Rajasthan High Court: In a case wherein, the Sales Tax Revisions was filed under Section 84 of the Rajasthan Value Added Tax Act, 2003 (’RVAT Act’), Sameer Jain, J. opined that ‘Kurkure’ and ‘Cheetos’ were namkeen and not snacks. The Court further opined that the respondent had failed to establish that ‘Kurkure’ and ‘Cheetos’ fell under general, residual or orphan entry and not the specific entry under RVAT Act and accordingly, allowed the Sales Tax Revisions.
Background
Since, the common question of classification of Kurkure and Cheetos was involved in all the Sales Tax Revisions, therefore the matters were taken up together for adjudication.
The petitioner was a private limited company incorporated under the Companies Act, 1956 with its registered office at Gurugram, Haryana and principal place of business in the State of Rajasthan at Jaipur. The petitioner was a registered dealer under the RVAT Act and was engaged in the sale of various food products including ‘Kurkure’, ‘Cheetos’ and branded potato chips under the name of ‘Lays’ and ‘Uncle Chips’.
The petitioner self-classified these goods under Entry 131 Schedule IV of the RVAT Act, which included ‘Sweetmeat Deshi (including Gajak and Revri), bhujiya, branded and unbranded namkeens’ and paid tax at the rate of 4% or 5%.
A survey was conducted for the assessment year 2011-2012, at the business premises of the petitioner, after which the impugned assessment order dated 20-09-2016 was passed, whereby the aforesaid mentioned goods were classified by the respondent under the Residual Entry under Schedule V of RVAT Act and attracted tax at the rate of 12.5% or 14%. Accordingly, the differential tax and interest was imposed upon the petitioner.
The appeal against the said assessment order was allowed by the First Appellate Authority vide order dated 20-11-2017 to the extent of classification of branded potato chips being covered under Entry 107 of Schedule IV to the RVAT Act. Therefore, the differential tax and interest for the branded potato chips was deleted but the classification of ‘Kurkure’ and ‘Cheetos’ under the residual entry of Schedule V to the RVAT Act was maintained.
Further, the Rajasthan Tax Board (‘the Tax Board’) also dismissed the appeal filed by the petitioner vide order dated 03.01.2020 and maintained the levy of additional tax and interest by classifying ‘Kurkure’ and ‘Cheetos’ under the residual Entry No. 78 of Schedule V to the RVAT Act.
Thus, the present Sale Tax Revisions was filed.
Analysis, Law, and Decision
The Court observed that the present question related to classification of proprietary food items ‘Kurkure’ and ‘Cheetos’ (‘goods in question’) manufactured by the petitioner. The Court opined that as per settled position of law, specific entry would always trump a general entry and the burden would always be on the respondent to prove that the goods in question fell in the general entry as opposed to the specific entry.
The Court further opined that the Tax Board had misinterpreted the dictum of Pepsico India Holdings Pvt. Ltd. v. CTO, 2016 SCC OnLine Raj 10791 as the judgment apart from being under the regime of Rajasthan Sales Tax Act, 1994, pertained to classification within two competing specific entries. However, in the present case, the specific entry was competing with the general entry. Therefore, the Court relied on HPL Chemicals v. Commissioner of Central Excise, (2006) 5 SCC 208 and opined that, when two specific entries equally merit consideration, the more specific would prevail.
The Court relied on CCT v. A.R. Thermosets Pvt. Ltd., (2016) 16 SCC 122; Hindustan Poles Corporation v. CCE, (2006) 4 SCC 85; Dunlop India v. Union of India, (1976) 2 SCC 241 and Mauri Yeast India Pvt. Ltd. v. State of U.P., (2008) 5 SCC 680 and opined that the resort to residual entry could only be done as a last resort and the residual clause could be invoked only if the department could establish that the goods in question by no conceivable process of reasoning be brought under any of the tariff items.
With regard to issue that whether the respondent had successfully established that the goods in question could not be place in any specific entry, and had to be placed in residual entry, the Court opined that the respondent had not sought any expert opinion, nor brought any evidence on record to prove their point.
The Court opined that the Tax Board had arrived at the conclusion that the goods in question were snacks by mere reading of ingredients, which was ex facie fallacious and bereft of any reasoning. The Tax Board had ignored the ordinary definition of namkeen, specification of namkeen as set out by the Bureau of Indian Standard and Food Safety and Standards Authority of India Licences granted to the petitioner, which categorised the goods in question as namkeen. Further, the Court relied on CCE v. Frito Lay India, (2009) 10 SCC 752 and Pepsi Foods Ltd. v. Commr. of Cus. and Ex., 2002 SCC OnLine CEGAT 309 wherein the goods in question were classified as namkeen.
Thus, the Court opined that the goods in question were namkeen and not snacks, also the respondent had failed to establish that the goods in question fell under general, residual or orphan entry and not the specific entry. Further, no cogent reasons had been assigned to classify the goods in question as snacks and accordingly, allowed the Sales Tax Revisions.
[Pepsico India Holdings Pvt. Ltd. v. CCT, 2023 SCC OnLine Raj 2416, Order dated 06-10-2023]
Advocates who appeared in this case :
For the Petitioners: Rohan Shah with Maneesh Sharma, Manish Mishra, Chayank Bohra, Lakshay Pareek, Shreyansh Sharma, Advocates;
For the Respondents: Punit Singhvi with Ayush Singh, Advocates
