2018 (9) TMI 1424 - HC - VAT and Sales Tax

Taxability - frooti drink - rate of tax - taxable at 1% or at 2% - whether the assessing authority and the revisional authority are justified in holding that frooti would fall within Entry? - whether frooti is beverage? Held that - In the present case frooti is beverage within Entry 14 of Schedule II of the Act of 1976 in the name being non-alcoholic drink and beverage ice-cream and candy is of vide import and common parlance test would apply and the product frooti will be covered under Entry 14 of Schedule II of the Act of 1976 and would be charged at the rate of 2% - The petitioners cannot be allowed to make separate entry when frooti is covered within the specific entry and residuary entry cannot be resorted into. Both the authorities are absolutely justified in holding that frooti is a product covered by Entry 14 of Schedule II of the Act of 1976 - petition dismissed.

Summary

Issues Involved:
1. Taxability of "frooti" under Entry 14 of Schedule II of the Chhattisgarh Entry Tax Act, 1976.
2. Classification of "frooti" as a non-alcoholic beverage or a fruit product.
3. Applicability of the residual entry for tax purposes.

Issue-wise Detailed Analysis:

1. Taxability of "frooti" under Entry 14 of Schedule II of the Chhattisgarh Entry Tax Act, 1976:
The primary issue was whether "frooti" should be taxed as a non-alcoholic beverage under Entry 14 of Schedule II at the rate of 2%. The petitioners argued that "frooti" is a fruit product and should be taxed at 1% under the residual entry. The court upheld the decisions of the assessing and revisional authorities, which classified "frooti" as a non-alcoholic beverage and taxed it at 2%.

2. Classification of "frooti" as a non-alcoholic beverage or a fruit product:
The petitioners contended that "frooti," being a fruit juice-based drink, should not be classified as a non-alcoholic beverage. They relied on the Supreme Court decision in Parle Agro Private Limited v. Commissioner of Commercial Taxes, which dealt with similar issues. However, the court referred to the dictionary definition of "beverage" and concluded that "frooti" falls within the definition of a beverage, which includes drinks other than water, such as tea, coffee, and fruit juices.

3. Applicability of the residual entry for tax purposes:
The court examined the principles of statutory interpretation, particularly the use of specific versus residual entries in tax laws. Citing several Supreme Court judgments, the court emphasized that goods should only be classified under a residual entry if they cannot be reasonably classified under any specific entry. Since "frooti" could be classified as a non-alcoholic beverage, it did not fall under the residual entry. The court also noted that when two views are possible, the one favoring the assessee should be adopted, but this principle did not apply here as "frooti" clearly fell under the specific entry for non-alcoholic beverages.

Conclusion:
The court dismissed the writ petition, holding that "frooti" is correctly classified under Entry 14 of Schedule II of the Chhattisgarh Entry Tax Act, 1976, and is taxable at the rate of 2%. The petitioners' argument for a lower tax rate under the residual entry was rejected, as "frooti" clearly fits within the specific entry for non-alcoholic beverages. The court affirmed the decisions of the assessing and revisional authorities, finding no merit in the petitioners' submissions.