2023 (10) TMI 1448 - HC - VAT / Sales Tax

Classification of proprietary food items - Kurkure and Cheetos - classifiable under Entry 131 of Schedule IV to the RVAT Act, which reads as Sweetmeat Deshi (including Gajak Revri), bhujiya, branded and unbranded namkeens. or under the residual/orphan entry in Schedule V to the RVAT Act? - restricted meaning for the term namkeen in interpreting the scope of Entry 131 of the Schedule IV - HELD THAT - As per settled position of law, a specific entry would always trump a general entry and the burden would always be on the Revenue to prove that the goods in question would have to fall in general entry as opposed to the specific entry. The reliance placed by the Tax Board on Co-ordinate Bench judgment of Pepsico India Holding 2016 (12) TMI 1740 - RAJASTHAN HIGH COURT is onerous for the simple reason that the Co-ordinate Bench had classified the goods in the more specific entry, especially after observing that the goods in question can technically be considered namkeen. Merely because the specific entry of preserved food articles did not transition from RST Act to RVAT Act is no reason to automatically place the goods in question in the residual entry. In these circumstances, the correct approach would have been independent analysis of the relevant entries under the RVAT Act and examining whether the Revenue had discharged its onus to establish that the goods in question cannot, by any conceivable means, be included in any of the specific entries. Accordingly, the conclusion of the Tax Board, to the extent that it is based on Co-ordinate Bench judgment of Pepsico India Holding cannot be sustained. Whether the Revenue has successfully discharged its onus to establish that the goods in question cannot be placed in any specific entry and had to be placed in the residual entry? - HELD THAT - The Tax Board held that since the goods in questions are snacks, which do not find its place in any specific entry, the same had to be placed in residual entry. However, this conclusion of the Tax Board, in the opinion of this Court, is not supported by any cogent reason or evidence - It is noted that the Revenue neither sought any technical / expert opinion, nor brought any evidence on record to prove their point. It appears that the Tax Board merely relied on a basic Google search result wherein the goods in question were described as namkeen snacks. Considering that the Revenue and all the authorities below have misinterpreted the Co-ordinate Bench judgment of Pepsico India Holding that Revenue has failed to discharge its onus to establish that the goods in question would fall in general/residual/orphan entry and not the specific entry; that no cogent reason has been assigned to hold the goods in questions as snacks ; that the goods in question have been classified as namkeen as per the FSSAI license; that the goods in question have been held to be namkeen by Apex Court in Frito Lays India 2009 (8) TMI 98 - SUPREME COURT and Pepsi Foods Ltd. 2002 (9) TMI 184 - CEGAT, COURT NO. IV, NEW DELHI , this Court is inclined to answer the questions of law framed herein-above in favour of the petitioner-assessee and against the respondent-revenue. The order impugned of the Tax Board and the authorities below are quashed and set aside - all these STRs are allowed.

Summary

Issues Involved:

1. Classification of 'Kurkure' and 'Cheetos' under the Rajasthan Value Added Tax Act, 2003.
2. Interpretation of the term "namkeen" under Entry 131 of Schedule IV.
3. Applicability of specific vs. residual entry for tax classification.
4. Retrospective application of tax rates under amended entries.
5. Common parlance test for classification.
6. Reliance on global product descriptions for local tax classification.
7. Preference for beneficial tax classification in case of competing entries.

Detailed Analysis:

1. Classification of 'Kurkure' and 'Cheetos':

The core issue was whether 'Kurkure' and 'Cheetos' should be classified as "namkeen" under Entry 131 of Schedule IV, which attracts a lower tax rate, or under the residual entry of Schedule V, which attracts a higher tax rate. The petitioner argued that these products should be classified as "namkeen" based on their ingredients, packaging, and FSSAI classification. The Revenue, however, classified them under the residual entry, leading to a higher tax rate.

2. Interpretation of "namkeen":

The petitioner contended that the term "namkeen" should be interpreted broadly to include 'Kurkure' and 'Cheetos', relying on definitions from the Bureau of Indian Standards and FSSAI licenses. The Revenue's narrow interpretation was challenged, stating that the products were prominently labeled as "namkeen" and should be classified accordingly.

3. Specific vs. Residual Entry:

The court emphasized the principle that a specific entry should prevail over a general or residual entry. It was noted that the burden of proof lies on the Revenue to demonstrate that the goods cannot be classified under any specific entry. The court found that the Tax Board had misinterpreted previous judgments and had not provided sufficient evidence to support the classification under the residual entry.

4. Retrospective Application of Tax Rates:

The petitioner argued against the retrospective application of higher tax rates, which were introduced via a notification dated 14.07.2014. The court agreed, stating that tax amendments are generally prospective unless explicitly stated otherwise and should only be applied retrospectively if beneficial to the assessee.

5. Common Parlance Test:

The petitioner provided affidavits from traders and consumers to support the claim that the goods are commonly perceived as "namkeen". The court acknowledged this evidence, reinforcing the argument that the common understanding of the product should influence its classification.

6. Reliance on Global Product Descriptions:

The court dismissed the reliance on global descriptions of 'Kurkure' and 'Cheetos' as "snacks" from the company's international website. It was clarified that such descriptions should not affect the local classification, especially when the products are marketed as "namkeen" in India.

7. Preference for Beneficial Tax Classification:

In cases of competing entries, the court highlighted the principle that the entry more beneficial to the assessee should be preferred. The petitioner successfully argued that 'Kurkure' and 'Cheetos' should be classified under the specific entry for "namkeen", which is more favorable.

Conclusion:

The court ruled in favor of the petitioner, setting aside the order of the Tax Board and authorities below. It concluded that the Revenue failed to justify the classification of the goods under the residual entry, and the products should be classified as "namkeen" under Entry 131 of Schedule IV. The STRs were allowed, and the differential tax and interest imposed on the petitioner were quashed.