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TMI Blog2017 (5) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disposed of by this common judgment. 3. Civil Appeals arising out of SLP(C) Nos. 1469798 of 2016 are being treated as leading case, the facts of which case shall be noted in detail for deciding these cases. 4. Civil Appeals arising out of SLP(C) Nos. 1469798 of 2016 and SLP(C) No.9467 of 2016 are between the same parties whereas Civil Appeals arising out of SLP(C) Nos.2446061 of 2016 have been filed by different appellants. Civil Appeals arising out of SLP(C) Nos. 1469798 of 2016 5. The appellantM/ s. Parle Agro (P) Ltd. is a dealer engaged in fruit juice based drink known as 'Appy Fizz' which has obtained certificate of registration under Kerala Value Added Tax Act, 2003 (hereinafter referred to as "Act, 2003"). The appellant was classifying the product as fruit juice based drink under Entry 71 of the notification issued under Section 6(1)(d) of Act, 2003 till 2007 and was paying @ 12.5% VAT. One M/s. Trade Lines (a distributor of appellant Company) was assessed by the authorities under the Act, 2003 holding that M/s. Trade Lines is liable to pay tax @ 20% on the product. M/s. Trade Lines filed OT Revision No.114/2013 in the High Court of Kerala against the order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Joint Commissioner passed the clarification order dated 6th November, 2015 classifying the product as 'aerated branded soft drinks', at the rate of 20%. Against the order passed under Section 94 of Act, 2003, the appellant filed O.T. Appeal No.7 of 2015 in the Kerala High Court. The Division Bench by its judgment and order dated 5th February, 2016 dismissed the appeal filed by the appellant upholding the order dated 6th November, 2015. A review application was also filed by the appellant to review the judgment dated 5th February, 2016 which has been dismissed on 23rd March, 2016. 7. Civil Appeals arising out of SLP(C)No.1469798 of 2016 have been filed against the aforesaid order dated 5th February, 2016 and the review order dated 23rd March, 2016 by the appellant. Civil Appeal arising out of SLP(C)No.9467 of 2016 8. The Assistant Commissioner (Assessment) and the Commissioner of Commercial Taxes have filed this appeal challenging the judgment dated 5th October, 2015 by which writ appeal filed by the Assistant Commissioner(Assessment) and another against the direction of the learned Single Judge dated 31st August, 2015 has been dismissed. Civil Appeals arising out of SLP( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f that case. Prior to 2007 the product was covered under Entry 71. When in 2008 Entry 71 was amended, there was no amendment to the schedule under Section 6(1)(a). He submits that had the intention of the legislation was to pick up the certain products earlier covered under Entry 71 and place them in Schedule under Section 6, then entry 'aerated branded soft drinks, excluding soda' which earlier did not cover the said product, would also have been amended at the same time. He submits that if prior to 2007, 'Appy Fizz' could not be considered as an 'aerated branded soft drink' then there is no identifiable logic that the product would be so covered after 2007. Especially, there was no indication that the said product had been removed/ejected from Entry 71 after the amendment in 2007. 12. Further, he submits that common parlance test which has been applied by the High Court is not the correct test to determine the classification to include the product, as entries under the VAT Act are technical or scientific in nature. Soft drinks under Kerala VAT would be those drinks that are synthetic whether or not aerated. The product in question is not a synthetic produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of 2008 made the legislative intent clear and the High Court has rightly relying on the said amendment has held that product is not covered under Entry 71 and is liable to tax @ 20% under Section 6(1)(a). Learned counsel for the respondent, further, submits that CESTAT ruling has no relevance with regard to the classification under Act, 2003, since, the CESTAT ruling considered the different headings under Central Excise Tariff Act, 1975 which is not relevant. Learned counsel submitted that under the Rules of interpretation as contained in the Act, 2003, the product being not covered with any of HSN number common parlance or commercial parlance test has rightly been applied by the High Court. Under the common parlance even if the product contained more than 10% fruit concentrate it is a soft drink as commonly known and tax liability @ 20% has rightly been imposed. 16. Learned counsel for the parties have placed reliance on various cases which shall be referred to while considering the submissions in detail. 17. We have considered the submissions made by the learned counsel for the parties and perused the records. 18. From the submissions of learned counsel for the parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and tablets including (I) aerated water, soda water, mineral water, water sold in sealed containers or pouches (ii) fruit juice, fruit concentrate, fruit squash, fruit syrup and fruit cordial [x x x] (v) other nonalcoholic beverages; not failing under any other entry in this List or in any of the Schedule. (1) Water not containing added sugar or other sweetening matter; [x x x] (b) Aerated water (2) Water containing added sugar or other sweetening matter. 2201.10.20 (3) Fruit juices and vegetables juices, unfermented and not containing added spirit, whether or not containing added sugar of other sweetening matter 2009 (4) Fruit pulp or fruit juice based drinks 2202.90.30 (5) Soft drink concentrates (a) Sharbat 2106.90.11; (b) other 2106.90.19 (6) Beverages containing milk 2202.90.30 20. The words "(iii) soft drinks of all varieties" omitted by S.R.O. No. 543/2007 dated 20607 published in Kerala Extraordinary No.1167 dt. 21.6.07 21. Omitted by S.R.O. No.543/2007 dt, 20607 published in Kerala Gazette Extraordinary No.1167 dt.2162007. Prior to the omission it read as under: "(a) Mineral water 2201.10.10" " 21. Now, we come to Section 6(1)(a)(d) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that Section 6(1)(a) always covered 'aerated branded soft drinks' excluding soda' with tax liability of 20%. 23. By S.R.O.No.119 of 2008 Entry 71 has been substituted by another Entry. Entry 71 after amendment by S.R.O.No.119 of 2008 w.e.f. 1st April, 2007 is as follows: "NONALCOHOLIC BEVERAGES AND THEIR POWDERS, CONCENTRATES AND TABLETS IN ANY FORM INCLUDING; (1) Aerated water, soda water, Mineral water, water sold in sealed containers or pouches. (2) Fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp, and fruit cordial. (3) Soft drinks other that aerated branded soft drinks. (4) Health drinks of all varieties. (5) 'Similar other products not specifically mentioned under any other entry in this list or any other schedule'." 24. As noted above the application was filed by the appellant under Section 94 of Act, 2003 on 24th August, 2014 which has been decided by the Committee of Joint Commissioner by order dated 6th November, 2015. Section 94 of the Act, 2003 is as follows: "Section 94. Power of Authority to issue clarification.( 1) If any dispute arises, otherwise than in a proceedings before any appellate or revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns plastic goods and goods made of polypropylene, Chloride/ Polyethylene and other plastic sheets. All goods enumerated in Section 6(1)(a) by the Legislature itself indicates that higher rate of tax has been fixed for those goods which are harmful for environment and health. Aerated branded soft drinks, excluding soda is also in the company of the above goods described in Section 6(1)(a). Section 6(1)(a) also refers to Schedule I, Schedule II and Schedule III. Tax in Schedule I is exempted and rate in Schedule II is 1% whereas rate of tax in Schedule III is 5% in contrast to legislative policy in fastening tax liability at very high level on goods under Section 6(1)(a) is thus clear and categorical. Those goods which are not congenial to health and environment are charged with higher tax level, which is the purpose and object clear from the legislative scheme. 27. Now we come to Section 6(1)(d). Section 6(1(d) empowers the State to notify a list of goods which are taxable at the rate of 12.5% (at present at 14.5%) which does not fall under clause (a) and (c). The delegated legislative power of issuing notification to the State Government is thus restricted and can be exercised onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and pulp and fruit cordial; (3) Soft drinks other than aerated branded soft drinks; (4) Health drinks of all varieties; (5) Similar other products not specifically mentioned under any other entry in this list or in any other Schedules." 31. A bare perusal of Entry 71 as above indicates that the Entry covers nonalcoholic beverages and their powders, concentrates and tablets in any form including Item No.2 contains fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp and fruit cordial. Soft drinks other than aerated branded soft drinks are included in Item No.3. Health drinks of all varieties are included in Item No.4 and similar other products not specifically mentioned under any other entry in this list or in any other Schedules were included in Item No.5. The Entry of fruit juice based drinks got subsumed in the residuary entry and the amendment by S.R.O. No.119 of 2008 did not change or affect the character and content of the products which were included in Entry 71. Issue No.3 32. The High Court while interpreting the entries under Section 6(1)(a) and Entry 71 of the notification S.R.O.No.119 of 2008 had applied common parlance test. The High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry which does not mention with HSN code in Section 6(1)(a) although principle contained in such Rules of Interpretation may apply. Had the legislation intended the Rules of Interpretation of the Schedules should be made applicable both to the interpretation of the Schedules or those commodities which are not given with HSN code, the Rules of Interpretation of Schedules should have been in toto made applicable for interpretation of clause (a) of Section 6(1). Thus, common parlance test or commercial test which are to be applied on the commodities in the Schedules which are not given with HSN code is directly not applicable under Item 6(1)(a), hence, applicability of other Rules of Interpretation which were required to be applied is not ruled out. Hence, in the appropriate case apart from common parlance test or commercial test any other test can be applied for interpretation of the commodities included in Section 6(1)(a) apart from those which are given HSN code. 35. The principle of statutory interpretation with regard to a word in taxing statutes are well established. This Court in Porritts & Spencer (Asia) Ltd. vs. State of Haryana, 1979(1) SCC 82, has laid down following in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such a departure. In other words, in cases where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the said word was used then the said principle of interpretation should not be applied. Trade meaning or commercial nomenclature would be applicable if a particular product description occurs by itself in a tariff entry and there is no conflict between the tariff entry and any other entry requiring to reconcile and harmonise that tariff entry with any other entry. 37. In Union of India v. Delhi Cloth & General Mills1 the question arose as to how the term "refined oil" occurring in the tariff was to be construed. There was no competition between that tariff entry with any other, nor was there any need to reconcile and harmonise the said entry with any other provision of the tariff. This Court, therefore, considered the term "refined oil" by applying the commercial meaning or trade nomenclature test and held that only deodorised oil can be considered to be refined oil. This Court also referred to the specification of "refined oil" by the Indian Standards Institution and held that: "This specification by the Indian Standard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .V. Varkey v. Agricultural Income Tax and Rural Sales Tax Officer specifically declined to apply the popular or commercial meaning of 'Tea' occurring in the sales tax statute holding that the context of the statute required that the technical meaning of 'a product of plaint life' required to be applied and therefore green tea leaves were tea even though they might not be tea as known in the market. 43. In Cannanore Spinning and Weaving Mills Ltd. v. Collector of Customs and Central Excise, Cochin this Court held that the word 'hank' occurring in a Central Excise Notification could not be interpreted according to the well settled commercial meaning of that term which was accepted by all persons in the trade, inasmuch as the said commercial meaning would militate against the statutory context of the said exemption notification issued in June 1962. The word 'hank' as used in the notification meant a 'coil of yarn' and nothing more." 37. In the cases as noted above this Court departed from construing the entry from its normal commercial meaning but had adopted a technical or scientific meaning. Ultimately, in paragraph 53 of this judgment, the Court gave the technical and scientif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Entry 71. It was submitted that 'Appy Fizz' which a fruit juice based drink is more akin to other commodities included in the Entry 71 other than that which was included in Section 6(1)(a). In interpreting Item 5 of Entry 71 the doctrine of 'noscitur a sociis' is fully attracted. Justice G.P.Singh in 'Principles of Statutory Interpretation, 14th Edition, has explained the 'noscitur a sociis' in the following words: "(b)Noscitur a Sociis The rule of construction noscitur a sociis as explained by LORD MACMILLAN means: "The meaning of a word is to be judged by the company it keeps". As stated by the Privy Council: "It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them". It is a rule wider than the rule of ejusdem generis; rather the latter rule is only an application of the former. The rule has been lucidly explained by GAJENDERAGADKAR, J., in the following words: "This rule, according to MAXWELL, means that when two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. They take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 94 of the Act, 2003 filed several materials, expert opinions and pleadings for classifying the product in question. The Committee of Commissioners although in its order has noted several contentions raised by the appellant but the Committee of Commissioners mainly relying on the judgment of Division Bench of Kerala High Court in OT Revision No.114 of 2013M/ s. Trade Lines finalised the assessment by levying tax on the product 'Appy Fizz' at the rate of 20% against which M/s. Trade Lines has filed an appeal which was dismissed and thereafter Revision was filed in the High Court and the High Court dismissed the Revision affirming the assessment made at the rate of 20% tax. Proceeding under Section 94 of Act, 2003 is a separate and specific proceeding. In the present case when the appellant has filed application under Section 94 the judgment of Division Bench in M/s. Trade Lines was already rendered and in a writ petition filed by the appellant learned Single Judge has issued a direction on 31st August, 2015 for deciding the application under Section 94. The direction issued by the learned Single Judge to decide the application was challenged by the Revenue before the Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classifiable under subheading No.22029020 of Central Excise Tariff on the ground that the product is fruit juice based drink. Revenue challenged the order on the ground that the same is classifiable under subheading No.22021010 of Central Excise Tariff as 'aerated water'. The Tribunal vide its judgment dated 18.03.2008 dismissed the appeal. The order in paragraph 5 has referred to relevant subheading No.220210 and 22029020 on which Revenue had relied is to the following effect: "2202 10 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured: 22029020 Fruit pulp or fruit juice based drinks " 46. The Revenue has contended that product in question is aerated. The contention of the Revenue was noted in paragraph 3 of the judgment which is to the following effect: "3. The contention of the Revenue is that the Commissioner (Appeals) has ignored the chemical examiner's report and Ministry of Food and Processing Industries opinion and which was on record and Ministry of Food and Processing Industries opinion and which was on record and held in favour of the respondents. The contention of the Revenue is that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, 2003, now there are no HSN Codes mentioned. 50. Even though the order of CESTAT did not conclude the controversy in favour of the appellant but fact that the CESTAT did not hold the product to be under the "aerated water" was a factor which necessitated a more deeper consideration by the High Court to find out as to whether the product is 'aerated branded soft drink' or not. The High Court in its judgment found that since the product charged with air or carbon dioxide was an aerated drink. From the manufacturing process which was on the record, it is clear that carbon dioxide to the extent of 0.6 percent was added as preservative. Technical note submitted on behalf of the appellant clearly mentioned that use of carbon dioxide was only as a preservative of 'Appy Fizz'. Issue Nos.7 & 8 51. The appellant had been granted the licence to manufacture the product under Fruit Products Order 1955. The appellant has been labelling the product as 'Fruit Drink' under the Food Safety and Standards (Food Safety & Standards and Food Additives) Regulations, 2011. The statutory regulations require that beverages must contain minimum of 10% fruit juice to be cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should contain a maximum of 10% of fruit juice or pulp or bits. This category of product technically is same as at serial no.1." 53. Thus, according to the Government of India, Ministry of Food Processing Industries the product containing 10% of fruit juice are commonly known as fruit drinks. The appellant has also filed the order of 19th August, 2015 issued by the Food Safety and Standards Authority of India, Ministry of Health & Family Welfare where following permission was granted by Food Safety and Standards Authority of India, Ministry of Health & Family Welfare by order dated 19th August, 2015: "It is to inform you that you are now allowed to Manufacture, Store and Sale the product 'Appy Fizz' in pet bottles under the category2.3.10 i.e. Thermally Processed Fruit Beverages/Fruit Drink/Ready to serve Fruit Beverages of Food Safety and Standards (Food Product Standards & Food Additives) Regulations, 2011 with name of the food item as Fruit Pulp or Fruit Juice based Drinks for which you are already holding a license." 54. The Committee of the Joint Commissioners while deciding the application under Section 94 has noted the aforesaid orders passed by the Food Safety Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic acid, preservatives(sodium benzoate, potassium metabisulphite and potassium, sorbate), ascorbic acid and added nature identical flavouring substances and natural colour. The juice content of APPY FIZZ is 12.7% m/m and Total solids content is 13%. The product is manufactured under FSSAI licence category Ready to Serve fruit beverage/drink. The manufacturing process involves the following steps: 1. Addition of all the ingredients to treated water, except carbon dioxide and making a batch. 2. Thermal Process (Pasteurization) of the product at 950 C for 30 seconds and cooling to 40 C. 3. Purging Carbon dioxide gas into the product. 4. Filing the product into bottles/cans followed by sealing/seaming. 5. Filed bottles/cans are then passed through warmer to increase the temperature to room temperature followed by labeling and coding. The technical opinion is given with considering following two points: POINT NO. 1: Technical Opinion on why the category of the product should be FSSAI(Food Product Standards and Food Additives) Regulations, 2011 chapter 2.3.10(Thermally processed Fruit Beverages/Fruit drink/Ready to serve fruit beverage) * It is made from apple juice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Experts in their opinions and certifications have mentioned that product is commercially and technically distinct from products which have classified as 'aerated branded soft drinks'. The certifications which were relied by the appellant indicate that in the case of 'Appy Fizz' the product does not undergo aeration or carbonation; the product is thermally processed with CO2 which help in preserving the Apple Juice concentrate which is otherwise perishable in nature. 58. In the application which was filed for clarification, which has been brought on the record at page 138Annexure P13, in paragraph 3.1 elaborate process of manufacture was mentioned. 59. Other relevant materials which were part of the clarification application were mentioned in clause 6 which are to the following effect: "VI. OTHER RELEVANT MATERIAL (a) Technical opinion dated 28.02.2005 issued by the authority under Fruit Processing Order, 1955 i.e. Director Food & Vegetable Processing Industry working as licensing officer under Fruit Product Order 1955 in ministry of Food Processing Industries, Government of India.(Copy of the said certificate is enclosed herewith as Exhibit H) (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id assessment orders have attained the finality being not challenged by the department. (i) As per subsection( 1A) of Section 94 of Kerala VAT Act, 2003 which interalia contemplates that if the dispute relates to tax rate of a commodity the details of first seller or the manufacturer of such goods in the state as the case may be shall be furnished by the applicant. Accordingly, we are submitting sales tax Assessment order under Tamilnadu VAT Act since the manufacturer is located in Tamilnadu, Exhibit Q. Hence, the said party may please be made a necessary party. (j) The issue of classification of the product "Appy Fizz" is decided by Hon'ble Kerala High Court in case of other dealer namely Trade Lines. However, Hon'ble Kerala High has decided that in Revision and the facts of our case are totally different and therefore, as per the settled law the decision is binding only when the facts are same and not when the facts are different and therefore, in our case the facts which are totally different were not subject matter of consideration before Hon'ble High Court." 60. The above materials which were filed by the appellant before the Clarification Authority were relevant mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Entry 71 shall now stand transferred to Section 6(1)(a) is the question to be answered. Even though Entry 71 has been amended but there is no amendment in Entry 2 of Section 6(1)(a), so as to include something not included in Section 6(1)(a). By S.R.O. No.119 of 2008, residuary entry by Item No.5 is added which is "similar other products not specifically mentioned under any other entry in this list" which is potent enough to include fruit juice based drinks and it is clear that fruit juice based drinks are subsumed in Item No.5 of Entry 71 after its amendment. We have already observed that items which have been grouped under Section 6(1)(a) are all those items where higher tax slab has been fixed looking into the nature of the goods. It is well settled that all tobacco based goods which are now included in Item No.6(1)(a) are dangerous to health, the use of the plastic, polythene etc. which have also adverse effect on the health and environment. In contrast to 'aerated branded soft drinks' which are included in Section 6(1)(a), health drinks of all varieties are included in Entry 71 as amended. Aerated branded soft drinks which are referred to in Section 6(1)(a) cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the respondent through the application before the authority is concerned, there is no order that has already been passed or there is no proceedings recorded as against it which could be treated as a final one. All what has been done is the issuance of notice as noted above as a proposal in relation to the assessment proceedings. The socalled revisional order passed by this Court in yet another case would not also have the efficacy of depleting the jurisdiction of the authority under Section 94 of the KVAT Act to issue clarification. The very purpose of the provision in the form of Section 94 and clothing authority with power to make different nature of considerations to conclude such issues, necessarily, show that no revisional order of this Court in an earlier proceedings could conclude the issues which could be considered in an application for clarification by the competent authority under Section 94 of the KVAT Act." 65. The Division Bench did not commit any error in dismissing the appeal and observing that no revisional order of this Court in an earlier proceedings could conclude the issues which could be considered in an application for clarification by the competent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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