M/S. PARLE AGRO (P) LTD. vs. COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM

J U D G M E N T ASHOK BHUSHAN, J. Leave granted. 2

3 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   by   Kerala   Value Added   Appellate   Tribunal   dismissing   the   appeal. The High Court vide its judgment and order dated 17th November,   2014   dismissed   the   revision upholding   the   order   passed   by   the   Assessment Officer and the First Appellate Authority. Special Leave   Petition   was   filed   by   M/s.   Trade   Lines against   the   judgment   of   Kerala   High   Court   which was, however, permitted to be withdrawn by order dated   19th  January,   2015   of   this   Court.   On   4th

4 August, 2015 the assessment notices were issued to the   appellant   for   Assessment   Year   2009­15 proposing   classification   of   ‘Appy   Fizz’   under Section   6(1)(a)of   the   Act,   2003   as   “aerated branded   soft   drink”   and   tax   liability   @   20%   . After   receipt   of   the   notices   appellant   filed   an application dated 24th  August, 2014 under Section 94   of   the   Act,   2003   seeking   clarification   of product   ‘Appy   Fizz’.   In   the   clarification application   the   appellant   claimed   that   product ‘Appy Fizz’ had rightly been clarified as ‘fruit juice based drink’ and which has tax liability of 12.5%.   Along with the clarification application appellant   has   filed   certificates   and   expert opinions. Writ Petition No.26279/2015 was filed by the   appellant   before   Kerala   High   Court   seeking direction to the Commissioner of Commercial Taxes to consider and pass order on the application for clarification   within   a   specified   time   and   the proceedings   initiated   by   the   Commissioner   of 5 Commercial Taxes by different notices be kept in abeyance. Learned Single Judge by its judgment and order dated 31st August, 2015 disposed of the writ petition directing the Commissioner of Commercial Taxes   to   consider   and   pass   orders   on   the clarification application within a period of one month from the date of receipt of the judgment and liberty was given to the appellant to produce all material on which it intends to place reliance to substantiate its clarification with regard to the classification of the product, further proceedings in   various   notices   were   kept   in   abeyance.   The Assistant   Commissioner   and   Commissioner   of Commercial Taxes filed a writ appeal against the judgment   of   the   learned   Single   Judge   before Division   Bench   of   the   Kerala   High   Court.   The Division   Bench   of   Kerala   High   Court   vide   its judgment dated 5th October, 2015 dismissed the writ appeal   by   affirming   the   decision   of   the   learned Single Judge.

6

7 Civil Appeal arising out of SLP(C)No.9467 of 2016

9 judgment and order of the Kerala High Court dated 14th July, 2016. 10. We   have   heard   Shri   K.K.   Venugopal,   learned senior   counsel   for   the   assessee.   Shri   Jaideep Gupta, learned senior counsel has appeared for the Revenue.

10 in   which   appellant   was   not   a   party   and   the revision   proceedings   were   confined   to   the assessment   order   on   the   basis   of   facts   on   the record of 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. 11

Tax

Appellate

Tribunal

where classification of the product was upheld as 'fruit based   drink'   and   the   Revenue's   appeal   was dismissed by this Court on 18th  July, 2009. Shri Vanugopal   further   submits   that   neither   the Committee of Commissioners nor the High Court has adverted to the technical evidence and certificate filed   by   the   appellant   along   with   proceedings under   Section   94   of   Act,   2003. The   scientific evidence fully proved that products do 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.   The   certifications   fully proved the product as 'Thermally processed fruit juice based drink'.

14 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.

15

16 (5) Whether the Division Bench of Kerala High Court in  M/s. Trade Lines  can preclude the Committee of Joint Commissioners to examine   the   materials   filed   by   the appellant   along   with   Clarification

Application under Section 94. (6) Whether CESTAT decision dated 18.03.2008 has   any   relevance   with   regard   to   the classification of product in question ? (7) Whether   decision   and   opinion   of   Food Safety   Authorities   on   the   product   in question were relevant ? (8) Whether   the   Committee   of   Joint

Commissioners as well as the High Court has   rightly   discarded   technical   and expert opinion relied by the appellant ? (9) Conclusions.

17 Value Added Tax Act, 2003 provides for levy of tax on   sale   or   purchase   of   goods.   Section   6(1)(a) which is relevant for the present case as existed before 1st April, 2007, was as follows: "6(1)(a)   in   the   case   of   goods specified in the [Second, and Third Schedules]   at   the   rates   specified therein and at all points of sale of such goods within the State (and in the case of goods specified below at the rate of twenty percent, at all points of sale of such goods within the State, namely:­ Sl.          Description of goods        HSN No.                                      Code (1)                 (2)                  (3)

"

18 at the rate of 12.5%. Entry 71 which is relevant for the present case as notified by the State as existing prior to amendment by the S.R.O.No.119 of 2008 is as follows:

"

2009 (4) Fruit pulp or fruit juice based drinks 2202.90.30 (5) Soft drink concentrates

19 (a) Sharbat 2106.90.11; (b) other 2106.90.19 (6) Beverages containing milk 2202.90.30

“6. Levy of tax on sale or purchase of goods

(1)   Every   dealer   whose   total turnover for a year is not less than ten lakhs rupees and every importer or   casual   trader   or   agent   of   a non­resident   dealer,   or   dealer   in jewellery   of   gold,   silver   and platinum   group   metals   or   silver articles or contractor or any State Government,   Central   Government   or Government of any Union Territory or any department thereof or any local authority or any autonomous body or 20 any   multi­level   marketing   entity, their   distributor   and/or   agent engaged   in   multi­level   marketing, whatever be his total turnover for the year, shall be liable to pay tax on his sales or purchases of goods as   provided   in   this   Act.   The liability to pay tax shall be on the taxable turnover,­ (a)in the case of goods specified in   the   Second   and   Third Schedules at the rates specified therein   and   at   all   points   of sale of such goods within   the State   and   in   the   case   of goods specified below, mentioned in column (4), at all points of sale of such goods within the States namely; S.No. Description of Goods HSN Code Rates of Tax in percentage (1) (2) (3) (4)

21 [3A. Disposable plates, cups and leaves, made of plastic 3[including Styrofoam and Styrofoam sheets] *** 20] [3B. Printed banners, hoardings and leaflets of Poly Vinyl Chloride/Polyethylene and other plastic sheets] *** 20]

shall apply

to the interpretation   of   the   HSN   codes mentioned in this clause. xxx xxx xxx xxx (d) in the case of goods not falling under clause (a) or (c) at the rate of 14.5% at all points of

22 sale of such goods within the State, Government may notify a list   of   goods   taxable   at   the rate of 14.5%;”

23 (5) 'Similar   other   products   not specifically mentioned under any other entry in this list or any other schedule'.”

24 such dispute an authority consisting of   three   officers   in   the   rank   of Joint

Commissioner

or Deputy Commissioner   nominated   by   the Commissioner   on   application   by   a dealer or any other person. (1A) If the dispute relates to the   tax   rate   of   a   commodity,   the details of the first seller, or the manufacturer   of   such   goods   in   the State, as the case may be, shall be furnished by the applicant and they shall   be   made   necessary   parties   to such application. (2)   The   Authority   shall   decide   the question after giving the parties to the dispute a reasonable opportunity to   put   forward   their   case   and produce

evidence

and after considering   such   evidence   and hearing   the   parties.   Pass   orders within   three   months   or   within   such time   as   may   be   extended   by   the Commissioner.   The   Commissioner   may considering the fact in issue decide whether such orders have prospective operation only. ...  ... ... ... ...  ... ... ...”

26 goods, pan masala, other manufactured tobacco and manufactured   tobacco   substitutes.   Other   category contains   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,

27 which   is   the   purpose   and   object   clear   from   the legislative scheme.

28 "(a)   in   the   case   of   goods specified in the [Second, and Third Schedules]   at   the   rates   specified therein and at all points of sale of such goods within the State (and in the case of goods specified below at the rate of twenty percent, at all points of sale of such goods within the State, namely:­ Sl.         Description of goods         HSN No.                                      Code (1)                 (2)                  (3)

29 that fruit juice based drinks were not covered by Section   6(1)(a).   Applicability   of   the   power   of State to issue notification under Section 6(1)(d) arises only when goods were not covered by Section 6(1)(a).   Fruit   juice   based   drinks,   thus,   were never   treated   as   'aerated   branded   soft   drinks' which   was   the   understanding   of   State   of   Kerala while   issuing   notification   under   Section   6(1(d). Had   fruit   juice   based   drinks   were   also   to   be covered by aerated branded soft drinks, there was no occasion for subordinate legislative authority, i.e.,   the   State   Government,   to   include   such products in notification under Section 6(1)(d).

"

30 (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   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 in   Item   No.

OF INTERPRETATION

OF SCHEDULES The commodities in the schedules are   allotted   with   Code   Numbers, which   are   developed   by   the International   Customs   Organization as harmonized System of Nomenclature (HSN)   and   adopted   by   the   Customs

32 Tariff Act, 1975. However, there are certain entries in the schedules for which   HSN   Numbers   are   not   given. Those   commodities   which   are   given with HSN Number should be given the same meaning as given Customs Tariff Act, 1975. Those commodities, which are   not   given   with   HSN   Number, should   be   interpreted,   as   the   case may   be,   in   common   parlance   of parlance.

While interpreting   a   commodity,   if   any consistency is observed between the meaning   of   a   commodity   without   HSN Number   and   the   meaning   of   a commodity   with   HSN   Number,   the commodity   should   be   interpreted   by including it in that entry which is having the HSN Number.”

33 which fall for consideration in the present case is Item No.6(1)(a) as well as Entry 71 of S.R.O. No.119 of 2008 issued in exercise of power under Section 6(1)(d), which are the entries which are not mentioned in the Schedule. One more provision which is relevant to notice is the explanation to Section 6(1)(a). The explanation to Section 6(1) (a) provides as follows: “Explanation:

The 'Rules

of Interpretation   of   the   Schedules' appended   to   the   Schedules   of   this Act

shall apply

to the interpretation   of   the   HSN   codes mentioned in this clause.”

“36. In deciding this question the first   thing   that   requires   to   be noted   is   that   Entry   25.15   refers specifically not only to marble but also   to   other   calcareous   stones whereas   Entry   62   refers   to   the restricted item marble only. It does not refer to any other stones such as   ecaussine,   travertine   or   other calcareous   monumental   or   building stone of a certain specific gravity. Therefore,   on   a   plain   reading   of these   two   entries   it   is   apparent that travertine, ecaussine and other calcareous   monumental   or   building stones   are   not   intended   to   be included in ‘marble’ as referred to in   Entry   62   of   Appendix   2   as   a restricted   item.   Moreover,   the calcareous   stones   as   mentioned   in ITC   Schedule   has   to   be   taken   in scientific   and   technical   sense   as therein   the   said   stone   has   been described as of an apparent specific gravity   of   2.5   or   more.   Therefore,

37 the   word   ‘marble’   has   to   be interpreted,   in   our   considered opinion,   in   the   scientific   or technical sense and not in the sense as   commercially   understood   or   as meant   in   the   trade   parlance.   There is   no   doubt   that   the   general principle   of   interpretation   of tariff   entries   occurring   in   a   text (sic tax) statute is of a commercial nomenclature

and understanding between persons in the trade but it is   also   a   settled   legal   position that the said doctrine of commercial nomenclature   or   trade   understanding should   be   departed   from   in   a   case where the statutory content in which the   tariff   entry   appears,   requires such a departure. In other words, in cases   where   the   application   of 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.

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

Standards

Institution furnishes   very   strong   and   indeed almost   incontrovertible   support for   Dr   Nanji’s   view   and   the respondents’

contention

that without   deodorisation   the   oil   is not “refined  oil”  as  is known  to the   consumers   and   the   commercial community.” … … … … …

v.

Inland

Revenue Commissioner  observed:   (quoted   at SCR p. 724) “that   if   a   statute   contains language which is capable of being construed   in   a  popular   sense   such statute   is   not   to   be   construed according   to   the   strict   or technical   meaning   of   the   language contained   in   it,   but   is   to   be construed   in   its   popular   sense, meaning   of   course,   by   the   words ‘popular   sense’,   that   sense   which people conversant with the subject matter   with   which   the   statute   is dealing would attribute to it.” But “if a word in its popular sense and read in an ordinary way is capable of two constructions, it is wise to adopt   such   a   construction   as   is based   on   the   assumption   that Parliament merely intended to give so much power as was necessary for carrying out the objects of the Act and   not   to   give   any   unnecessary powers.   In   other   words,   the construction of the words is to be adapted   to   the   fitness   of   the matter of the statute.”

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.

41 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.”

“53. It is apparent from all these reports that the calcareous stone of specific   gravity   of   2.5   is   not marble

technically

and scientifically.   The   finding   of   the Appellate   Tribunal   is,   therefore, not   sustainable.   It   is,   of   course,

42 well   settled   that   in   taxing   statue the words used are to be understood in the common parlance or commercial parlance

but such a trade understanding

or nomenclature   can   be   given   only   in cases where the word in the tariff entry   has   not   been   used   in   a scientific   or   technical   sense   and where   there   is   no   conflict   between the words used in the tariff entry and   any   other   entry   in   the   Tariff Schedule.”

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 45 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 as it were their   colour   from   each   other,   that is,   the   more   general   is   restricted to   a   sence   analogous   to   a   less general.   The   same   rule   is   thus interpreted   in   Words   and   Phrases.” “Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of the doubtful word may be ascertained by reference   to   the   meaning   of   words associated with it; such doctrine is broader   than   the   maxim   ejusdem generis.”   In   fact   the   latter   maxim “is only an illustration or specific application   of   the   broader   maxim noscitur a sociis'. It must be boren in mind that noscitur a sociis, is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately   used   in   order   to   make the   scope   of   the   defined   word correspondingly   wider.   It   is   only where the   intention   of   the Legislature   in   associating   wider words   with   words   of   narrower significance

is doubtful,

or otherwise not clear that the present

46 rule of construction can be usefully applied.”

“9. Entries in the Schedules of Sales   tax   and   Excise   statutes   list some   articles   separately   and   some articles are grouped together. When they are grouped together, each word in the Entry draws colour from the other   words   therein.   This   is   the principle of noscitur a sociis.”

the aforesaid

principle

of construction of  'noscitur a sociis'  on Entry 71, it is clear that clause 5 of Entry 71 has to take colour and meaning from the other items included in Entry 71. Item 5 of Entry 71 uses the words “similar other products not specifically mentioned under any other entry in this list or any other schedule”.   Thus,   the   products   which   are   to   be 47 covered   under   Item   No.5   are   similar   other products. When Item No.2 of the Entry 71 that is fruit   juice,   fruit   concentrates,   fruit   squash, fruit syrup and pulp, and fruit cordial and item No.4 that is health drinks of all varieties, are kept   in   mind   the   fruit   juice   based   drink   shall fall   in   Item   No.

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.”

51 Issue No.6. 45. Appellant had relied on the order of CESTAT dated   18.03.2008   reported   in   2008   (226)   ELT 194(Tribunal­Delhi) which was in appeal filed by the Commissioner of Central Excise, Bhopal against the   M/s.   Parle   Agro   Pvt.   Ltd.   regarding classification of the same product 'Appy Fizz' and the   order   passed   by   the   Commissioner(Appeals) whereby it was held that product 'Appy Fizz' is 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 52 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 “

"

therefore,

is classifiable   as   flavoured   aerated water. The Revenue also relied upon 53 the HSN Explanatory notes in support of their claim.”

"

sweetening

matter

or flavoured” and second is in respect of   others.   Whereas   Central   Excise Tariff   under   Sub­heading   No.2202 there   are   specific   headings   in respect of soya milk, drinks etc. As per   the   Central   Excise   Tariff,   the waters; including mineral waters and aerated   waters,   containing   added sugar or other sweetening matter or flavoured   are   classifiable   under sub­heading   No.2202. 10. The   drinks based

on fruit

juice

are specifically

classifiable

under Heading   No.22029020   of   the   Tariff. In   the   present   case,   there   is   no dispute   regarding   the   contents   of the   product.   Revenue   is   not disputing   the   certificate   given   by the Ministry of Food and Processing Industries,   New   Delhi   rather   they are   relying   it   in   the   ground   of 54 appeal, and as per the certificate, the product in question contains 23% of   apple   juice,   therefore,   we   find no infirmity in the impugned order. The appeal is dismissed.”

55 water   and   was   included   in   entry   as   fruit   juice based   drink.   The   product   was   not   held   to   be aerated water was a relevant fact to be considered even though in the entries under the Act, 2003, now there are no HSN Codes mentioned.

56 mentioned that use of carbon dioxide was only as a preservative of 'Appy Fizz'. Issue Nos.7 & 8

Packed)

means

an unfermented but fermentable product which   is   prepared   from   juice   or Pulp/Puree or concentrated juice  or pulp   or   sound   mature   fruit.   The substances   that   may   be   added   to fruit juice or pulp are water, peel oil,   fruit   essences   and   flavours, salt,   sugar,   invert   sugar,   liquid glucose, milk and other ingredients appropriate   to   the   product   and processed by heat, in an appropriate manner, before or after being sealed in   a   container,   so   as   to   prevent spoilage.

permitted

in these regulations   including   Appendix   A. The   product   shall   conform   to   the microbiological   requirements   given in   Appendix   B.   The   product   shall meet the following requirements:­ (i)   Total   Soluble   Solid   (m/m) Not less than 10.0 percent (ii) Fruit Juice content (m/m) (a) Lime/Lemon

ready

to serve beverage Not  less than 5.0 percent (b) All   other   beverage/drink   Not   less than 10.0 percent ... ... ... ...”

58

60

61 of clause (5) of Entry 71 is a question on which the   manufacture   licence,   orders   issued   by   Food Safety   and   Standards   Authority   of   India   were relevant   facts   which   were   although   cited   before the   Committee   of   Joint   Commissioners   but   were brushed aside relying on the Kerala High Court's order in M/s. Trade Lines. We, thus, are of the opinion   that   the   manufacture   licence   dated   19th August, 2015 granted to appellant and the opinion of   the   Government   of   India,   Ministry   of   Food Processing   Industries   dated   28.03.2005   were relevant for finding the nature of the product of the   appellant   for   the   purpose   of   classification and the Committee of Joint Commissioners as well as   High   Court   erred   in   not   adverting   to   and considering the aforesaid material.

62 2011   in   clause   2.3.10   deals   with   thermally processed   fruit   beverages/fruit   drink   ready   to serve   fruit   beverages   which   has   already   been extracted   above.   The   appellant   has   filed   a certificate dated 11.06.2015 from the Institute of Chemical Technology. It is useful to refer to the above   certificate   which   is   to   the   following effect: “INSTITUTE OF CHEMICAL TECHNOLOGY ICT/FET/USA/1590 June 11, 2015 TO WHOMSOEVER IT MAY CONCERN Technical opinion on the product Appy Fizz manufactured by PARLE AGRO PVT LTD. Appy   Fizz   is   a   fruit   product manufactured   using   apple   juice concentrate as a fruit juice source. The   ingredients   declared   on   the label   include   Water,   Sugar,   Apple Juice

concentrate,

Carbon dioxide(290),   malic   acid,   citric acid, preservatives(sodium benzoate, potassium

metabisulphite

and potassium, sorbate),   ascorbic acid and added

nature

identical flavouring   substances   and   natural

63 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:­

2011

chapter 2.3.10(Thermally

processed

Fruit Beverages/Fruit   drink/Ready   to   serve fruit beverage) • It is made from apple juice concentrate.

64 • It   compiles   with   respect   to   the   juice content   and   solids   content   percentage which  is  more  than  10%  required as  per the 2.3.10. • It mentions CONTAINS APPLE JUICE on the label. • It is thermally processed beverage. • It has substances mentioned ..sic.. other ingredients appropriate to the product. • After   the   Thermal   processing   the ready   ..sic..   as   required   in   2.3.10 Carbon Dioxide is purged in the beverage FRUITS  action of preservation to create an environment which will help to prevent spoilage during itself life. POINT NO. 2: Technical   Opinion   on   why   the category   of   the   product   should   NOT be   classified   under   FSSA   (Food Product Standards as Food additives) Regulation,   2011   chapter   2.3.30 (Carbonated Fruit beverage / drink) OR   2.10.6.1   (Carbonated   Fruit beverage/drink)

OR 2.10.6.1 (Carbonated Water) • APPY  FIZZ  is  not   a  synthetic   carbonated wate. • APPY  FIZZ  contains  reconstituted  natural apple   juice   made   from   apple   juice concentrate. • APPY   FIZZ   is   thermally   processed (Pasteurization). • Thermal   process   is   not   mentioned   in 2.3.30 and 2.10.6.1 • APPY   FIZZ   are   not   contain   artificial sweeteners/caffeine

as allowed

in 2.10.6.1. 65 Carbon   dioxide(INS   290/E   290)   is mentioned

as a Packing gas/propellant/carbonating agent/preservative/foaming   agent   by CODEX   ALIMENTATIRUs   and   its   use   is allowed as per GMP. Carbon   dioxide   along   with   other preservatives help in extending the shelf   life   of   the   product   as   the product is filed in PET bottles/cans and is not filled aseptically.

Conclusion: In view of the above mentioned points, I am of the opinion that the APPY   FIZZ   is   a   THERMALLY   PROCESSED FRUIT BEVERAGE/READY TO SERVE FRUIT BEVERAGE   complying   with   category 2.3.10   as   per   FSSAI   Regulations, 2011   despite   having   carbon   dioxide as an ingredient which is used for preservation   purpose   only.   This opinion

is purely

based

on scientific and technical information however ICT will not be part of any court conflicts. Sd/­11.6.2015 Dr. Uday S. Annapure, Associate Professor, Dept.   of   Food   Engineering   & Technology, Institute of Chemical Technology Matunga, Mumbai­400 019.”

66

only.

Before

the Committee

of Commissioners the entire process of manufacture of the product was explained along with all relevant orders   and   certificates   of   Food   Safety Authorities.   It   was   stated   that   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.

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) Permission

given

for manufacture,   storage   and   sale   of product   to   the   factory   at   Varanasi issued

by Central

Licensing Authority   having   their   office   at Lucknow under letter dated19.08.2015 confirming   the   classification   of product   “Appy   Fizz”   under   category 02.03.2010   i.e.   Fruit   Juice   based Drink   and   also   held   that   we   are already holding a license. (Copy of the said letter is enclosed herewith as Exhibit I)

68 (c) Technical   expert   opinion   issued   by Professor Dr. Uday S. Annapure dated 11.06.2015   classifying   the   said product   as   ready   to   serve   Fruit beverage falling under the category of   02.03.2010   of   FSSAI   Regulation 2011   and   specifically   stated   that “Appy Fizz” is not Carbonated Water. Exhibit J. (d) Technical   Note   and   Photographs explaining   the   use   of   impregnated Carbon   Dioxide   for   the   purpose   of preservation   as   well   as   for   the strengthening   the   wall   of   PET bottles   due   to   expansion   of   Carbon Dioxide   from   inside   providing   the strength   to   wall   of   PET   bottle during   the   transit   so   as   to withstand with the handling hazards while   delivering   the   product   to remote   area.   Note   and   photocopies are   enclosed   herewith   as   Exhibit   K and L Colly. (e) Classification of the product “Appy Fizz”   has   been   recognized   by   a legislative

body

of Kerala Government based on the white paper issued   by   empowered   committed   of state

Finance

Minister

while introducing   the   White   Paper   on 17.01.2005   and   has   issued   the Original Notification SRO 82 of 2006 dated 21.01.2006 and classified the product   based   on   Central   Excise Tariff which inter­alia is based on HSN at Entry no.71 Sr. No.4 as Fruit Juice Based Drink. Copy of the said Notification   and   White   Paper   is 69 enclosed   herewith   as   Exhibit   M   and Exhibit N Colly. (f) The said classification under Entry No.71   sr.No.4   of   the   product   under Kerala   VAT   remained   in   Entry   No.71 at   Sr.5   despite   the   substitution brought   by   Notification   SRO   119   of 2008   dated   24.01.2008.(Copy   of   the said   Notification   is   enclosed herewith as Exhibit O) (g) The Kerala VAT dept. had raised an issue   regarding   the   classification of   the   product   Appy   Fizz   in   2009. However,   the   Company   had   explained the   reason   as   to   why   the   product Appy Fizz has been classified as a fruit   juice   based   drink.   The   said explanation of the company has been accepted   and   no   order   has   been passed   by   the   KVAT   Department, accepted assessment order passed by assessing officer Exhibit P. (h) The   said   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

70 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.”

71 opinion   and   materials   have   been   erroneously discarded.

“3. It is not in dispute before us,as it cannot be, that the onus of establishing   that   the   said   rings fell   within   Item   22F   lay   upon   the Revenue.   The   Revenue   led   no evidence. The   onus was   not discharged. Assuming therefore, that the Tribunal was right in rejecting the   evidence   that   was   produced   on behalf of the appellants, the appeal

72 should,   nonetheless,   have   been allowed.”

73 branded soft drinks'. Had fruit juice based drinks were   also   included   in   'aerated   branded   soft drinks',   the   State   could   not   have   exercised   its power   under   Section   6(1)(d)   to   include   such products in Entry 71. Whether after amendment of Entry 71 by S.R.O. No.119 of 2008 something which was earlier included 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 74 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 be drinks which are health drinks. Fruit juice based drinks   can   be   regarded   as   health   drinks   as compared to other aerated branded soft drinks like pepsi cola, coka cola, etc. We are, thus, of the opinion that the appellant has successfully proved by   relevant   scientific   and   technical   materials that the product in question that is 'Appy Fizz' is a commodity which is fully covered by Item No.5 of Entry 71 as amended by S.R.O. No.119 of 2008. 75 The   High   Court   discarded   scientific   and   expert opinion with regard to manufacturing process and contents of the product. The orders of Food Safety Authority were also discarded which were relevant for   considering   the   nature   and   contents   of product. The adjudication by CESTAT was relevant at least on the aspect that the 'Appy Fizz' is not aerated which was also discarded by the High Court as well as by the Committee of the Commissioners. In view of the aforesaid discussion, we are of the considered   opinion   that   the   appellant   has successfully proved from the materials brought on the   record   that   the   product   'Appy   Fizz'   was required to be classified under Item No.5 of the Entry 71 as amended with tax liability at 12.5% after amendment by S.R.O. No.119 of 2008 (now at the rate of 14.5%).

76 Single Judge and Division Bench by which direction was issued to the Committee of the Commissioners to decide the application filed by the appellant under   Section   94   of   Act,   2003. Learned   Single Judge has issued directions dated 31st August, 2015 directing the Commissioner of Commercial Taxes to pass orders on the clarification application. The appellant   was   also   given   liberty   to   produce   all material, on which the appellants intend to place reliance   to   substantiate   their   contention   with regard to the classification of the product   in question.   In   writ   petition   filed   by   the   Revenue before   the   Division   Bench,   the   Division   Bench affirmed   the   order   and   while   referring   to sub­section (4) of Section 94 stated following: "Sub­section(4) of Section 94 states that where any question arises from any   order  already   passed  or   any proceedings recorded under the KVAT Act,   or   any   earlier   law,   no   such question   shall   be   entertained   for determination under Sub­section (1). Insofar as the issue raised by the 77 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.”

78 be considered in an application for clarification by   the   competent   authority   under   Section   94   of Act,   2003. We   do   not   find   any   error   in   the judgment of the learned Single Judge as well as of Division   Bench   and   this   appeal   deserves   to   be dismissed.

of the petitioners depositing   50%   of   the   amount involved. (ii) The petitioners are granted four weeks time to remit the amount.

79 (iii)The   Appellate   Authority shall   endeavour   to   dispose   of   the appeal

as expeditiously

as possible.”

80 and   the   Civil   Appeals   are   disposed   of   with direction that in proceedings against the assessee consequential orders shall be passed including an adjustment of the amount deposited, if necessary, as per our judgment in Civil Appeals arising out SLP(C)Nos.14697­14698 of 2016. In the result (1) Civil

Appeals

arising

out

of SLP(C)Nos.14697­14698   of   2016   are   allowed, judgment of the Division Bench as well as order passed in the Review Application are set aside. OT Appeal filed by the appellant is allowed and the order   passed   by   the   Committee   of   Joint Commissioners dated 06.11.2015 is set aside. It is declared that product of the appellant 'Appy Fizz' is required to be classified as under Item No.5 of Entry 71 as amended by S.R.O. No.119 of 2008. (2) Civil Appeal arising out of SLP(C)No.9467 of 2016 is dismissed.

81 (3)

Civil

Appeals

arising

out

of SLP(C)Nos.24460­61   of   2016   are   disposed   of directing the proceedings against the assessee be decided   in   the   light   of   our   judgment   in   Civil Appeals arising out of   SLP(C)Nos.14697­14698 of 2016 and necessary consequential orders be passed accordingly. .........................J. ( A.K. SIKRI ) .........................J. ( ASHOK BHUSHAN ) NEW DELHI, MAY 09, 2017. 82 ITEM NO.1D COURT NO.7 SECTION III (For judgment) S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Civil Appeal Nos.6468-6469 of 2017 (Arising out of SLP (C) Nos. 14697-14698 of 2016) M/S. PARLE AGRO (P) LTD. ... Appellant(s) VERSUS COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM ... Respondent(s) WITH Civil Appeal Nos.6471-6472 of 2017 (Arising out of SLP(C) No. 24460-24461 of 2016) Civil Appeal No.6470 of 2017 (Arising out of SLP(C) No. 9467 of 2016) Date : 09/05/2017 These matters were called on for hearing today. For Petitioner(s) Mr. Aditya Bhattacharya, Adv. Mr. Victor Das, Adv. Mr. M. P. Devanath, Adv. Ms. L. Charanya, Adv. Mr. Ramesh Babu M. R., Adv. For Respondent(s) Mr. G. Prakash, Adv. Mr. Jishnu M. L., Adv. Ms. Priyanka Prakash, Adv. Ms. Beena Prakash, Adv. Mr. Manu Srinath, Adv.

Mr. Rajesh Kumar, Adv. Hon'ble Mr. Justice Ashok Bhushan pronounced the 83 judgment of the Bench comprising Hon'ble Mr. Justice A.K.Sikri and His Lordship. Leave granted. Civil Appeals arising out of SLP (C)Nos. 14697-14698 of 2016 are allowed, Civil Appeal arising out of SLP (C)No. 9467 of 2016 is dismissed and Civil Appeals arising out of SLP (C)Nos. 24460-61 of 2016 are disposed of in terms of the signed reportable judgment. (Nidhi Ahuja) (Mala Kumari Sharma) Court Master Court Master [Signed reportable judgment is placed on the file.]