. The court agreed, stating that subsequent legislation can clarify the interpretation of earlier ambiguous provisions. The inclusion of 'Pizza' and 'Sandwich' in the category of cooked food in later notifications indicated the State Government's intent to treat them as such all along.

Conclusion:
The court held that 'Pizza' and 'Sandwiches' are "cooked foods" under the notification dated 09.03.2010. The question(s) of law were answered in favor of the petitioner-assessee, and consequential relief was awarded within 90 days. All Sales Tax Revisions (STRs) were allowed, and pending applications were disposed of.