1 mgj IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Sales Tax Appeal No. 5 of 2008 M/s Chavan Foods ..Appellant vs. The Commissioner of Sales Tax ..Respondent Sales Tax Appeal no. 6 of 2008 M/s Delicia Foods ..Appellant vs. The Commissioner of Sales Tax ..Respondent Sales Tax Appeal No. 7 of 2008 M/s Monginis Foods Pvt.Ltd ..Appellant vs. The Commissioner of Sales Tax ..Respondent Mr.P.V.Surte with Mr.Subhash P.Surte i/b P.V.Surte and Co. for appellant in all appeals. Mr.B.B.Sharma, A.G.P. for respondent in all appeals. 2 CORAM: V.C.DAGA AND K.K.TATED JJ 15th April ,2010 J U D G M E N T (Per K.K.TATED J.) Perused appeals. Heard. 1 The questions involved in all these appeals are common based on similar facts and, therefore, all these three appeals can safely be disposed off by common judgment. INTRODUCTION: 2 Being aggrieved by the order dated 4th July, 2008 passed by Maharashtra Sales Tax Tribunal at Mumbai, the original appellant preferred present appeals under section 27 of the Maharashtra Value Added Tax Act, 2002 (for short MVAT Act ). 3 The issue involved in these appeals is about interpretation of entry 107(11)(f) of MVAT Act inserted on 1st 3 February, 2006, which was in force during the period from 1st February, 2006 to 1st February, 2008 only. THE FACTS (SALES TAX APPEAL NO.5 OF 2008) 4 The appellant M/s Chavan Foods carries on business of manufacture and sale of ice-cream at Pune. As a result of amendment to entry 107(11)(f) the appellant filed an application under section 56(e) of the MVAT Act on 1st September, 2006 before the Commissioner and requested him to decide the rate of tax applicable to the sale of ice creams covered by entry 107(11)(f). It was the case of the appellant before the Commissioner that ice cream was manufactured by the appellant for sale. He contended before the Commissioner that the appellant was not engaged in the business of serving ice creams for consumption and, therefore, the goods in 4 question i.e. ice cream was squarely covered by entry 107(11)(f). 5 The appellant submitted before the Commissioner that as the goods were not covered by expression ready to serve foods as well as it were not served for consumption, the appellant is squarely covered by the said entry. The Commissioner by order dated 26th February, 2008 rejected the contention raised by the appellant. 6 Being aggrieved by the order dated 26th February, 2008 passed by the Commissioner under section 56(1)(e) and under section 56(2) of the MVAT Act, the appellant preferred VAT Appeal No.8 of 2008 before the Second Bench of the Maharashtra Sales Tax Tribunal at Mumbai. The said appeal was dismissed by the Tribunal by judgment dated 4th July, 2008 confirming the order passed by the 5 Commissioner. 7 Being aggrieved by the order dated 4th July, 2008 passed by the Tribunal the appellants preferred Sales Tax Appeal No.5 of 2008 in this Court. FACTS IN SALES TAX NO. 6 OF 2008 8 The appellant is registered under the MVAT Act. The appellant is manufacturer of various products such as breads, cakes and pastries. The appellant felt that the cakes and pastries which were sold by the appellant to other dealers are liable to tax at the rate of 4% as covered by entry C-107(11)(f) of Schedule C of MVAT. To confirm these facts the appellant sought clarification about the rate of tax by making an application on 20th February, 2006 to the Deputy Commissioner of Sales Tax (Legal). By letter dated 6th May, 2006, the Commissioner of Sales Tax, confirmed the 6 belief of the appellant. Acting on this clarification the appellant started collecting sales tax @ 4% on sale of cakes and pastries. 9 On 20th June, 2007 the appellant received another communication from the Commissioner whereby the Commissioner has enclosed a copy of determination order dated 31st May 2007 passed in the case of one M/s Parampara Food Products. By the said communication the appellant was requested to take note of the said determination order. The communication dated 20th June, 2007 from Commissioner created a doubt in the mind of the appellant and hence it applied to the Commissioner for seeking determination under sections 56(1)(e) and 56(2) of the MVAT Act. The Commissioner by its order dated 6th November, 2007 held that the appellants products would fall under 7 Schedule Enetry E-1 for the period from 1st April, 2005 and, therefore, the appellants were liable to pay tax @ 12.5% 10 Being aggrieved by the order dated 6th November,2007 passed by the learned Commissioner for Sales Tax, the appellants preferred VAT Appeal No.15 of 2007 before the 2nd Bench of Maharashtra Sales Tax Tribunal at Mumbai. The said appeal was dismissed by the Tribunal by judgment dated 4th July 2008 confirming the order passed by the Commissioner. 11 Being aggrieved by the order dated 4th July 2008 passed by the Tribunal, the appellants preferred Sales Tax Appeal No. 6 of 2008 in this Court. FACTS OF APPEAL NO. 7 OF 2008 12 In Sales Tax Appeal No.7 of 2008, the appellant by an application dated 20th February, 2006 requested the Commissioner of Sales Tax to clarify the rate of taxes 8 applicable to the sale of cakes, pastries and other goods. 13 By reply dated 28th April, 2006, the commissioner of Sales Tax informed the appellant that the rate of tax will be 4%. Lateron on 20th June, 2007, the Commissioner informed the Appellant that in another case he has passed the order holding that the rate of tax is 12.5% being the goods covered under Entry I of Schedule E and, therefore, the appellant may file an application under section 56 if he desires to have a statutory ruling. 14 In view of this communication, the appellant on 18th July, 2007 filed application under section 56(1)(e) of MVAT Act before the Commissioner of Sales Tax, Maharashtra State, Mumbai for determination of the rate of tax applicable to the sale of cakes and pastries, panpizza, veg. Burger etc. sold 9 under invoice no.2429 dated 9th June, 2007. According to the appellant, the goods sold by him were covered by entry 107(11)(f) of Schedule C to the MVAT Act. The said entry was inserted on 1st February, 2006 and was in force till 1st February 2008, thereafter it was repealed. 15 The Commissioner of Sales Tax by his order dated 6th November, 2007 held that the goods sold by the appellants are covered by entry 1 of Schedule E and are liable to tax at 12.5%. The learned Counsel for the appellant submits that the Commissioner held that the goods sold by the appellant are ready to eat food and, therefore, they were not covered by entry C-107(11)(f). 16 Being aggrieved by the order passed by the learned Commissioner of Sales Tax, the appellant filed an appeal under section 26 of the MVAT Act before 10 the Maharashtra Sales Tax Tribunal at Mumbai. The Tribunal by its order dated 4th July 2008 dismissed the appeal confirming the order passed by the Commissioner. THE ISSUE: 17 The main issue which arises in the present appeals for consideration is: whether or not the products in which the appellants are dealing covered under entry C-107(11)(f). Entry C-107(11)(f) reads as under: Schedule C-107: (11)(a) Raw meat, raw flesh of poultry and raw sea food including fish, prawns, lobsters, crabs and shrimps when sold in frozen state or in sealed container, (b) fruits and vegetables when sold in frozen state or in sealed container; (c) Processed, semi processed or semi-cooked food articles made from meat of any animal or flesh of bird including Ham, Bacon, Sausages, Salami or 11 Kababs, whether or not sold in frozen state or in sealed container; (d) Processed, semi proce3ssed or semi cooked flesh of poultry, seafood including fish, prawns, lobsters, crabs and shrimps, whether or not sold in frozen state or in sealed container; (e) Processed, semi processed or semi cooked fruits and vegetables including fruit jams, jelly, pickle, sauce, porridge, marmalade, cottage cheese (paneer) honey, preserved fruits, fruit squash, fruit paste, fruit drink, fruit juice, vegetable juice, squashes, syrups, cordials, whether or not sold in frozen stage or in sealed container; (f) Food stuffs and food provisions of all kinds including raw, semi cooked or semi processed foods, ready to mix and ready to cook preparations excluding ready to serve foods; Explanation: The items referred to in clause (a) to 9f) will not be covered by the scope of this entry when those are served for consumption. SUBMISSIONS 18 Mr. Surte, learned Counsel appearing on behalf of the appellants 12 submits that the appellants are dealing in goods which are covered under entry 11(a) (f) because the appellants are not selling goods for the purpose of ready for consumption to the customers. He submits that as per MVAT Act if the goods are sold for consumption, then, tax would be @ 12.5% and if the goods are not sold directly for consumption to the customers then tax liability would be @ 4%. He thus submits that in the present case the appellants are carrying on activities of manufacturing goods and selling them in wholesale basis to the dealers or agents so that they can sell it to the retailers or public at large. The appellants never sell the goods to the consumers directly for the purposes of consumption. He submits that the goods sold by the appellants are covered by the expression food stuff . 13 19 According to Mr. Surte, the appellants are engaged in the business of selling the goods to various dealers who in turn purchase the goods for resale. The appellants do not serve the goods manufactured by them to the consumers but sell them to other dealers on whole sale basis. The distinction between sale and served for consumption is sharp.. He submits that the Commissioner, Sales Tax Tribunal erred in holding that the goods sold by the appellants are covered by entry 1 of Schedule E and liable to pay tax @ 12.5% 20 Mr.Surte submits that the Commissioner erred in holding that the goods sold by the appellants were ready to eat food and, therefore, they were not covered by entry C-107(11)(f). The Commissioner observed that there are two exclusions. Main entry excludes ready to 14 serve food and second exclusion is in the explanation where it is stated that the items referred to in clause (a) to (f) will not be covered by the scope of this entry when those are served for consumption. He submits that both the authorities below erred in holding that ready to serve food implies food which is ready to eat and erroneously proceeded to hold that anything which is food ready to eat excluded from entry C-107(11)(f). 21 The learned counsel for the Appellants submitted that when the expression ready to serve food is not defined under the Act, the said expression ought to have been interpreted in a manner as understood in common parlance. Various decisions on the meaning of the expression in common parlance though cited were not duly considered by the Tribunal. According to him, a large number of cases including 15 the judgment of the Apex Court as to what is meant by food stuffs and food provisions though cited were brushed aside by the Tribunal though they were specifically cited for consideration wherein it was held that food not ready to serve means food ready to eat. The very meaning of the word food is something which can be eaten and if food ready to eat is not covered by Entry C-107(11)(f) then nothing will be covered by the expression food stuffs and food provisions. He further submitted that the Tribunal also ignored the ratio of the judgment in the case of M/s Chitale Bandhu Vs. State of Maharashtra in Second Appeal No.442/1990 decided on 20.09.1991 in which the Appellant was selling food stuffs which were meant for consumption but the Tribunal erroneously made a distinction between food stuffs sold and food stuffs 16 served for consumption. The said judgment was distinguished by observing that it was under the earlier enactment but the fact that it was held by the Tribunal and accepted by the Department over two decades goes to prove that selling food stuffs is different from serving food stuff for consumption. 22 Mr. Surte submits that exclusion clause referred to the ready to serve food and not ready to eat food . The explanation to the entry further says that entry (f) will not cover food stuff when those are served for consumption. At both places, there is a reference to the service of food. The food is served in hotels and restaurants. Shops do not serve food. They sell food. The shops do not hold eating house licence whereas the hotels and restaurants hold licence to serve food. Therefore, it was wrong to 17 exclude the goods manufactured by the appellants for sale and which are not served for consumption were excluded from the entry 107(11)(f). 23 The learned Counsel appearing on behalf of the appellants submits that even as per the notification dated 15th May, 1986 issued under section 8A of the Bombay Sales Tax Act, it was clear that the tax liability on the goods was on the last point of sale. He relied on the notification which explained last point of sale means a point of sale when the sale was effected within the State of Maharashtra (other than a sale falling under section 75 of the said Act) by dealer to any person, who was not registered under the said Act; or to a registered dealer who purchased the goods for the purpose other than for resale or to any person by way of or as a part of 18 any service rendered in respect of the goods covered by entries 2 and 3 of the notification or in any other manner whatsoever of the said articles for consumption inside any eating house, restaurant, hotel, canteen, refreshment room or boarding establishment, or any part thereof. The text of the said notification reads as under: No.STA.1195/CR-114/Taxation 1 dated 15th May, 1996.- In exercise of powers conferred by sub-section (1) of section 8A of the Bombay Sales Tax Act, 1959 (Bom.LI of 1959), hereinafter referred to as the said Act ) and of all other powers enabling it on that behalf and in supersession of all the earlier notifications issued in this behalf, the Government of Maharashtra, after previous publication as required by the said sub-section (1) of section 8A, hereby specifies; the last point of sale to be the point of sale at which the goods specified in column (2) of the Statement below shall be taxed with effect from the 1st day of October, 1995 under the said Act, namely:- STATEMENT 19 Sr.No. Goods for last point of sales 1 2 1 Precious stones including diamonds, synthetic or artificial stones and pearls whether real, artificial or cultured, covered by entry 98A in Part II of Schedule C. 2 Food ready to serve. 3 Foreign Liquor as defined in rule 3(b)(i) of the Bombay Foreign Liquor Rules, 1953 and which has been brought into India. 4 Coal Gas, Natural Gas, Compressed Natural Gas, Associated Gases,Lean Gas and Mixture of Gases. Explanation: - The expression last point of sale means a point of sale when the sale is effected within the State of Maharashtra (other than a sale falling under section 75 of the said Act) by a dealer to any person who is not a registered under the said act; or to a registered dealer who buys the goods for the purpose other than for resale or to any person by way of or as a part of any service rendered in respect of the goods covered by entries 2 and 3 above or in any other manner whatsoever of the said articles for consumption inside any eating house, restaurant, hotel, canteen, refreshment room or boarding 20 establishment or any part thereof. 24 Mr.Surte submits that it is crystal clear from this notification that the tax liability was attracted on the last point of sale. In the present case the appellants were manufacturers and they sold their goods to dealers who in turn sold to the consumers and/or shop keepers. Therefore, both the authorities below erred in coming to the conclusion that the appellants were selling the goods for consumption purpose. 25 On the other hand, learned A.G.P. appearing on behalf of the respondents in support of judgment of both the authorities below would submit that the products involved in the present case were ready to serve and, therefore, the same could not be covered under entry C-107(11) (f). It was specifically excluded in entry 11(f) ready to serve foods. This 21 itself shows that the goods in which the appellants were dealing were ready to serve . The schedule entry for food stuffs and food provisions is a wide entry which included raw, semi cooked or semi processed foods, ready to mix and ready to cook preparations. But this entry came with an exclusion clause which was sweeping in its ambit. It had specifically excluded the category of ready to serve foods i.e food which was ready to eat. Here the exclusion ready to serve foods could be construed as food which was ready to eat where nothing more needed to be done to make it ready for the table. Such foods were specifically excluded from the purview of schedule entry C-107(11)(f). 26 The products which were specifically mentioned under the entry belong to a specific category and they spoke for themselves. They were : 22 i)Raw foods ii)Semi cooked foods iii)ready to mix foods iv)Ready to eat foods The common features in the entries listed above were that all these foods which were not ready to eat foods and some process was needed to be done on them to make them ready for consumption. The specie of ready to eat foods or ready to serve foods did not belong to the genus of raw, semi processed, semi cooked foods . Therefore, it was not to fall under schedule entry C-107(11)(f). 27 He submits that admittedly the products/items, the subject matter of these appeals, which were manufactured and sold by the appellants were food items and were of such a nature that those could be consumed as it is. That is to say that they were ready to eat and ready to serve. 23 He further submitted that exclusion clause in the main entry excluding ready to serve foods excluded ready finished food product items which could be consumed directly without any further cooking or process being done to the product. Service means serviceable for . Food to which nothing needed to be done was ready to serve food. This serving was not restricted to merely serving of food in a hotel or a public eating place. Exclusion did not contemplate any act of service. Ready to serve foods meant ready to eat foods which was a tautology for ready to serve foods as they both implied the same. 28 The learned A.G.P. for the Respondents submitted that a plain reading of the schedule Entry C-107(11)(f) showed that the category of ready to serve foods was excluded from the main entry and the category of food served for 24 consumption was excluded in view of its explanation. The explanation given after the schedule Entry C-107(11)(f) stated that the items referred to in clause (a) to (f) and not be covered by the scope of this entry when those were served for consumption. The exclusion of food served for consumption as given in the explanation contemplated food served in hotels, restaurants, eating houses, refreshment rooms, boarding establishments and other similar entities. 29 The explanation food served for consumption were applicable to all clauses from (a) to (f) whereas the explanation ready to serve food was applicable only to clause (f). According to him, one of the prime principle of interpretation is that one should give meaning to each and every word in a statute, nothing is to be understood as 25 redundant in a statute. The two exclusions provided in the entry did carry a meaning and a purpose. Both the exclusions i.e. exclusion of ready to serve food from the main entry and the exclusion provided in the explanation render themselves to construction and they were to be attributed like (i) the exclusion of ready to serve foods in the main entry excludes food ready to eat in any place and (ii) the exclusion of food served for consumption as given in the explanation excludes food served in hotels, restaurants, eating houses, refreshment rooms, boarding establishments and other similar entities. 30 The learned A.G.P. further submits that the cardinal rule of interpretation is that every word used in statute has some purpose; ordinarily no word therein can be said to be redundant or 26 superfluous. Therefore, while interpreting the provisions, nothing is to be subtracted and nothing is to be added therein. To substantiate this, the learned AGP placed reliance on the judgment in case of K.M.Mohamed Abdul Khader Vs. The State of Madras and another reported in (1960)11 STC 247 (Mad) wherein it has been held as under:- 14.It is a general rule of construction that every provision or word employed by a statute was intended to have effect or be of some use and a tautology or superfluity of language should not be imputed to the Legislature except without necessity. Prima facie a statute is not supposed to use words unnecessarily. 31 The learned AGP also relied on the judgment in the matter of R.Shanmuga Rajeswara Sethupathi and others Vs. Income Tax Appellate Tribunal reported in 58 ITR 514. In this case, the Madras High Court held as under:- 27 The real intent of a statute must be gathered from the words used in the statute; that if the expression used in a statute read in the context of the entire enactment, is capable for a rational construction, the aim and object of what the legislature thought would not really call for consideration; and that it is not the presumptions of the legislature that make the law but what is expressly set down in the statute. 32 The learned AGP further relied on the judgment in case of Grasim Industries Ltd. Vs. Collector of Customs, Mumbai reported in 128 STC 349. In this case, the Apex Court held thus:- No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. Every statute is an edict of the Legislature: The elementary 28 principle of interpreting any word while considering a statute is to gather the means or sententia legis of the Legislature. Where the words are clear and there is no obscurity and the intention of the Legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or altering the statutory provisions. Wherever the language is clear the intention of the Legislature is to be gathered from the language used. While doing so what has been said in the statute and what has not been said has to be noted. A construction which requires for its support addition or substitution of words which results in rejection of words has to be avoided. The Court cannot aid the Legislature s defective phrasing of an Act, the Court cannot add or amend and by construction make up deficiencies which are left there. In the case of an ordinary word there should