Bombay High Court
The Commissioner Of Sales Tax vs Neulife Nutrition System on 6 May, 2016
Bench: S.C. Dharmadhikari
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
MAHARASHTRA VALUE ADDED TAX APPEAL NO.2 OF 2016
IN
VALUE ADDED TAX APPEAL NO.931 OF 2014
The Commissioner of Sales Tax,
Maharashtra State, Mumbai
8th Floor, Vikrikar Bhavan,
Mazgaon, Mumbai - 400 010. ..... Appellant
V/s
M/s. Neulife Nutrition System
A-11, Shriram Industrial Estate
Wadala, Mumbai - 400 031. ..... Respondent
igWITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.3 OF 2016
IN
VALUE ADDED TAX APPEAL NO.932 OF 2014
The Commissioner of Sales Tax,
Maharashtra State, Mumbai
8th Floor, Vikrikar Bhavan,
Mazgaon, Mumbai - 400 010. ..... Appellant
V/s
M/s. Neulife Nutrition System Pvt.Ltd.
A-11, Shriram Industrial Estate
Wadala, Mumbai - 400 031. ..... Respondent
Mr. V.A. Sonpal, Special Counsel a/w Ms. Uma Palsuledesai, AGP for
the State/Appellant in both Appeals.
Mr. Vinayak Patkar a/w Mr. Ishaan Patkar i/b Ms. Manjiri S. Parasnis for
Respondent in both Appeals.
CORAM : S.C. DHARMADHIKARI &
A.A. SAYED, JJ.
RESERVED ON : 08 MARCH 2016
PROUNOUNCED ON : 06 MAY 2016
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JUDGMENT: (PER A.A. SAYED, J.)
1 Above two Appeals filed under section 27 of the Maharashtra
Value Added Tax Act, 2002 (hereinafter referred to as 'MVAT Act') arise
out of common judgment and order passed by the Maharashtra Sales
Tax Tribunal, Mumbai dated 6 August 2015 in VAT Appeal Nos.931 and
932 of 2014.
2.
The operative part of the impugned judgment and order of the
Tribunal reads as under:
"In view of all above, the matter is disposed of are as under:-
ORDER
The VAT appeal bearing No.931/2014 is hereby
allowed and the D.D.Q. order dated 18-07-2014 of the
Commissioner of Sales Tax, Maharashtra State, Mumbai is
set aside. The products of the appellant are classified under
schedule entry C-107 (11)(g) during the relevant period i.e.
from 15.01.2011 to 13.03.2013 liable for 5% of VAT Tax.
The VAT appeal bearing No.932 of 2014 is hereby
allowed and the D.D.Q. order dated 18.07.2014 of the
Commissioner of Sales Tax, Maharashtra State, Mumbai is
set aside. The products of the appellant are classified under
schedule entry C-107, (11) (g) during the relevant period i.e.
from 15.01.2011 to 13.03.2013 liable for 5% of VAT Tax."
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3 M/s. Neulife Nutrition System, the Respondent-Dealer in Appeal
No.2 of 2016, had filed an Application under section 56 of the MVAT Act
before the Commissioner of Sales Tax to decide the classification of its
products and the rate of tax applicable for the relevant period i.e. 15-01-
2011 to 31-03-2013. It had sought the rates of tax for the following
products:
"(1) 100% Whey Gold (French Vanilla 2 Lbs and Mocha
Capuccino 1 Lbs)
Platinum Hydrowhey (Turbo Chocolate 3.5 Lbs)
Serious Mass (Straw 12 Lbs)
(4) PRO Complex GAINER (Choc 10.16 Lbs and Straw
10.16 Lbs)
(5) True Mass (Chocolate 5 Lbs)
(6) Syntha 6 (Chocolate 5 Lbs)"
M/s. Neulife Nutrition System Pvt.Ltd., the Respondent-Dealer in Appeal
No.3 of 2016 had also filed similar Application under section 56 of MVAT
for classification of its products for same period and sought the rates of
tax for the following products:
"(1) 100% Whey Gold (Straw 2.07 Lbs, Cookie & Cream
2.073 Lbs, Choco Mint 2.073 LBs, Straw 5.174 Lbs
and Vanilla Ice Cream 5 Lbs)
(2) Syntha 6 (Chocolate 5 Lbs)
(3) Serious Mass (Choc 6 Lbs)
(4) Platinum Hydrowhey (Chocolate 3.5 Lbs)
(5) True Mass (Chocolate 5.75 Lbs and Strawberry 5.75
Lbs)"
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The aforesaid products of the Respondent-Dealers are hereinafter
referred to as `the said products'.
4 It was the case of the Respondent-Dealers before the
Commissioner of Sales Tax that they were dealers in non-alcoholic
beverage concentrate in powder form and the said products are general
purpose protein powders from which non-alcoholic beverages are
prepared. These powders are manufactured in USA and the proteins are
obtained from whey products which are remnants of cheese making
process and are sold in flavours and the said products are therefore
covered under Schedule Entry No.C-107 (11)(g) of MVAT Act which are
exigible to tax @ 5%, which Entry reads as follows:
"Powders, Tablets, Cubes, Crystals and other solids or liquids from
which non-alcoholic beverages and soups are prepared."
5. The Commissioner of Sales Tax by his common order dated
18 July 2004 held that the said products were not covered by Schedule
Entry C-107 (11)(g) of MVAT Act. The Commissioner was of the view
that as there was no specific entry which can be held applicable to the
said products, and classified the said products in Residuary Schedule
Entry E-1 which is exigible to tax @ 12.5%.
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6. Being aggrieved by the order dated 18 July 2014 of the
Commissioner of the Sales Tax, the Respondent-Dealers preferred two
Appeals before the Tribunal. After hearing the parties, the Tribunal set
aside the order dated 18 July 2014 and allowed the two Appeals and
held that the said products of the Respondent-Dealers are classifiable
under Schedule Entry C-107 (11) (g) and liable for tax at the rate of 5%.
Being aggrieved by the order of the Tribunal the Appellant-Commissioner
of Sales Tax has preferred the present Appeals and has framed the
following substantial questions of law to be decided in the Appeals:
"(a) Whether upon true and correct interpretation of Schedule Entry
C-107 (11)(g) of MVAT Act, 2002 and upon the application of
common parlance test in its true perspective, was the Tribunal
justified in holding that the impugned products will fall within the
purview of Schedule Entry C-107(11)(g) during the relevant period
from 15.01.2011 to 31.03.2013 and hence taxable @ 5% of VAT
and not covered by the Schedule Entry E-1 of MVAT Act, 2002 and
therefore taxable @ 12.5%.
(b) Whether on application of the common parlance theory and taking
into consideration the true intent of legislature, can it be said that
the Schedule Entry C-107 (11)(g) envisaged within itself the
inclusion of the impugned products "Health Drinks" within the term
"Beverages (Non-Alcoholic)" as enshrined the said Schedule entry
under MVAT Act, 2002."
7. We have heard the learned Counsel appearing for the Appellant
and the learned Counsel appearing for the Respondent.
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8. Learned Counsel for the Appellant submitted that the said products
are consumed to achieve specific goals and the drink made therefrom
are not `beverages' as commonly understood and the principle of
common parlance is required to be applied in the present case. The said
products are targeted to be consumed by certain class of population who
are into heavy work-out and/or intense physical activity and people who
seek to be muscular or gain weight or become lean. He submitted that
the said products carry a warning that they are not to be consumed by
persons under 18 years of age and pregnant & feeding women. The said
products are food supplements and/or health drinks and cannot be
termed as `beverages'. Learned Counsel for the Appellant submitted
that the Commissioner of Sales Tax had rightly classified the said product
and had rightly held that the said products are not 'powders from which
non-alcoholic beverages are prepared' and they would be covered by
Schedule Entry E-1 of MVAT Act and that the Tribunal had erred in
classifying the product under Schedule Entry C-107 (11)(g) of the MVAT
Act which was liable for the VAT for the relevant period at the rate of 5%.
Learned Counsel for the Appellant, in support of his submission of
principle of common parlance, has placed reliance upon the judgment of
the Supreme Court in the case of Commissioner of Central Excise,
New Delhi vs. Connaught Plaze Restaurant Private Limited, New
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Delhi1, and inter alia invited our attention to paragraph 20 of the
judgment, which reads as under:
"20. Time and again, the principle of common parlance as the
standard for interpreting terms in the taxing statutes, albeit subject
to certain exceptions, where the statutory context runs to the
contrary, has been reiterated. The application of the common
parlance test is an extension of the general principle of
interpretation of statutes for deciphering the mind of the law-maker;
"It is an attempt to discover the intention of the legislature from the
language used by it, keeping always in mind, that the language is
at best an imperfect instrument for the expression of actual human
thoughts. (See Oswal Agro Mills Ltd.2, para 4.)"
9. Learned Counsel for the Respondent-Dealers on the other hand
supported that impugned order of the Tribunal and submitted that the
reasons for classifying its products under Entry C-107 11(g) are that the
said powders are meant for one and all and are being sold and bought
by people for their flavors as well as their content. The Entry is clear and
unequivocal. The onus to prove coverage under particular entry is on the
Revenue. In view of the specific entry in the Schedule Entry C-107 11(g)
to the taxing statute, it would override the general entry and only when
1 (2012) 13 SCC 639
2 1993 Supp (3) SCC 721
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liberal construction of specific Entry cannot cover the goods in question,
the residuary Entry viz. Schedule Entry E-1 would apply. He urged that
no interference is called for with the impugned order of the Tribunal.
10. We have considered the rival contentions of the parties.
11. The issue arises for consideration is whether for the relevant
period the said products of the Respondent-Dealers should be classified
under Schedule Entry C-107 (11)(g), which is exigible to tax @ 5% OR
whether the said products are classifiable under Residuary Schedule
Entry E-1, which is exigible to tax @ 12.5%.
12. In our view, the Tribunal has rightly held that the said products are
classifiable under Schedule Entry C-107 (11)(g) and has rightly set aside
the order of the Commissioner of Sales Tax who had classified the said
products under Residuary Schedule Entry E-1, for the reasons which
shall presently indicate.
13. The Schedule Entry C-107 (11)(g) for the relevant period reads as
follows:
Name of commodity Rate of tax (%)
(g) Powders, tablets, cubes, crystals 5%
and other solids or liquids from which
non-alcoholic beverages and soups are
prepared.
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The Schedule Entry E-1 reads as follows:
Name of commodity Rate of tax (%)
All goods not covered in any of the 12.5%
other schedules
14. It is well settled that the Entry in the Schedule is to be construed
as it stands and when the Entry is clear and equivocal, it does not
demand any outside interpretation. There can no dispute that the said
products of the Respondent-Dealers are `powders' from which 'non-
alcoholic' drinks are prepared for the purpose of consumption by mixing
the said powders with liquids like water, milk, juice, etc. In our view, there
is no warrant for restricting the meaning of term "beverages" in the
Schedule Entry C-107 (11)(g) as sought to be contended by the learned
Counsel for the Appellant. The Entry in our view is clear and
unambiguous. The Entry is couched with the non-technical word
"beverages", which has to be understood in its ordinary meaning. The
meaning of "beverage" as stated in the Concise Oxford English
Dictionary is "drink other than water". The question is, while construing
the Entry as it stands, would the drinks made from the said powders be
any less of "beverages" because they are "health drinks"? We think not!
Merely because a drink has more nutritive value in the form of proteins
and meant for a certain class of consumers, it would not cease to be a
"beverage". In our view, even if the potable drink made from the said
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powders are perceived as health drink, it does not fall out of the purview
of the Entry. It has been held by the Supreme Court in State of
Maharashtra v/s. Bradma of India Ltd.3 that the residuary entry could
be resorted to only when by a liberal construction the specific entry
cannot cover the goods in question. In the present case, in view of the
specific Entry 107-C (11)(g) to the Statute, it would override the general
Entry. Even otherwise, we do not think that the drink prepared from the
said powders can be excluded from the term `beverages', even assuming
that the principle of common parlance were to apply. In our view, the
Tribunal has rightly concluded that the `powders' of the Respondent-
Dealers are covered under Schedule Entry C-107 11(g). The judgment in
the case of Connaught Plaza Restaurant (supra) relied upon by the
learned Counsel for the Appellant would be of no assistance in the facts
of the present case. As a matter of fact, in the aforesaid case in para 41
of the judgment, the Supreme Court held that the terms of the statutes
must be adapted to developments of contemporary times rather than
being held entirely inapplicable.
15. The Tribunal has reproduced the legislative history of the Schedule
Entry 107-C (11)(g) in the impugned judgment and order in the following
terms:
3 (2005) 2 SCC 669
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C-II-47 Aerated waters and non-alcoholic 12% 1-7-1981 to 30-4-1982
beverages (including fruit juices,
squashes, syrups and cardials) when
sold in sealed, capsuled or carked
bottles, jars, tins drums or other
container
C-II-47(i) i) Aerated waters and non-alcoholic 12% 1-5-1982 to 30-4-1992
beverages (including fruit juices,
squashes, syrups and cardials) when
sold in sealed, capsuled or carked
bottles, jars, tins, drums or other
container
ii) Soft drink powders, tablets and
crystals for which non-alcoholic
beverages are prepared by adding any
potable liquid
iii) Powder, tablets Soft drink powders, 12% 1-4-1989 to 30-4-1992
tablets and crystals for which non-
alcoholic beverages are prepared by
adding any potable liquid
C-II-47 i) Aerated, mineral, medicinal tonics, 12% 1-5-1992 to 8-9-1992
distilled or demineralised water and
water sold in sealed, capsuled or carked
container but excluding water for
injection
ii) Non-alcoholic beverages including 2% 1-5-1992 to 8-9-1992
vegetable or fruit juices, squashes,
syrups and cardials when sold in
sealed, capsuled or carked bottle, jar,
tins drums
iii) Powders, tablets, cubes, crystals, 12% 1-5-1992 to 8-9-1992
and other solids from which non-
alcoholic beverages and soups are
prepared
C-II-47 i) Aerated waters and non-alcoholic 12% 9-9-1992 to 31-3-1994
beverages (including fruit juices,
squashes, syrups, and cardials) when
sold in sealed, capsuled or carked
bottles, jars, tins, drums or other
containers
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ii) Powders, tablets, crystals from 12% 9-9-1992 to 31-3-1994
which non-alcoholic beverages are
prepared by adding potable liquid
C-II-47 i) Aerated, minerals, medicinals tonics, 12% 1-4-1994 to 30-9-1995
distilled or demineralised water and
water sold under brand name in sealed,
capsuled or carked containers but
excluding water for injection
ii) Non-alcoholic beverages, including 12% 1-4-1994 to 30-9-1995
vegetable or fruit juices, squashes,
syrups and cardials when sold in
sealed, capsuled or carked bottle, jars,
tins, drums or other container
iii) Powders, tablets, cubes, crystals 12% 1-4-1994 to 30-9-1995
and other solid from which non-
alcoholic beverages and soups are
prepared
C-II-18 i) Non-alcoholic beverages including 13% 1-10-1995
vegetable or fruit juices, squashes
syrups and cardials when sold in
sealed, capsuled and carked bottles, jar
Tine or drums or other contained (But
excluding those covered by Entry 21 of
this part of the schedule)
ii) Powders, Tablets Cubes, crystals and 13% 1-10-1995
other solids from which non-alcoholic
beverages and soups are prepared,
(Cashew Juice is exempted from whole
of tax w.e.f. 1-6-2004 vide notification
entry A-158)
(The entry C-II 21 is related to 20% 1-10-1996
`Aerated and carbonated non-alcoholic
beverages whether or not containing
sugar or other sweetening matter as
flavour or any other additives)
C-107(7) Alcoholic and non-alcoholic beverages 4% 1-5-2005 to 31-3-2010
C-107(II)(g) Powders, tablets, cubes, crystals and 4% 1-2-2008 to 31-3-2013
other solid or liquids from which non-
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alcoholic beverages and soups are
prepared.
As C-107 (II)(g) is added w.e.f. 1-2-
2008 hence during the period 1-4-2005
to 31-1-2008 the said entry will be
covered by E-I schedule liable for
12.5% of tax.
The Tribunal inter alia has observed as follows:
"Therefore, now it is clear that impugned powders even if made with
reference of achieving some goal they are nothing but beverages for
which the above schedule entry is available in statute book from 1-2-
2006 to 31-3-2013 hence the relevant schedule rate will be 4% upto 31-
3-2010 and 5% w.e.f. 1-4-2010. We want to make it clear that during
the period 1-4-2005 to 30-4-2005 and from 1-4-2005 to 31-1-2006 such
products were no place in schedules A,B,C,D therefore, during that
period they will be covered under schedule Entry E-1 and from 1-4-2013
onwards, that schedule entry is deleted hence that will be covered
under E-1 only. As we have decided the classification as above, we
don't think, any prospective effect be given from 01-04-2013 onwards
when for a period of 01-04-2005 to 31-01-2006, there was no place to
those products in Schedule Entry C."
16. In our view the Tribunal has analyzed the issue in depth and by a
well reasoned order rightly held that the said products of the
Respondent-Dealers are classifiable under Schedule Entry C-107 (11)(g)
for the relevant period. Having concluded that the Scheduled Entry
C-107 (11)(g) is clear and unambiguous, in our opinion, no substantial
questions of law arise in the facts and circumstances of the present case.
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17. In light of the aforesaid discussion, no interference is warranted
with the impugned order of the Tribunal. The Appeals are accordingly
dismissed. There shall be no order as to costs.
(A.A.Sayed, J.) (S.C.Dharmadhikari, J.)
