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2022 (12) TMI 969 - HC - VAT and Sales TaxClassification - Porridge / Daliya (cracked wheat) - Entry No. 36 of the Schedule of UPVAT Act excludes instant porridge as the latter sui generis a class of instant food as opposed to natural food - Whether the Tribunal is correct in law in stating that Entry No. 100 in Part-A of Schedule-II of the UPVAT Act is specific in nature and it covers brochures which are nothing but printed material even though brochures are comprehended within the meaning of Books in Entry No. 7 of the Schedule-I of the UPVAT Act and which in law is a specific entry is being taken up first and decided? HELD THAT - The Constitution Bench of the Hon ble Apex Court in Dilip Kumar 2018 (7) TMI 1826 - SUPREME COURT had cleared the air in regard to concession/exemption/incentive/rebate/subsidy and have dealt the matter in extenso and held, that in the event of any ambiguity in the exemption notification the benefit of such ambiguity should be construed in favour of the revenue denying the benefit of exemption to the subject/assessee - The Apex Court found that it is a settled law that any ambiguity in taxing statute should enure benefit of subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of the revenue. It is clear that the issue in regard to exemption clause is no more res-integra and the Apex Court has settled the question in favour of the revenue, that when there is an ambiguity in exemption notification or exemption clause, the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principal that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Classification - Porridge - The Act does not make any distinction between the normal porridge and instant porridge, and the finding arrived by the Tribunal is a fallacy. The intention of legislature was clear that exemption from tax has to be given to the product Porridge whether it was instant Porridge or normal Porridge i.e. Daliya (cracked wheat). The finding recorded by the Tribunal does not record any substantial finding so as to exclude instant wheat porridge under Entry 36 of Schedule-I of the exempted list of goods, when no distinction has been made by legislature. The Tribunal was not correct to read in between and deny the benefit to the assessee as granted by the taxing statute. The finding recorded by the Tribunal is hereby set aside - the question of law framed thus is answered in favour of the assessee and against the revenue.
Issues Involved:
1. Classification of brochures under UPVAT Act: Whether brochures are covered under Entry No. 100 in Part-A of Schedule-II as "printed material" or under Entry No. 7 of Schedule-I as "books." 2. Classification of instant porridge under UPVAT Act: Whether the term "Porridge" in Entry No. 36 of Schedule-I includes instant porridge. Detailed Analysis: Issue 1: Classification of Brochures under UPVAT Act The primary issue in these connected Commercial Tax Revisions is whether brochures should be classified under Entry No. 100 in Part-A of Schedule-II of the UPVAT Act as "printed material" subject to a 4% tax, or under Entry No. 7 of Schedule-I as "books," which are exempt from tax. The applicant, a private limited company engaged in the resale of goods via direct selling, argued that brochures should be classified as books and thus be exempt from tax. The initial assessment did not impose tax on brochures, but in re-assessment proceedings, a 4% tax was imposed, classifying brochures as "printed material" under Entry No. 100 of Schedule II-A. The applicant relied on previous judgments, such as *Commissioner of Sales Tax vs. Indo Arts* and *Thomson Press (India) Limited vs. State of Haryana*, which had considered brochures as books. However, the court noted that these judgments were based on older notifications and not on the current VAT Act, 2008, which clearly distinguishes between exempted goods (Schedule-I) and taxable goods (Schedule-II). The court emphasized that the VAT Act, 2008, specifically lists books and periodicals under Schedule-I Entry 7, while printed materials, including diaries and calendars, are listed under Schedule-II Part-A Entry 100. The court concluded that brochures, being promotional and advertising materials, fall under the category of printed materials and are subject to a 4% tax. The court also referred to the Constitution Bench judgment in *Commissioner of Customs (Import) Mumbai vs. Dilip Kumar and Company*, which clarified that any ambiguity in exemption notifications should be construed in favor of the revenue. Therefore, the court ruled that brochures are taxable under Entry No. 100 of Schedule-II Part-A, and the question of law was answered in favor of the revenue. Issue 2: Classification of Instant Porridge under UPVAT Act The second issue, specific to Revision No. 281 of 2022, was whether the term "Porridge" in Entry No. 36 of Schedule-I of the UPVAT Act excludes instant porridge. The applicant argued that instant wheat porridge, which can be consumed by mixing with hot milk, should be classified as "Porridge" under Entry 36, which is exempt from tax. The state counsel could not defend the Tribunal's judgment, which had denied this exemption. The court noted that Entry 36 of Schedule-I lists exempted goods, including "Porridge," without distinguishing between normal and instant porridge. The court found that the Tribunal's distinction between normal and instant porridge was incorrect and that the legislature intended to exempt all forms of porridge from tax. Therefore, the court set aside the Tribunal's finding and ruled that instant porridge should be exempt under Entry 36 of Schedule-I. The question of law was answered in favor of the assessee. Conclusion: The court dismissed the revisions concerning the classification of brochures, upholding the Tribunal's decision that brochures are taxable as printed materials. However, the court allowed the revision concerning the classification of instant porridge, ruling that it should be exempt from tax under Entry 36 of Schedule-I.
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