2016 (5) TMI 522 - HC - VAT and Sales Tax

Classification and applicable rate of tax - period involved is 15-01-2011 to 31-03-2013 - Whether the non-alcoholic beverage concentrate in powder form are to be classified under Schedule Entry C-107 (11)(g), which is exigible to tax @ 5% OR whether the under Residuary Schedule Entry E-1, which is exigible to tax @ 12.5%. Held that - there is no dispute that the said products of the Respondent-Dealers are powders from which nonalcoholic drinks are prepared for the purpose of consumption by mixing the said powders with liquids like water, milk, juice, etc. In our view, there is no warrant for restricting the meaning of term beverages in the Schedule Entry C-107 (11)(g) as sought to be contended by the learned Counsel for the Appellant. The Entry is clear and unambiguous and is couched with the non-technical word beverages , which has to be understood in its ordinary meaning. The meaning of beverage as stated in the Concise Oxford English Dictionary is drink other than water . The question is, while construing the Entry as it stands, would the drinks made from the said powders be any less of beverages because they are health drinks ? We think not Merely because a drink has more nutritive value in the form of proteins and meant for a certain class of consumers, it would not cease to be a beverage . even if the potable drink made from the said powders are perceived as health drink, it does not fall out of the purview of the Entry. It has been held by the Supreme Court in State of Maharashtra v/s. Bradma of India Ltd. (2005) 2 SCC 669 that the residuary entry could be resorted to only when by a liberal construction the specific entry cannot cover the goods in question. In the present case, in view of the specific Entry 107-C (11)(g) to the Statute, it would override the general Entry. Even otherwise, we do not think that the drink prepared from the said powders can be excluded from the term beverages , even assuming that the principle of common parlance were to apply. Therefore, the Tribunal has rightly concluded that the powders of the Respondent is covered under Schedule Entry C-107 11(g) and no interference is warranted with the impugned order of the Tribunal. - Decided against the revenue

Summary

Issues Involved:
1. Classification of products under Schedule Entry C-107 (11)(g) or Residuary Schedule Entry E-1 of the Maharashtra Value Added Tax Act, 2002 (MVAT Act).
2. Application of common parlance test for determining the classification.
3. Whether the products are considered "beverages" under the MVAT Act.

Issue-wise Detailed Analysis:

1. Classification of Products under Schedule Entry C-107 (11)(g) or Residuary Schedule Entry E-1:

The appeals arose from a common judgment by the Maharashtra Sales Tax Tribunal, which classified the respondent-dealers' products under Schedule Entry C-107 (11)(g) of the MVAT Act, making them liable for 5% VAT. The Commissioner of Sales Tax had earlier classified these products under Residuary Schedule Entry E-1, subjecting them to a 12.5% tax. The Tribunal's decision was based on the premise that the products, being powders from which non-alcoholic beverages are prepared, fit under Schedule Entry C-107 (11)(g). The High Court upheld the Tribunal's classification, concluding that the products are indeed "powders" from which "non-alcoholic beverages" are prepared, thus falling under the specific entry rather than the general one.

2. Application of Common Parlance Test:

The appellant argued that the products are consumed for specific goals, such as muscle gain or weight loss, and are not "beverages" as commonly understood. They emphasized that the products are targeted at a specific demographic and carry warnings against consumption by certain groups. The appellant relied on the Supreme Court's judgment in Commissioner of Central Excise, New Delhi vs. Connaught Plaza Restaurant Private Limited, which underscores the principle of common parlance for interpreting terms in taxing statutes. However, the High Court found that even under the common parlance test, the products qualify as "beverages" because they are consumed as drinks, regardless of their additional health benefits.

3. Whether the Products are Considered "Beverages" under the MVAT Act:

The High Court examined the definition and ordinary meaning of "beverages" and concluded that the term includes any drink other than water. The court rejected the argument that the products cease to be beverages because they are health drinks. The court cited the legislative history of Schedule Entry C-107 (11)(g), which consistently covered powders from which non-alcoholic beverages are prepared. The court also referenced the Supreme Court's ruling in State of Maharashtra v/s. Bradma of India Ltd., which states that a specific entry in a taxing statute overrides a general entry. The High Court affirmed that the products, being powders used to prepare drinks, are covered under Schedule Entry C-107 (11)(g) and thus subject to 5% VAT.

Conclusion:

The High Court upheld the Tribunal's decision, confirming that the respondent-dealers' products are classifiable under Schedule Entry C-107 (11)(g) and liable for 5% VAT. The court found no substantial questions of law warranting interference with the Tribunal's order, and the appeals were dismissed with no order as to costs.