2023 (10) TMI 158 - HC - VAT and Sales Tax

Classification of goods - Bakery Shortening and Vanaspati (Hydrogenated Vegetable Oil) - both are one and the same commodity or not - whether bakery shortening should be covered under Entry 130, Part A, Schedule II of UP GST Act or to be taxed as unclassified goods at a higher rate of tax, i.e., 12.5%? HELD THAT - After considering various materials brought on record from the stage of Assessing Authority to the stage of Tribunal, the Assessing Authority brushed aside the evidence brought on record and levied higher rate of tax, which has been turned down by the appellate authority after due consideration of materials on record, holding that bakery shortening is one and the same thing as vanaspati. The Apex Court in Mauri Yeast India Private Limited 2008 (4) TMI 101 - SUPREME COURT has specifically held that if there is a conflict between the two entries, one which favours the assessee must be followed. he judgement relied upon by the Revenue of the Kerala High Court in the case of M/s Parisons Food Private Limited 2018 (1) TMI 1195 - KERALA HIGH COURT is distinguishable and not applicable in the present case, since the entries in both the Kerala VAT Act/UP VAT Act are different. Under the aforesaid case, entry of others , including 'vanaspati' was interpreted by the Kerala High Court by holding that the general word other is followed by the specific word including vanaspati . Hence, the definition is exhaustive, coupled with the fact that 8 digit HSN Code is provided against the said entry under the Kerala VAT Act, while under the UP VAT Act, entry is 'Vanaspati (hydrogenated vegetable oil)', which is specific word being followed by general words. Further, the notifications dated 16.12.1998 and 30.04.2003 issued by the Government of India were not placed for consideration before the Kerala High Court, wherein, it has been acknowledged by the Government of India that bakery shortening means and is commonly known as 'vanaspati'. The revision fails and is hereby dismissed.

Summary

Issues Involved:
1. Classification of 'Bakery Shortening' under the U.P. VAT Act.
2. Tax rate applicable to 'Bakery Shortening'.

Summary:

Issue 1: Classification of 'Bakery Shortening' under the U.P. VAT Act

The primary issue was whether 'Bakery Shortening' and Vanaspati (Hydrogenated Vegetable Oil) are the same commodity and thus taxable at 4% under Entry No. 130 of Schedule II, Part - A of the U.P. VAT Act, 2008. The Tribunal treated 'Bakery Shortening' and Vanaspati as the same commodity based on various certifications and expert opinions, including those from the Institute of Science & Technology for Advanced Studies & Research, Gujarat, and M/s Techno Chem International, Inc. The Tribunal noted that both products are manufactured from the same raw material, crude vegetable oil, and undergo the same process. The Tribunal also referenced the Government of India's definitions and notifications, which support the classification of 'Bakery Shortening' as Vanaspati.

Issue 2: Tax rate applicable to 'Bakery Shortening'

The Assessing Authority initially rejected the claim of 4% tax and levied a higher rate of 12.5%, treating 'Bakery Shortening' as an unclassified item. However, the Tribunal and the appellate authority overturned this decision, holding that 'Bakery Shortening' should be taxed at the same rate as Vanaspati, i.e., 4%. The Court upheld this view, citing the principle that when two views are possible, the one favoring the assessee should be adopted, as established in precedents like Mauri Yeast India Private Limited vs. State of U.P. & Others and Union of India & Others vs. Garware Nylons Limited & Others. The Court distinguished the Kerala High Court's judgment in M/s Parisons Food Private Limited, noting differences in the VAT Act entries and the absence of relevant notifications in that case.

Conclusion

The High Court dismissed the revision, affirming that 'Bakery Shortening' is to be classified and taxed as Vanaspati at 4% under the U.P. VAT Act. The question of law was answered in favor of the assessee, and the burden of proof was held to be on the Revenue to disprove the classification, which they failed to do.