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TMI Blog2010 (9) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... y of tax.-(1) Subject to the provisions of this Act, there shall be levied a tax,- (a) at every point of sale in respect of the goods specified in the second column of Schedule A, (b) at the prescribed points of purchase in respect of goods specified in the second column of Schedule C, and (c) at the first point of sale in respect of the goods specified in the second column of Schedule D." The Act contains four Schedules. Schedule A containing 3 parts: Part I enumerates goods taxable at one per cent, Part II at four per cent and Part III covers goods other than those specified in Part I and Part II of Schedule A and Schedules B, C and D. Schedule B enumerates goods which are exempted from tax. Schedule C enlists goods which are subject to purchase tax and Schedule D deals with goods which are subject to tax at the first point of sale. Part III of Schedule A which in taxing statutes is generally known as residuary entry, reads as follows: (SCHEDULE A) PART III Goods taxable at 12.5 percentum "All goods other than those specified in Part I, Part II of Schedule A, Schedule B, Schedule C and Schedule D." The question before us is whether potato chips are goods specified in Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that potato chip is also covered by the definition of "goods". Then the simple question is whether potato chip is goods covered under Schedule B exempted, Schedule A, Part II, goods taxable at four per cent. or Schedule A, Part III, goods taxable at 12.5 per cent. At the outset, we have to state that the petitioner-company has no case that potato chip being basically potato itself, is goods wholly exempted from tax. It is also to be noted that the residuary entry also deals with goods assessable to tax at 12.5 per cent. The only difference is that under the residuary entry, the goods are not specifically enumerated as under other Schedules. The State has specified under Schedule B, goods which are exempted from tax and under Schedule A, Part I, goods which are liable to tax at one per cent and in Part II goods at four per cent. Schedule C goods at 12.5 per cent, Schedule D 25 per cent, 14 per cent, 12.5 per cent, etc. The purpose of the taxing statute is to provide for the levy of value added tax on the sales or purchases of goods in the State of Himachal Pradesh. Therefore, the State Legislature has specified the goods which are exempted from tax and the goods which are assessab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all at in Part II of Schedule A at four per cent. It is significant to note that the Legislature has conspicuously left out any form of potato processing or processed potato, under Part II, Schedule A to be taxed at four per cent, though potato is exempted from tax under Schedule B. The vehement contention of the assessee is that potato is a processed vegetable. Technically or say scientifically, it cannot be disputed that potato chips is also a processed form of potato and potato is a vegetable and by the processing of slicing, frying and spicing, the potato chips do not cease to be vegetable. However, we may make a passing observation that in common man's dictionary of vegetables, we may not find a place for potato chips. We may also record the submission of Sh. Ankush Dass Sood, learned Additional Advocate-General that the branded goods, "Lays and Uncle Chips" do not claim to have starch after the processing of potato to make it the branded item. But the question is whether the Legislature intended potato chips to be covered by the omnibus expression "processed vegetable". The answer in the context of the specified items exempted and taxed at four per cent when processed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since processed potato is not a specified item under Part II of Schedule A in the four per cent group, it has to be covered by the residuary entry for the un-specified items in the other Schedules. It is one of the cardinal principles of construction of an entry in a fiscal statute that the articles in the Schedules should be construed in its normal, popular and commercial parlance. In the words of Lord Wright in Attorney General for the Isle of Man v. Emily Moore reported in AIR 1938 PC 238, where the question considered was a particular material is "mineral" or not. "Whether particular material is mineral and comes within the reservation made by the Crown is an issue of fact to be decided according to the particular circumstances of the case, the duty of the court being to determine what the words meant in the vernacular of the mining world, the commercial world and landowners at the relevant time." In Ganesh Trading Co., Karnal v. State of Haryana reported in [1973] 32 STC 623 (SC); AIR 1974 SC 1362, the question considered was whether paddy and rice are identical goods. It was held that where paddy is de-husked and rice is produced, there is a change in the identity of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. . ." In Indian Cable Co. Ltd., Calcutta v. Collector of Central Excise, Calcutta reported in [1995] 97 STC 307 (SC); [1994] 6 SCC 610, (at page 312 of STC; at paragraph 5 of SCC), it has been held as follows: ". . . in construing the relevant item or entry, in fiscal statutes, if it is one of every day use, the concerned authority must normally, construe it, as to how it is understood in common parlance or in the commercial world or trade circles. It must be given its popular meaning. The meaning given in the dictionary must not prevail. Nor should the entry be understood in any technical or botanical or scientific sense. In the case of technical words, it may call for a different approach. . ." In Mauri Yeast India Pvt. Ltd. v. State of Uttar Pradesh reported in [2008] 14 VST 259 (SC); [2008] 5 SCC 680, it has been reiterated that the trade or commercial meaning or the end-user context would, thus, be a relevant factor in construing the fiscal statute. We may also refer to a celebra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be included" is also unacceptable since the Legislature, as we have discussed above, has specifically excluded potato chips or for that matter any form of processed potato in the entries for concessional tariff at four per cent in Part II of Schedule A though several other such exempted goods, when processed have been granted the concessional rate of four per cent tax. The reason is simple. Potato chips in common and commercial parlance have distinct identity and the State does not want to put such a commercially different product in the basket of processed vegetables. The Legislature only included potato for exemption and excluded a commercially different product namely potato chips for reduced tax-concessional tax. Thus, it is a case of exclusion by express omission in the entry for concessional tariff. Such goods, being taxable have to find a place in the fiscal statute and thus, the relevance for residuary entry, which is also an entry for taxable goods not specified elsewhere. Having analysed the factual position on the basis of pristine first principle of taxation, we shall also deal with various other contentions raised by the learned senior counsel, Sh. C.S. Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has to be specifically noted that potato is not goods exempted under the First Schedule in the Assam Act. The exempted goods are only fresh vegetables and fruits, garlic and ginger. Still further, it has also to be very significantly noted that the residuary entry, namely, the Fifth Schedule uses the expression "all other goods not covered by First, Second, Third and Fourth Schedules," whereas under the H.P. VAT Act, 2005, Part III residuary entry uses the expression "all goods other than those specified in Part I, Part II of Schedule A, Schedule B, Schedule C and Schedule D. It makes a lot of difference between the two expressions, "covered" as used in the Assam VAT Act and "specified" under the H.P. VAT Act. This aspect of the matter is not discussed or dealt with in the judgment of the Gauhati High Court and probably could not be discussed also since the same was not required or relevant for the decision. That apart, we may also deal with the other aspects as well. One of the views taken in the judgment is that by the inclusive definition of various vegetable items, potato chips are also covered. We find it difficult to be persuaded on that aspect since in entry No. 80, at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s word, being a word of every day use, must be construed not in any technical sense, not from any botanical point of view, but as understood in common parlance. The question which arose in Ramavatar's case [1961] 12 STC 286 (SC); AIR 1961 SC 1325, was whether betal leaves are "vegetables" and this court held that they are not included within that term. This court quoted with approval the following passage from the judgment of the High Court of Madhya Pradesh in Madhya Pradesh Pan Merchants Association, Santra Market, Nagpur v. State of Madhya Pradesh [1956] 7 STC 99 at page 102: "In our opinion, the word 'vegetables' cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before. The term 'vegetables' is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table," and observed that "the word 'vegetable' in taxing statutes is to be understood as in common parlance, i.e., denoting class of vegetables which are grown in a kitchen garden or in a form and are used for the table". This meaning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould govern the interpretation of the entry in other statutes as well. We are afraid that the contention cannot be appreciated, though the said contention was found favour with by the Gauhati High Court. The expressions take their meaning in the particular context where they are used. As we have discussed above, there is no dispute with regard to botanical content of potato chips, as a processed vegetable. It has also to be specifically noted that Union Ministry while dealing with the food processing policy only, stated that potato wafers and chips would be major vegetable food products. Purpose was only to show that there is no non-vegetarian content and that it is a food product of vegetables only. The purpose is clear from the following expression in the policy itself; "fiscal initiatives, interventions like rationalisation of tax structure on fresh foods as well as processed foods and masonry used for the production of processed foods". Therefore, it is fairly clear that the Ministry was dealing with the food processing sector, while issuing the policy. In the National Industrial Classification Policy, 2008, published by the Central Statistical Organisation, manufacture of pota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t understood to be items of processed vegetable or fruit, gives sufficient indication that processed vegetable or fruit appearing in entry 80 has been given a special or technical meaning as distinguished from the ordinary meaning. If a processed vegetable or fruit is to be understood in the ordinary way, none of the items specifically included in entry 80 could have been so included. That apart, the Government of India has understood 'potato chips' to be a vegetable product for the purpose of classification under the Central Excise Tariff Act. Such understanding has also been reiterated by the Ministry of Food Processing. As held by the apex court in State of Tamil Nadu v. Mahi Traders [1989] 73 STC 228, at page 229, 'Contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in a statute'. Considering the above, we are of the view that the words 'processed vegetables or fruits' appearing in entry 80 must be ascribed a fictional meaning to include items which in everyday use may not be vegetable or fruit items." We regret, we are unable to be persuaded and in our humble vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking, metals, the learned judge held, they cannot be treated as such for the purpose of the Act in question which provided for levy of duties on several metals. Two other learned judges, Parke, J. and Taunton, J. too agreed with this view. The next decision cited is in Earl of Normanton v. Giles [1980] 1 All ER 106. There the question was whether rearing pheasants for sport can be characterized as livestock-keeping within the definition of the expression 'agriculture'. The Rent Agriculture Act, 1976, defined 'agriculture' in the following words: '(a) agriculture includes-(i) diary farming and live-stock keeping and breeding (whether those activities involve the use of land or not) . . .' It was held by the House of Lords that rearing pheasants for sport cannot be characterized as live-stock-keeping or breeding for the purposes of the Act. However, if the pheasants are reared and bred for food, the situation would be different. Similarly in Hemens (Valuation Officer) v. Whitsbury Farm and Stud Ltd. [1988] 1 All ER 72, the House of Lords held that keeping and breeding of thoroughbred racehorses does not amount to agricultural operation within the meaning o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than those specified in the Fourth Schedule." Entry 107 of Part B of the First Schedule to the TNVAT Act is as follows: "Processed fruit and vegetables including fruit jam, jelly, pickle, fruit squash, paste, fruit drink and fruit juice (whether in sealed containers or otherwise), other than specified in the Fourth Schedule." It has to be specifically noted that the Fourth Schedule enumerated goods exempted from tax. Part B, item No. 33 following items: "Fresh vegetables including potatoes, tapioca and fresh fruits." Despite "potato" being exempted goods as in the H.P. VAT Act, the Tamil Nadu State Legislature prescribed four per cent tax in the First Schedule only for non-branded potato chips under entry 51. It has also to be specifically noted that under entry 52, several fried vegetables and fruits have been included in B Schedule for four per cent tax but, fried potatoes or fried vegetables have not been specified in that Schedule. Under the Tamil Nadu VAT Act, also under entry No. 107 for four per cent tax, the categories enumerated among the processed vegetables are fruit jams, jelly, pickles, fruit squash based on fruit juice. Processed potato in brand name is not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been held that potato chips being a processed vegetable should be included as an item under entry 88. To quote: "In the instant case, it is the admitted position that potato which is a vegetable is processed in order to manufacture potato chips. It is also the admitted position that there is a specific entry for 'processed vegetables'. In order to manufacture potato chips, the potato is sliced, fried, sprinkled with spicy and flavouring substances and the resultant product includes all the essential characteristics of potato and, thus, chips are potatoes in a processed form, i.e., a processed vegetable. Therefore, the potato chips have to be classified under entry 88 of Schedule B of the Punjab VAT Act, 2005 and would not fall under the residuary entry. The judgment of the Gauhati High Court in Pepsico India Holding Pvt. Ltd. [2009] 25 VST 41 and the judgment of the Madras High Court referred to above squarely cover the case of the appellant, as similar questions were involved in those cases also." As already pointed out, potato is not an item of goods exempted under the Punjab VAT Act. However, potato chips originally was an item included in the four per cent tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the tariff should be attempted to be brought under the residuary entry. In other words, unless the Department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort cannot be had to the residuary item. . ." It is contended that potato chips cannot be included in the orphaned residuary clause since the same can find a place in Part II of A Schedule under entry No. 78 of "processed vegetables". As we have already discussed above, residuary entry under Part III in H. P. VAT Act, 2005, is not an entry of orphaned goods. Unlike, the Assam VAT Act, where the expression of residuary entry is "goods not covered" and unlike the expression under the Punjab VAT Act "goods not mentioned elsewhere", the expression under the H.P. VAT Act is "goods not specified in other Schedules". Potato chips are goods taxable and that item is not goods specified in any other entry. The three guiding principles against orphaning an article are (i) by all standards and (ii) by no conceivable process of reasoning and (iii) reasonable claim. In fact the third-reasonable claim-has relevance, only if the other two are satisfied, namel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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