2024 (1) TMI 240 - HC - VAT and Sales Tax

Classification of the coconut oil sold by the appellant - to be classified under Entry No. 25 of the Third Schedule appended to DVAT Act as Edible Oils and Oil cake or to be classified as a residuary item under Section 4(1)(e) of the DVAT Act bi-monthly publication namely Amagram ? - HELD THAT - The argument of the appellant that the product Amagram is a periodical since it is published periodically, and is a book having collection of number of leaves or sheets or paper, is not persuasive. Even though the product is published periodically, but from the bare glance, the same in the nature of a catalogue, containing list of goods that can be bought from Amway. Though it contains other information like upcoming training schedules, achievement levels of distributors, etc., however, the nature of the product being a catalogue, cannot be taken away. Strictly speaking, even a diary is a book and the book is also a printed material. The printed material has been taxed under Entry No. 52 of the Third Schedule, however, the limited exemption has been given to the material which falls under Entry No. 5 of the First Schedule. The same has to be given a restricted interpretation. In the case of INDUSTRIAL AND COMMERCIAL SERVICE, ALLAHABAD VERSUS COMMISSIONER OF SALES TAX, UP., LUCKNOW 1962 (12) TMI 44 - ALLAHABAD HIGH COURT , the Division Bench of the Hon ble Allahabad High Court had answered the issue whether books used in Section 4 of the UP Sales Tax Act would include the diaries sold by the appellant therein. In terms of Section 4 of the UP Sales Tax Act, the sale of books was exempted from taxation. The appellant therein was selling the diaries, which were claimed to be books as they were bound like a book. There were few pages in the diary containing general information on various matters and the Shlokas from Bhagavad Gita were referred. The Hon ble High Court noted that book has got several meanings and in a wider sense, means a writing in the collection of sheets of paper, blank, written or printed, strung or bound together and the diary would come within this meaning. However, it held that the diary would not come within the restricted meaning because primarily it is meant to be written and not to be read. It held that the books referred to in Section 4 are not to be interpreted in a wider sense but in a restricted or popular sense, which is the one that can be read for education, knowledge, enlightenment or recreation, the book that one would find in a literary or a book seller shop. In the present case also, the appellant is contending that Amagram is a periodical since the same is published periodically and would fall within Entry 5 of the First Schedule. On first blush, the contention might appear to be merited, however, when the Entry is read as a whole, which is accompanied with journals, including maps, charts and globes, the intention of Legislature does not appear to exempt periodicals as circulated by the appellant. In the case of MINERVA PRINTING WORKS VERSUS STATE OF BIHAR 1973 (6) TMI 51 - PUNJAB HIGH COURT , the Hon ble Patna High Court had considered whether the sale of blank registers, exercise books, letter pads was exempted under the Bihar Sales Tax Act in the category of books and periodicals. It was held that the word book is used along with the word periodical and are meant for reading purposes and derive lessons from and gather information. Therefore, in a wider sense, blank registers, exercise books, etc. might fall within the category of books, the restricted meaning has to be given by looking at the entry in its entirety and gathering the intensity of the Legislature. In the present case also, the product sought to be classified as periodicals by the appellant, is essentially in the nature of catalogue containing information in relation to the products being offered for sale. No doubt, certain other information and news in relation to events, being organized, is also mentioned for the purpose of the consumption of its dealers. The same, however, cannot be held to be a periodical as referred in Entry No. 5 of the First Schedule. Moreover, it is not disputed that Amagram is in the nature of a catalogue , which has specifically been included in Entry No. 52 of the Third Schedule by Circular No. 2 dated 26.04.2005 - It is settled law that a person claiming exemption has to establish that the product squarely falls within the category of exempted goods. It is also settled that while interpreting the exemption notification / statute, a consideration in favour of the Revenue has to be given and in case of ambiguity, the same has to be interpreted against the assessee. The question of law as to whether the periodical Amagram is to be classified as catalogue liable for tax under Entry 52 of Third Schedule of the DVAT Act, is answered in favour of the Revenue. Coconut Oil - HELD THAT - In view of the admitted fact that the coconut oil is sold by the appellant in small packs; is displayed in the category of hair care; the manner in which it is to applied on hair; and the purpose for which it is purchased by the consumer leaves no manner of doubt that the coconut oil sold by the appellant is wrongly sought to be classified under Entry 25 of the Third Schedule of the DVAT Act - the question of law as to whether the coconut oil is wrongly classified under Entry No. 25 of the Third Schedule of the DVAT Act is answered in favour of the Revenue as well. Appeal disposed off.

Summary

Issues Involved:
1. Classification of the bi-monthly publication "Amagram."
2. Classification of the coconut oil sold by the appellant.

Summary:

Classification of Amagram:
The appellant argued that "Amagram" is a periodical under Entry No. 5 of the First Schedule of the DVAT Act, thus exempt from tax. The Revenue contended it is a catalogue under Entry No. 52 of the Third Schedule, subject to tax. The Tribunal upheld the Revenue's classification, finding "Amagram" to be a catalogue containing product lists, despite its periodic publication and additional content like training schedules and distributor achievements. The court noted that the dictionary definitions and legislative intent suggest that "periodicals" in Entry No. 5 are serious or academic publications, not catalogues. The court cited precedents emphasizing a restricted interpretation of "books" and "periodicals" for tax exemption purposes. Ultimately, the court held that "Amagram" is rightly classified as a catalogue under Entry No. 52 of the Third Schedule, favoring the Revenue.

Classification of Coconut Oil:
The appellant claimed that the coconut oil, being 100% pure and edible, should be classified under Entry No. 25 of the Third Schedule as "Edible Oils and Oil cake," attracting 5% tax. The Revenue argued it should be classified as a residuary item under Section 4(1)(e) of the DVAT Act, attracting 12.5% tax, as it is marketed and sold primarily for cosmetic purposes. The Tribunal upheld the Revenue's classification, noting that the product is sold in small containers, advertised for hair care, and not typically used as a cooking medium. The court applied the "popular intention test" and "common parlance test," concluding that the product is perceived and used as a hair oil, despite being edible. Thus, the court held that the coconut oil is rightly classified under the residuary entry, favoring the Revenue.

Conclusion:
The appeal was disposed of with both issues decided in favor of the Revenue, affirming the Tribunal's classifications of "Amagram" as a catalogue and the coconut oil under the residuary entry.