Telangana High Court
Eggway International Asia Private ... vs The State Of Telangana on 14 June, 2024
*THE HON'BLE SRI JUSTICE SUJOY PAUL
AND
*THE HON'BLE SRI JUSTICE NAMAVARAPU
RAJESHWAR RAO
+TAX REVISION CASE No.2 of 2024
% 14-06-2024
#Eggway International Asia Private Limited.
...Appellant
vs.
$The State of Telangana.
... Respondent
!Counsel for the Appellant: Sri Shaik Jeelani Basha.
^Counsel for Respondent:
<Gist :
>Head Note :
? Cases referred
1. (2006) 7 SCC 714
2
SP, J & RRN, J
TREVC_2_2024
IN THE HIGH COURT FOR THE STATE OF TELANGANA
HYDERABAD
****
TAX REVISION CASE No.2 OF 2024
(Per Hon'ble Sri Justice Sujoy Paul)
Between:
Eggway International Asia Private Limited.
...Appellant
vs.
The State of Telangana.
... Respondent
JUDGMENT PRONOUNCED ON: 14.06.2024
THE HON'BLE SRI JUSTICE SUJOY PAUL
THE HON'BLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? :
2. Whether the copies of judgment may be
Marked to Law Reporters/Journals? :
3. Whether His Lordship wishes to
see the fair copy of the Judgment? :
___________________
SUJOY PAUL, J
_____________________________________
NAMAVARAPU RAJESHWAR RAO, J
3
SP, J & RRN, J
TREVC_2_2024
THE HONOURABLE SRI JUSTICE SUJOY PAUL
AND
THE HONOURABLE SRI JUSTICE NAMAVARAPU
RAJESHWAR RAO
TAX REVISION CASE No.2 of 2024
JUDGMENT:
(Per Hon'ble Justice Sujoy Paul) This revision filed under Section 34 (1) of the Telangana Value Added Tax Act, 2005 ('Act') read with Rule 46 of Telangana Value Added Tax Rules, 2005, assails the levy made by the Audit and Assessing Officer as per residual entry under Schedule-V of the Act, by making it leviable to tax @ 14.5% by way of Assessment Order dated 30.11.2016. The order of the Appellate Authority in ADC No.694 (Appeal No.R/84/2016-2017-VAT) dated 12.06.2017 and order of Telangana Value Added Tax Appellate Tribunal ('Tribunal') in T.A.No.8 of 2018 dated 19.12.2022, affirming the order of the Audit and Assessing Officer are subject matter of challenge.
2. The interesting conundrum before the Authorities below was:
"Whether the process/manufacture and selling of commodities like Pasteurized Frozen Whole eggs, Egg Albumen Powder, Whole Egg Powder and Egg Yolk Powder from fresh eggs falls under Entry 107 (a) of the IV Schedule exigible to tax at 5% as claimed by the appellant or exigible to tax at 14.5% falling under the V Schedule to the TVAT Act?"4
SP, J & RRN, J TREVC_2_2024 Factual Backdrop:
3. The appellant is a private limited company registered under Companies Act, 1956, engaged in the business of manufacturing and selling of pasteurized frozen whole eggs, egg albumen powder, whole egg powder and egg yolk powder made out of fresh eggs and is a registered dealer on the rolls of the Assistant Commissioner (ST), Madhapur Circle, Hyderabad. For the tax period 2012-13 to 2015-16, as authorized by the Deputy Commissioner (CT), Hyderabad Rural Division, Hyderabad, the Commercial Tax Officer (Intelligence), Hyderabad Rural Division, Hyderabad, completed assessment by proceedings dated 30.11.2016 levying tax @ 14.5% on the sale of 'whole egg powder' treating it to be not falling under Schedules-I to IV and VI and treating it to be covered under residuary entry under Schedule-V of the Act. The first appeal and the second appeal filed by appellant before the Appellate Authority and the Tribunal were dismissed.
Contention of the appellant:-
4. Sri Shaik Jeelani Basha, learned counsel for the appellant submits that in the manner 'whole egg powder' is manufactured, it can be said that the activity falls within the ambit of 'preserving' 5 SP, J & RRN, J TREVC_2_2024 the eggs and authorities have erred in holding that the commodity was 'processed' one. By placing reliance on the judgment of the Supreme Court in Sneh Enterprises Vs. Commissioner of Customs, New Delhi 1, it is submitted that while dealing with a taxing provision, the principle of 'strict interpretation' should be applied, the Court shall not interpret the statutory provision in such a manner which would create physical burden on a person. Certainly, this cannot be done by invoking provisions of another Act, which is not attracted. If two interpretations are possible, the Court should give benefit to the tax payer and decide against revenue.
5. No other point is pressed by the learned counsel for the appellant. We have heard him on admission and on the aspect of availability of substantial questions of law. Findings:-
6. The learned Tribunal has considered the Food Safety and Standards Authority of India (FSSAI) Gazette Notification dated 29.12.2020 on the Food Safety and Standards (Food Products Standards & Food Additives) Tenth Amendment Regulations, 2020 1 (2006) 7 SCC 714.
6
SP, J & RRN, J TREVC_2_2024 (FSSAI Regulations, 2020). On the basis of this literature, the characteristics of product namely 'whole egg powder' was considered. The relevant portion reads as under:
"Egg powder:
(1) The standard specified in this clause apply to "Egg powder"
obtained under hygienic conditions from the liquid contents of sound, wholesome, hens eggs by suitable drying. The product so obtained shall retain the original properties of fresh eggs, like solubility of protein, aerating capacity, binding power and palatability.
(2) For the purpose of this clause,-
(a) Whole Egg powder: Product prepared from suitable drying of whole egg liquid with maximum permissible moisture content of 2.0% and free from any extraneous material and off odour:
(b) Egg Yolk Powder: Product prepared from suitable drying of egg yolk with maximum permissible moisture content of 2.0% and free from any extraneous material and off odour;
(c) Egg White Powder: Product prepared from suitable drying of egg white with maximum permissible moisture content of 2.0% and free from any extraneous material and off odour."
7. The Tribunal gave a finding that the product 'egg' as per the FSSAI Regulations, 2020, is as under:
"'Egg' means eggs-in-shell - other than broken, incubated or cooked eggs, laid by poultry species or birds meant for direct human consumption or for the preparation of egg products"
8. The Entry 107(a) of Schedule-IV of the Act, reads as under:
"Entry 107 of the IV Schedule to VAT Act:7
SP, J & RRN, J TREVC_2_2024 '(a) Preserved fruits, vegetables, meat, poultry, sea foods and fish sold in sealed containers or in a frozen state.
(b) Fruit jams, jelly, fruit squash, fruit juices, (fruit pulp) and fruit drinks but excluding aerated fruit drinks;
1. Inserted vide G.O.Ms.No.43 dated 29.01.2013 w.e.f., 31.01.2013.
(c) Cottage cheese (paneer), pickles, sauces, porridge, marmalade, honey;
(The original entry "107 w.e.f., 1-7-2008). Processed meat, poultry, fish, processed or preserved vegetables and fruits, including fruit jams jelly, pickle fruits squash, paste, fruit drink and fruit juice whether in sealed container or otherwise." was substituted by G.O.Ms.No.818 Rev.(CT-II), Dept, dated 30.06.2008 w.e.f., 01.07.2008 and subsequently by Act No.28 of 2008 dated 24.09.2008 w.e.f., 01.07.2008)."
(Emphasis Supplied)
9. The Tribunal came to hold that a careful reading of Entry 107 (a) aforesaid covers only "preserved fruit, vegetables, meat, poultry, sea foods and fish" sold in sealed containers or in a frozen state, falling within the ambit of said entry, but it does not include 'processed' ones. Putting it differently, the Tribunal opined that the substituted entry does not take within its fold 'processed' poultry products, but takes only preserved meat and poultry products, which the appellant is claiming as HSN Code 0408. Thereafter, by considering the meaning of words 'preserved' and 'processed' and the procedure adopted by the appellant in 8 SP, J & RRN, J TREVC_2_2024 achieving the product, the Tribunal clearly held that the item is leviable under Schedule-V of the Act and leviable tax is @ 14.5%.
10. The singular question raised before us by the learned counsel for the appellant is as to whether the activity carried out by the appellant in getting 'egg powder' is covered under Entry 107 (a) aforesaid or not.
11. The learned Tribunal considered the typical 'process flow chart' pursuant to which said product is achieved, which is as under:
"Breaking of Eggs and removal of shells Filtration Storage and Drying Packing"
12. The learned counsel for the appellant during the course of hearing did not dispute that the egg powder is prepared by adopting the above said process. He did not dispute the methodology shown regarding the process of manufacture is inconsonance of the FSSAI Regulations, 2020. Thus, the 9 SP, J & RRN, J TREVC_2_2024 procedure and treatment for obtaining end product is not in dispute.
13. The word "process' is defined in various dictionaries as follows:
"1. According to Webster's Dictionary 'process' means 'to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable from, as livestock by slaughtering, grain by milling, cotton by spinning milk, by pasteurizing, fruits and vegetables by sorting and repacking.
2. In Webster's New International Dictionary, Vol.II besides other things, process has been defined to mean 'a course of procedure, something that occurs in the series of action'.
3. According to Chamber's Twentieth Century Dictionary, 'process' inter alia, means to prepare (e.g., agricultural product) for marketing. In the Oxford English Dictionary, Vol. VIII, 'Process' has been defined to mean besides other thing, 'to preserve fruit, vegetable, etc., by some process.'
4. The Dictionary 'Words and Phrases Legally defined, Volume 4, 1969 Edition, wherein the word 'processing' is defined as 'processing' (in relation to fish) includes preserving or preparing fish, or producing any substance or article from fish, by any method for human or animal comsumption (Sea Fish) (conservation) Act. 1969, s.22 (I)."
14. A bare perusal of Dictionary meaning of 'process' shows that it is wide enough to bring within its four corners, the nature of activity carried out by the appellant to get the end product of egg powder.
10
SP, J & RRN, J TREVC_2_2024
15. Thus, looking from any angle that is by strict and literal interpretation as well as considering the same on common parlance, the word 'process' covers achieving the end product in question. Putting it differently, as per lexicographical or in scientific and technical sense, there does not appear any difference, if the word 'process' is examined in the facts of the present case where the end product is achieved by adopting some course of procedure and pursuant to a series of action. In view of this finding, the judgment in the case of Sneh Enterprises (cited supra) cannot be pressed into service.
16. As noticed above, the attempt of the learned counsel for the appellant was to bring the activity within the ambit of 'preservation'. Interestingly, Lord Migdale in (1966) 42 TC 675, at para No.683, held as under:
"Now I am unable to find any warrant in the sub-section for requiring that the nature or size of the material must be altered before one can say that it has been subjected to a process. In my opinion, when the coal was cleaned and then packed into containers of a convenient size it was subjected to a process. 'Subject to' means that it went through a process and 'process' means some course of operation."
(Emphasis Supplied) 11 SP, J & RRN, J TREVC_2_2024
17. In view of forgoing discussion, in our opinion, the Authorities below have taken a plausible view regarding the applicability of the relevant entry of the Act. Hence, no substantial question of law is involved which warrants adjudication in this appeal. The admission is accordingly declined.
18. In the result, the Tax Revision Case is dismissed. There shall be no order as to costs. Miscellaneous applications pending, if any, shall stand closed.
_______________________ JUSTICE SUJOY PAUL ____________________________________________ JUSTICE NAMAVARAPU RAJESHWAR RAO Date: 14.06.2024 Note:
L.R copy marked.
B/o.-GVR