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TMI Blog2015 (8) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... d in form in which they were available – Heading of entry 1516 reveals that, it could be animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, whether or not refined, but not further prepared – Process of "emulsification" was not at all mentioned with regard to entries. It was for this reason, that product like "margarine" were separately enlisted under Head 1517, showing it as edible mixture –All types of margarine, except liquid margarine, stand specifically included under HSN Code 1517.10 – By virtue of entry 64(8) of SRO No. 82/2006 and description of commodity with HSN Code 1517.10, all margarine, except liquid margarine, were liable to attract higher rate of tax and there cannot be any distinction between "table margarine" and "industrial/ bakery margarine" – Challenge raised by petitioners was not correct or sustainable – Decided against the assessee. - W. P. (C) Nos. 13780, W. P. (C) Nos. 16328, W. P. (C) Nos. 30086 of 2013, W. P. (C) Nos. 1477, W. P. (C) Nos. 1608, W. P. (C) Nos. 3850, W. P. (C) Nos. 3920, W. P. (C) Nos. 4458 of 2014 - - - Dated:- 27-3-2014 - RAMACHANDRA MENON P. R., J. V. V. Asokan and K. I. Mayankutty Mather for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act is sought to be re-considered, applying the ratio of the decision rendered by the apex court in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC). Brief facts of the case: 3. The above writ petitions have been filed mainly challenging the assessment orders/penalty orders passed by the concerned authority for different assessment years, and also challenging the clarification issued by the competent authority under section 94 of the KVAT Act, declaring that margarine is liable to attract a higher rate of tax, by virtue of entry 64(8) of the relevant notification. The said clarification is stated as already under challenge in OTAP. 7 of 2012 (Foods, Fats and Fertilizers Ltd. v. Commissioner, Office of the Commissioner, Commercial Taxes) before the Division Bench of this court. It is stated that, by virtue of the clarification issued by the competent authority under the said Act, the alternative remedy by way of appeal, as provided under the statute, can only be nugatory or futile, which is stated as the reason for approaching this court, challenging the assessment/penalty orders. In the meanwhile, taking note of the fact that the legal position has already been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o different types-one, table-margarine and the other one, industrial/bakery margarine. All the petitioners are dealing with industrial margarine made from exclusively vegetable oils, which stands on a different footing than table margarine made of refined vegetable oils and skimmed milk powder (with such other ingredients). It is contended that all the items coming under entry 64 are milk products and that the margarine mentioned under entry 64(8) can only be table margarine (i.e., made by skimmed milk and vegetable oil). It is conceded that there is no dispute for any of the petitioners, that by virtue of the entry 64(8) of the relevant notification issued by the Government under section 6(1) of the KVAT Act, table margarine attracts higher rate of tax as specified. But in the case of industrial/bakery margarine , it still remains to be an edible oil, as made clear by the apex court in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC) and hence can attract only a lesser rate of tax at four per cent. Grounds of challenge:- 6. The following vital points are projected by the learned counsel for the petitioners, to call for interference. - Industrial/ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax to margarine with reference to its use (for not being directly used by consumer) has been reversed by the apex court as per the decision in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC), holding that industrial margarine is liable to be treated as an edible oil for granting concessional rate of tax. - Though the decision rendered by the apex court in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC) is under the KGST Act, the ratio decidendi is liable to be followed with regard to the present dispute under the KVAT Act as well. Reliance is sought to be placed on the decision rendered by the apex court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC) ; [2006] 282 ITR 273 (SC) ; [2006] 6 RC 276. - Applying the principle of noscitur a sociis , as explained by the apex court in Godfrey Phillips India Ltd. v. State of U. P. [2005] 139 STC 537 (SC); [1981] 2 SCC 141, the commodity of industrial margarine, being a hydrogenated vegetable oil, is entitled to be put together with vanaspati , attracting a lesser rate of tax. - HSN Code is not the last word, and it is for the courts to interfere in appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decision was never brought to the notice of the apex court when the decision in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC) was rendered with reference to the provisions of the KGST Act, nor is there any reference in the said verdict passed by the apex court to the HSN Code under the Customs Tariff Act or the relevant entries therein. - There is no inconsistency between the decisions rendered by the Division Bench of this court in SSD Oil Mills Company Ltd. v. State of Kerala [2011] 37 VST 594 (Ker) and the one rendered by the apex court in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC), which stands on a different pedestal, dealing with a different factual scenario. - The challenge against the clarification issued by the competent authority under section 94 of the KVAT Act is not maintainable by way of a writ petition, as the remedy, if aggrieved, is only to file an appeal, by virtue of the mandate under section 62(1) of the KVAT Act, read with rule 80 of the KVAT Rules, 2005. - Reliance is sought to be placed on the decision rendered by the apex court in Babu Verghese v. Bar Council of Kerala [1999] 3 SCC 422 to contend that, when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be treated as the same commodity. - The State decision to reckon margarine attracting higher rate of tax, at the rate of 13.5 per cent. with effect from April 1, 2005 while retaining vanaspati in the Third Schedule with a lesser tax liability, is a matter of policy and hence is not liable to be interfered. Though a review petition was filed by the assessee by way of RP No. 797 of 2013, seeking to review the verdict passed by the Division Bench of this court in SSD Oil Mills Company Ltd. v. State of Kerala [2011] 37 VST 594 (Ker), the same stands dismissed as per the order dated November 18, 2013. 8. As mentioned hereinbefore, the main reason put forth by the petitioners for having approached this court, challenging the assessment/penalty orders, is because of pendency of OTAP No. 7 of 2012 (Foods, Fats and Fertilizers Ltd. v. Commissioner, Office of the Commissioner, Commercial Taxes), wherein exhibit PI clarification (in W. P. (C) No. 3850 of 2014) issued by the competent authority under section 94 of the KVAT Act was subjected to challenge. It is pointed out that, appellate remedy will not be an effective remedy under such circumstance, as the appellate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Edible oils , observing that margarine was a different commodity. In the course of further proceedings, the concerned Tribunal rendered a decision in favour of the assessee, holding that bakery margarine sold by the assessee was hydrogenated oil like vanaspati and hence was eligible for concession under the notification. This was sought to be challenged by the State before this court by filing a revision petition, leading to the decision reported in [2007] 8 VST 726 (Ker) (State of Kerala v. Aluva Sugar Agency). 10. The Division Bench of this court observed that use of bakery margarine was only for bakery/confectionary industries and that the manufacturers had specifically prohibited use of the item for any other purpose. It was also observed that, it was not directly consumable unlike vanaspati or such other edible oils ; and further that, although hydrogenated oil or refined oil can also be used for bakery or confectionary industries, the reverse is not true, in so far as margarine, exclusively made for use in bakery or confectionary industries, cannot be treated as edible oil and the same cannot be used for all purposes for which edible oil is used. When a doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government was, whether hydrogenated oil like vanaspati would come within the concessional rate (paragraph 2 of the circular). It was accordingly clarified, that the term edible oil mentioned in the relevant notification, granting concessional rate of tax, also included refined or hydrogenated oil, such as groundnut oil, gingelly oil, refined oil and vanaspati (without mentioning anything specifically about margarine). It was with reference to the above clarification, that the apex court observed that the definition of the term edible oil given in the circular was not exhaustive but illustrative, and further that the circular did not say, that only edible oil referred to in the said circular would be taxed at four per cent. The Bench observed that, one has to consider whether margarine can be considered as an edible oil, pointing out that edible oil is one which could be used for human consumption ; simultaneously making it clear that, it is not necessary that all edible things should be consumed in the form in which they are available. It was also mentioned that, there are several ingredients in cooking, which we do not consume in the same form, but they are used in pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the KGST Act considered by the court earlier and it was accordingly, that the matter was heard on merits. 13. After referring to the different entries under the KVAT Act and the notification thereunder, and also after making reference to the different HSN Code assigned to the different commodities under the Customs Tariff Act, the Bench observed that all forms of margarine would come within the purview of entry 64(8) of SRO 82/2006 attracting higher rate of tax. The case of the assessee (as in the case of the present petitioners) that bakery margarine dealt with by the concerned assessee was different, not being a milk product, was also taken note of and a positive finding was rendered, that the contention of the assessee that his product fell under entry 38(19)(d) of the Third Schedule of the KVAT Act could not be accepted, because none of the items covered by sub-entry (19) had the same HSN code of margarine as provided under the Customs Tariff Act. The observations of the Bench in the penultimate paragraph and the paragraph immediately preceding the same, are relevant, which are extracted below (pages 597 and 598 in 37 VST):- From the above it is very clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature never intended margarine to be covered along with oils under the Third Schedule. On the other hand, margarine in all its forms are covered by entry 64(8) of the Third Schedule to the KVAT Act, which has the same HSN Code for margarine contained in the Customs Tariff Act. 14. According to the petitioners, the ingredients of industrial or bakery margarine are edible vegetable oils (palm oil, palmolin, ricebran oil, sesame oil), water, salt, vitamin A, emulsifying agents and antioxidents. The manufacturing process involves various stages including hydrogenation and/or interesterification, deodorisation and emulsification. In the case of table margarine, the ingredients are, refined vegetable oils, water, common salt, skimmed milk powder, emulsifiers and stabilisers, acid regulators, starch, vitamin A, D and E. The difference, with regard to the nature and process, between vanaspati and margarine is mainly to the effect that, in the case of margarine, apart from the process of hydrogenation (which is common), there is a process of emulsification as well, vanaspati is almost in grainy form, whereas industrial margarine is in pasty form. 15. To have a bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de given under the Head-517; more so, in view of the Rules of Interpretation of Schedules, under the Appendix to the Customs Tariff Act. It is also relevant to note that, animal or vegetable fats and oils (hydrogenated or otherwise), dealt with as specified, are grouped together under the Head 1516, from which an exception has been carved out in respect of margarine, which forms an edible mixture or preparation of animal or vegetable fats or oils, as given under the Heading 1517. The six digit nomenclature of margarine under the HSN Code 1517.10 gives a further exclusion, in so far as liquid margarine is concerned. In other words, all types of margarine, except liquid margarine, stand specifically included under the HSN Code 1517.10. This being the position, the entry margarine , as given under the entry 64(8) of SRO 82/06 deals with all sorts of margarine, whether it be table margarine or bakery margarine . The version of the petitioners, to the contrary, is liable to be rejected. 18. Yet another important aspect to be noted is that, the petitioners themselves have made available the distinctive characters of table margarine and bakery/industrial margarine , in so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy v. State of Kerala [2011] 45 VST 1 (SC) and of the Full Bench of this court in Kevi Hardware v. State of Kerala [2003] 11 KTR 562 (Ker), as discussed herein before. It was declared by the Division Bench of this court in State of Kerala v. Aluva Sugar Agency [2007] 8 VST 726 (Ker) that margarine cannot be directly consumed, unlike other edible oils used for cooking and the distinction was sought to be made with reference to the use . The said course with reference to use was deprecated by the apex court in Aluva Sugar Agency v. State of Kerala [2011] 45 VST 1 (SC), holding that the question was not the use to which the oil is put, but whether the oil is edible, to have extended the concessional rate of tax as given in the notification. This being the position, the petitioners cannot turn back to user theory , to have differential treatment with regard to table margarine and bakery/industrial margarine ; more so, when no such distinction is discernible from entry 64(8) of SRO No. 82/2006. 20. In the above facts and circumstances, this court finds that there is absolutely no inconsistency between the decisions rendered by the Division Bench of this court in State of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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