M/S Pepsico India Holdings ... vs Assistant Commissioner Anti ...
2023 Latest Caselaw 5596 Raj/2

[2023:RJ-JP:21225]                  (1 of 16)                       [STR-119/2020]


        HIGH COURT OF JUDICATURE FOR RAJASTHAN
                    BENCH AT JAIPUR

          S.B. Sales Tax Revision / Reference No. 119/2020

Ms Pepsico India Holdings Private Ltd., F-549, Road No. 6 Vki
Area Jaipur- Through Its Authorized Signatory Shri Chitwan
Prabhakar Aged 33 Year S/o Shri Virendra Prabhakar
                                                                   ----Petitioner
                                    Versus
Assistant Commissioner, Commercial Taxes Department , Special
Circle Rajasthan, Jaipur.
                                                                 ----Respondent

Connected With S.B. Sales Tax Revision / Reference No. 121/2020 M/s Pepsico India Holdings Private Ltd, F-549, Road No. 6 Vki Area Jaipur- Through Its Authorized Signatory Shr Chitwan Prabhakar Age 33 Yr S/o Shri Virendra Prabhakr

----Petitioner Versus Assistant Commissioner Anti Evasion, Zone-Ii, Commercial Taxes Department Jaipur.

----Respondent S.B. Sales Tax Revision / Reference No. 122/2020 M/s Pepsico India Holdings Private Ltd, F-549, Road No.6 Vki Area, Jaipur- Through Its Authorized Signatory Shri Chitwan Prabhakar Aged 33 Years S/o Shri Virender Prabhakar

----Petitioner Versus Assistant Commissioner Anti Evasion, Zone-Ii, Commercial Taxes Department, Jaipur

----Respondent S.B. Sales Tax Revision / Reference No. 123/2020 M/s Pepsico India Holdings Private Ltd., F-549, Road No. 6, Vki Area, Jaipur - Through Its Authorized Signatory Shri Chitwan Prabhakar S/o Shri Virender Prabhakar

----Petitioner Versus

[2023:RJ-JP:21225] (2 of 16) [STR-119/2020]

Assistant Commissioner, Commercial Taxes Department, Special Circle Rajasthan, Jaipur.

----Respondent

For Petitioner(s) : Mr. Rohan Shah with Mr. Maneesh Sharma, Mr, Manish Mishra, Mr. Chayank Bohra, Mr. Lakshay Pareek, Mr. Shreyansh Sharma For Respondent(s) : Mr. Punit Singhvi with Mr. Ayush Singh

HON'BLE MR. JUSTICE SAMEER JAIN

Order

Reserved on - 12/07/2023 Pronounced on - 06 /10/2023

1. The present Sales Tax Revisions / References (for short

"STRs"), filed under Section 84 of the Rajasthan Value Added Tax

Act, 2003 (for short "RVAT Act"), were admitted on following

questions of law:

"(i) Whether the learned Tax Board is justified in

holding that Kurkure and Cheetos are not

classifiable as Namkeen under Entry 131 of

Schedule IV, holding that the products will fall

under Schedule V (Residual Rate) of the VAT Act,

just because similar contention was turned down

while interpreting different entries under the

erstwhile Rajasthan Sales Tax Act, 1994?

             (ii)    Whether the learned Tax Board is right in

             adopting a restricted meaning for                      the term

"namkeen" in interpreting the scope of Entry 131

of the Schedule IV?"

[2023:RJ-JP:21225] (3 of 16) [STR-119/2020]

2. As common issue of classification of 'Kurkure' and

'Cheetos' is involved in all these STRs, with the consent of the

parties, they were heard together and are now being decided by

way of this common order. STR No. 119/2020 is taken as lead file

to peruse the facts.

3. Learned counsel for the petitioner-assessee submits

that the petitioner-assessee is a private limited company

incorporated under the provisions of the Indian Companies Act

1956 having registered office at Gurugram, Haryana (formerly

known as 'Gurgaon') and having its principal place of business in

the State of Rajasthan at Jaipur. The petitioner-assessee is also a

registered dealer under the RVAT Act and is engaged in the sale of

various food products, including the goods in question, i.e.

'Kurkure' and 'Cheetos'. The petitioner-assessee is also engaged in

the sale of branded potato chips, which are sold under the brand

name of 'Lays' and 'Uncle Chips'. The petitioner-assessee was self

classifying the goods in question along with the branded potato

chips under Entry 131 [Sweetmeat Deshi (including Gajak &

Revri), bhujiya, branded and unbranded namkeens.] of Schedule

IV to the RVAT Act and paying tax @ 4% / 5%. A survey was

conducted at the business premises of the petitioner-assessee for

the assessment year 2011-2012, which ultimately resulted into

passing of the impugned Assessment Order dated 20.09.2016,

wherein the Revenue classified the goods in question along with

the branded potato chips under the Residual Entry under Schedule

V to the RVAT Act attracting tax @ 12.5% / 14%. Accordingly, the

differential tax and interest was imposed upon the petitioner-

[2023:RJ-JP:21225] (4 of 16) [STR-119/2020]

assessee vide assessment order dated 20.09.2016. The appeal

against the said assessment order was partly 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 qua 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. The Rajasthan Tax

Board also dismissed the appeal filed by the petitioner-assessee

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. Being

aggrieved, the present STRs were filed.

4. Learned counsel for the petitioner-assessee has

challenged the classification adopted by the Revenue, of the goods

in question under residual entry, primarily, on the following

grounds:

4.1) The first submission of learned counsels for the

petitioner-assessee is that the revenue has not discharged its

onus to prove that the goods in question, i.e. 'Kurkure' and

'Cheetos' could not be considered 'namkeen' and covered under

Entry 131 of Schedule IV to the RVAT Act. In support of his claim

that the goods in question would qualify as 'namkeen', learned

counsel for the petitioner-assessee has placed reliance on

definition of namkeen as provided by the Bureau of Indian

Standards. Learned counsel for the petitioner-assessee has also

emphasized that on the packaging material of the goods in

[2023:RJ-JP:21225] (5 of 16) [STR-119/2020]

question, the word 'namkeen' is prominently displayed and the

ingredients used therein also establishes that the goods in

question would be considered 'namkeen'. The FSSAI license

classifying the goods in question as namkeen is also highlighted

by learned counsel for the petitioner-assessee. Learned counsel

for the petitioner-assessee further submits that as per Hon'ble

Supreme Court judgments of Parle Agro (P) Ltd. and Ors. vs.

Commissioner of Commercial Taxes, Trivandrum and Ors.

(Neutral Citation: 2017/INSC/458) reported in 2017 (352)

ELT 113 (SC), Commissioner of Central Excise vs. Hindustan

Lever Ltd. (Neutral Citation: 2015/INSC/606) reported in

2015 (323) ELT 209 (SC), and Muller and Phipps (India)

Ltd. vs. The Collector of Central Excise, Bombay-I reported in

2004 (167) ELT 374 (SC), reliance can be placed on relevant

food laws to determine the classification of food products. In

furtherance of the submission that the goods in question would be

considered namkeen, reliance is also placed on judgment of

Hon'ble Supreme Court in Commissioner of Central Excise,

Pune-II vs. Frito Lays India reported in (2009) 10 SCC 752

and judgment of CESTAT Delhi in Pepsi Foods Ltd. vs. Commr.

of Cus. and C. Ex., Chandigarh-II reported in 2003 (151) ELT

180 (Tri.-Del.), which was upheld by the Hon'ble Supreme Court

vide order dated 26.07.2011 in Civil Appeal Nos. 4055-4058 of

2003 titled as CCE, Chandigarh-III vs. M/s Pepsi Foods Ltd.

4.2) The second submission of learned counsel for the

petitioner-assessee is that the reliance placed by the Revenue and

the Tax Board on the Co-ordinate Bench judgment of Pepsico

[2023:RJ-JP:21225] (6 of 16) [STR-119/2020]

India Holdings Private Ltd. vs. CTO, Special Circle

Rajasthan, Jaipur and Ors. (S.B. STR No. 194/2009;

decided on 22.12.2016) reported in [2018] 50 GSTR 191

(Raj.) is also onerous as the judgment pertained to classification

of potato chips, Kurkure and Cheetos under the erstwhile

Rajasthan Sales Tax Act, 1994 (for short "RST Act"), wherein the

dispute was within two specific entries and the Court opined that

those goods would fall under the category of 'preserved foods'.

Learned counsel for the petitioner-assessee strongly contends that

the said judgment is not applicable in the facts and circumstances

of the present case and has drawn attention of this Court to the

following excerpt of the said judgment:

"I do concur with the arguments of the learned counsel for the Revenue that the product in which the assessee is dealing, though technically can be said to be namkin but taking into consideration the specific entry under the Act, it can only be placed in the category of 'preserved food article' "

Learned counsel for the petitioner-assessee contends that the

issue before the Co-ordinate Bench was with regard to

applicability of two specific entries, whereas in the present case

the issue is applicability of specific entry over general entry. The

essence of the above quoted Co-ordinate Bench judgment, where

goods in question were held to be preserved foods, is not

applicable in the present case because under the RVAT Act, there

is no specific entry named 'preserved foods' and in the absence of

such specific entry, reliance placed on the said judgment is

unsustainable. Reliance in placed on Apex Court judgment of X vs.

Registrar General, High Court of Madhya Pradesh and Ors.

[2023:RJ-JP:21225] (7 of 16) [STR-119/2020]

(Neutral Citation: 2022/INSC/171) reported in 2022 SCC

OnLine SC 171 to submit that one additional or different fact can

make a world of difference between conclusion in two cases even

when the same principles are applied in each case to similar facts.

Learned counsel for the petitioner-assessee has further

highlighted that against the Co-ordinate Bench judgment dated

22.12.2016, the petitioner-assessee has preferred an appeal

which is pending adjudication with the Hon'ble Supreme Court in

Civil Appeal Nos. 15693-15695 of 2017 arising out of SLP (Civil)

No. 19671/2017.

4.3) The third submission of learned counsels for the

petitioner-assessee is that it is an established cannon of

classification that a specific entry would override a general entry.

Reliance in this regard is placed on Apex Court judgments of

Bharat Forge and Press Industries (P) Ltd. vs. Collector of

Central Excise, Baroda, Gujarat reported in 1990 (45) ELT

525 (SC), Dunlop India Ltd. vs. Union of India reported in

(1976) 2 SCC 241, Mauri Yeast India Pvt. Ltd. vs. State of

Uttar Pradesh reported in (2008) 5 SCC 680, Commissioner

of Commercial Tax, U.P. vs. A.R. Thermosets (Pvt.) Ltd.

reported in (2016) 16 SCC 122, State of Maharashtra vs.

Bradma of India Ltd. reported in (2005) 140 STC 17 (SC),

Hindustan Poles Corporation vs. Commissioner of Central

Excise, Calcutta reported in (2006) 145 STC 625 (SC), and

Krishi Utpadan Mandi Samiti and Ors. vs. Ved Ram reported

in 2012 (277) ELT 299 (SC). It is stated that a special entry

must prevail over the general entry and that the residuary clause

[2023:RJ-JP:21225] (8 of 16) [STR-119/2020]

can be invoked only if the department can establish that the goods

in question can, by no conceivable process of reasoning, be

brought under any of the tariff items.

4.4) The fourth submission of learned counsel for the

petitioner-assessee is that the goods in question were specifically

included in Entry No. 16 of Schedule V to the RVAT Act only w.e.f.

14.07.2014 and the rate of tax was enhanced to 14%. However,

such enhancement of tax cannot be given retrospective application

as the notifications are deemed to apply prospectively unless

either expressly specified to apply retrospectively. Reliance in this

regard is placed on Apex Court judgments of L.R. Brothers Indo

Flora Ltd. vs. Commissioner of Central Excise (Neutral

Citation: 2020/INSC/525) reported in 2020 (373) ELT 721

(SC) and Commissioner of Income Tax vs. Vatika Township

Private Limited (Neutral Citation: 2014/INSC/629) reported

in (2015) 1 SCC 1. In the case in hand, the Schedule V to the

RVAT Act was substituted vide Notification dated 14.07.2014 and

only thereafter the goods in question were incorporated under

Schedule V and therefore there is no question of the notification

having retrospective application.

4.5) The fifth submission of learned counsel for the

petitioner-assessee is that even as per common parlance test, the

goods in question are considered to be 'namkeens'. Reliance is

placed on affidavits from traders and consumers of the goods in

question to buttress the submission that the goods in question are

perceived to be 'namkeen' in the common parlance. Reliance is

also placed on Apex Court judgments of Collector of Central

[2023:RJ-JP:21225] (9 of 16) [STR-119/2020]

Excise, Kanpur vs. Krishna Carbon Paper Co. reported in

(1989) 1 SCC 150, Ramavatar Budhaiprasad and Ors. vs.

Assistant Sales Tax Officer, Akola reported in AIR 1961 SC

1325, Purnia vs. State of Orissa reported in AIR 1979 SC

1454, Indian Cable Company Ltd., Calcutta vs. Collector of

Central Excise, Calcutta and Ors. reported in 1994 (74) ELT

22 (SC), Collector of Central Excise vs. Fusebase Eltoto Ltd.

reported in 1993 (67) ELT 30 (SC), and Commissioner of

Customs, Central Excise and Service Tax, Hyderabad vs.

Ashwani Homeo Pharmacy (Neutral Citation:

2023/INSC/483) reported in 2023 SCC OnLine SC 558.

4.6) The sixth submission of learned counsel for the

petitioner-assessee is that the Tax Board has erroneously relied

upon information available on the petitioner's global website,

which is headquartered in United States of America. As per the

impugned order, the petitioner is selling several variants of

Cheetos, which is factually incorrect as the products manufactured

by the petitioner's global counterparts significantly vary in their

manufacturing process and are specified to varied geographies.

The said variants of Cheetos are not available or sold in India and

any information gathered from the international website regarding

said products sold abroad cannot be relied upon in the instant

case.

4.7) The seventh submission of learned counsel for the

petitioner-assessee, without prejudice to his other submissions, is

that as per settled position of law, in case there are two

competing entries in which the product can be classified, the one

[2023:RJ-JP:21225] (10 of 16) [STR-119/2020]

that is more beneficial to the assessee should be given preference.

Reliance in this regard is placed on Apex Court judgment of

Commnr. of Central Excise, Bhopal vs. Minwool Rock Fibers

Ltd. reported in 2012 (3) SCALE 37.

5. Per contra, supporting the concurrent findings of the

authorities below, learned counsels for the respondent-revenue

contends that no question of law worth consideration arises in the

present STRs. It is submitted that the issue involved is squarely

covered by Co-ordinate Bench judgment of assessee's own case of

Pepsico India Holding (S.B. STR No. 194/2009; decided on

22.12.2016) (supra) wherein the exact same contentions of the

petitioner-assessee were rejected and the goods in question were

held to be 'preserved food articles' under the RST Act and though

an appeal has been preferred, no stay has been granted and

therefore the said judgment still holds the field. The entry of

'preserved food articles' was changed to 'preserved vegetables' in

the RVAT Act, as a result of which the goods in question could no

longer fall under the specific entry of 'preserved vegetables' and

had to be accommodated in the residual entry. Learned counsel

for the respondent-revenue further contends that the judgments

relied upon by the petitioner-assessee wherein the goods in

question have been classified as 'namkeen' pertains to Excise Act

and have no application in the instant case, more so when the

goods in question are 'namkeen snacks' and not 'namkeen'.

Learned counsel for the respondent-revenue has also relied upon

Notification dated 14.07.2014, through which the goods in

question were specifically added to Schedule V to the RVAT Act, to

[2023:RJ-JP:21225] (11 of 16) [STR-119/2020]

submit that the intention of the Legislature was always to tax the

goods in question at the rate prescribed under Schedule V to the

RVAT Act. It is submitted that subsequent legislation can be

looked into to ascertain the intention of the legislation and reliance

in this regard is placed on para 13.3 of judgment of this Court in

the case of M/s Compuage Infocom vs. The Assistant

Commissioner, Rajasthan and other connected matters (S.B.

STR No. 182/2017; decided on 30.05.2023; Neutral

Citation: 2023/RJJP/012108).

6. Heard the arguments advanced by both the sides,

scanned the record of the STRs and considered the judgments

cited at Bar.

7. The lis in question pertains to classification of

proprietary food items 'Kurkure' and 'Cheetos', manufactured by

the petitioner-assessee. As per the petitioner-assessee, the goods

in question, for the relevant period, would fall under the category

of namkeen and would thus fall under Entry 131 of Schedule IV to

the RVAT Act, which reads as "Sweetmeat Deshi (including Gajak

& Revri), bhujiya, branded and unbranded namkeens." On the

contrary, the respondent-revenue contends that the good in

questions are snacks and because snacks are not covered under

any specific entry, the same would necessarily fall under the

residual/orphan entry in Schedule V to the RVAT Act. As per

settled position of law, a specific entry would always trump a

general entry and the burden would always be on the Revenue to

prove that the goods in question would have to fall in general

entry as opposed to the specific entry.

[2023:RJ-JP:21225] (12 of 16) [STR-119/2020]

8. From the perusal of the order of the Tax Board, it

appears that the decision of the learned Tax Board holding the

goods in question as 'snacks' and not 'namkeen' was based on the

following factors:

(a) Because the same contention of petitioner-assessee,

classifying the goods as 'namkeen', was rejected by Co-ordinate

Bench of this Court under the erstwhile RST regime in the case of

Pepsico India Holding (S.B. STR No. 194/2009; decided on

22.12.2016) (supra).

(b) Because as per the information available on the

petitioner's own website, Kurkure and Cheetos are snacks having

various iterations/flavours.

(c) Because of the ingredient mentioned on the packaging

of the goods in question, the goods in question cannot be

considered as namkeen.

9. Having gone through the record and after careful

analysis of the Co-ordinate Bench judgment of Pepsico India

Holding (S.B. STR No. 194/2009; decided on 22.12.2016)

(supra), this Court is of the considered view that the Tax Board

has misinterpreted the dictum of Pepsico India Holding (S.B.

STR No. 194/2009; decided on 22.12.2016) (supra). The

said judgment, apart from being under the erstwhile regime of

RST Act, pertained to classification within two competing specific

entries. Whereas, in the case in hand, the specific entry is

competing with the general/residual entry. As per settled position

of law, when two specific entries equally merit consideration, the

more specific would prevail. Reliance in this regard can be placed

[2023:RJ-JP:21225] (13 of 16) [STR-119/2020]

on Apex Court judgment of HPL Chemicals vs. Commissioner

of Central Excise reported in (2006) 5 SCC 208. Similarly,

resort to residual entry can only be done as a last resort and the

residuary clause can be invoked only if the department can

establish that the goods in question can, by no conceivable

process of reasoning, be brought under any of the tariff items.

Reliance in this regard can be placed on A.R. Thermosets (Pvt.)

Ltd. (supra), Hindustan Poles Corporation (supra), Dunlop

India (supra) and Mauri Yeast India Pvt. Ltd. (supra). The

reliance placed by the Tax Board on Co-ordinate Bench judgment

of Pepsico India Holding (S.B. STR No. 194/2009; decided

on 22.12.2016) (supra) is onerous for the simple reason that

the Co-ordinate Bench had classified the goods in the more

specific entry, especially after observing that the goods in question

can technically be considered namkeen. Merely because the

specific entry of 'preserved food articles' did not transition from

RST Act to RVAT Act is no reason to automatically place the goods

in question in the residual entry. In these circumstances, the

correct approach would have been independent analysis of the

relevant entries under the RVAT Act and examining whether the

Revenue had discharged its onus to establish that the goods in

question cannot, by any conceivable means, be included in any of

the specific entries. Accordingly, the conclusion of the Tax Board,

to the extent that it is based on Co-ordinate Bench judgment of

Pepsico India Holding (S.B. STR No. 194/2009; decided on

22.12.2016) (supra) cannot be sustained.

[2023:RJ-JP:21225] (14 of 16) [STR-119/2020]

10. The next issue which falls for consideration of this Court

is whether the Revenue has successfully discharged its onus to

establish that the goods in question cannot be placed in any

specific entry and had to be placed in the residual entry. The Tax

Board held that since the goods in questions are snacks, which do

not find its place in any specific entry, the same had to be placed

in residual entry. However, this conclusion of the Tax Board, in the

opinion of this Court, is not supported by any cogent reason or

evidence for the following reasons:

10.1. It is noted that the Revenue neither sought any

technical / expert opinion, nor brought any evidence on record to

prove their point. It appears that the Tax Board merely relied on a

basic Google search result wherein the goods in question were

described as namkeen snacks.

10.2. Reliance was also placed by the Tax Board on the

description of Cheetos as snacks by the global website of

petitioner-assessee. However, this Court is satisfied with the

explanation put fourth by learned counsel for the petitioner-

assessee that as the petitioner-assessee is a part of a global

conglomerate having international presence, the description of

Cheetos as snack by global website of the petitioner-assessee

would not preclude the categorization of the same as 'namkeen' in

India, especially considering that namkeen, in essence, is also a

snack. However, it is clarified that not all snacks would be

considered as namkeen.

10.3. The Tax Board also ignored the ordinary definition of

namkeen, specification of namkeen as set out by the Bureau of

[2023:RJ-JP:21225] (15 of 16) [STR-119/2020]

Indian Standard and the FSSAI licenses granted to the petitioner-

assessee, which categorizes the product in question as namkeen.

As per the Apex Court judgments of Parle Agro Pvt. Ltd.

(supra), Hindustan Lever Ltd. (supra), and Muller & Phillips

(India) Ltd. (supra), reliance can and should be placed on

relevant food laws to determine the classification of food products.

10.4. The Tax Board also arrived at the conclusion that the

goods in question are snacks based on a mere reading of the

ingredients. This conclusion of the Tax Board, solely on the basis

of ingredient, is ex facie fallacious and bereft of any reasoning. It

is also contrary to the Apex Court judgment of Frito Lays India

(supra) and order of CESTAT New Delhi in Pepsi Foods Ltd.

(supra), which has been affirmed by the Apex Court. Though the

said judgments pertains to Excise Law, the same can be relied

upon to ascertain the basic characteristic of the goods in question.

11. The reliance placed upon judgment of this Court in the

case of M/s Compuage Infocom Limited (supra) by learned

counsel for the respondent-revenue, to contend that the

subsequent Notification dated 14.07.2014 would reveal the

intention of Legislature to place the goods in question in Schedule

V, is also misplaced as the Notification dated 14.07.2014

substituted the Schedule V to the RVAT Act and that substitution

was prospective and could not be given retrospective effect, as per

Apex Court judgment of M/s L.R. Brothers Indo Flora Ltd.

(supra). Even otherwise, as per settled position of law, an

amendment in revenue matters can be given retrospective

application only when the same is beneficial to the assessee and

[2023:RJ-JP:21225] (16 of 16) [STR-119/2020]

not otherwise. Reliance in this regard can be placed on Apex Court

judgment of Suchitra Components Ltd. vs. Commissioner of

Central Excise, Guntur reported in (2006) 12 SCC 452.

12. In view of the foregoing analysis, considering that the

Revenue and all the authorities below have misinterpreted the Co-

ordinate Bench judgment of Pepsico India Holding (S.B. STR

No. 194/2009; decided on 22.12.2016) (supra); that

Revenue has failed to discharge its onus to establish that the

goods in question would fall in general/residual/orphan entry and

not the specific entry; that no cogent reason has been assigned to

hold the goods in questions as 'snacks'; that the goods in question

have been classified as namkeen as per the FSSAI license; that

the goods in question have been held to be namkeen by Apex

Court in Frito Lays India (supra) and Pepsi Foods Ltd.

(supra), this Court is inclined to answer the questions of law

framed herein-above in favour of the petitioner-assessee and

against the respondent-revenue.

13. Accordingly, all these STRs are allowed. The order

impugned of the Tax Board and the authorities below are quashed

and set aside.

14. Pending application(s), if any, shall stand disposed of.

(SAMEER JAIN),J

ANIL SHARMA /70-73

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