1 STA26.10.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION KJ SALES TAX APPEAL NO.26 OF 2010 The Addl. Commissioner of Sales Tax ) VAT-III, 8th Floor, Vikrikar Bhavan ) Sardar Balwant Singh Dhodhi Marg, ) Mumbai-400 010. )..Appellant Vs. M/s. Bunge India Pvt. Ltd., ) B-401 and 501, Business Square, ) Andheri Kurla Road, Chakala, Andheri (East) ) Mumbai-400 093 )..Respondents ---- Mr.V.A.Sonpal `A’ Panel Counsel for the appellant. Mr. P. V. Surte @ Mr.S.P. Surte for the respondents. ---- CORAM : J.P.DEVADHAR & MRS.MRIDULA BHATKAR,JJ DATE OF RESERVING THE JUDGMENT : 4.2.2011 DATE OF PRONOUNCING THE JUDGMENT : 4.3.2011 JUDGMENT ( PER : MRS.MRIDULA BHATKAR,J) 1 The present appeal is filed directing against the judgment dated 9.7.2010 passed by the Second Bench of the Maharashtra 2 STA26.10.sxw Sales Tax Tribunal, Mumbai. In an appeal, the Tribunal accepted the case of the respondents-manufacturers and held that Margarine is hydrogenated vegetable oil and therefore, it is classifiable under entry C-100 meant for “vanaspati” (hydrogenated vegetable oil). Margarine is a product manufactured by the respondent used for cooking especially for bakery products. Different vegetable oils vis. Coconut oil, groundnut oil, mahua oil, maize (corn) oil, mango kernel fat, mustard oil, sunflower oil, palm oil, etc. can be used to get the Margarine. Margarine is obtained by hydrogenation and emulsification. In the present appeal substantial question of law involved is :- “Whether the Margarine is classified at entry C-100 or entry C-107 (11) (F) liable @ 4% of tax or entry E-1 and taxable @ 12.5% from 1.2.2008 under MVAT Act 2002 ? 2 The respondents are the manufacturers of margarine under the brand name Lotus Margarine - 15 k.g, Golden Seal Margarine 3 STA26.10.sxw - 15 k.g and Silver Seal Margarine - 15 k.g. All these products though named differently is Margarine. The Commissioner of Sales Tax by its order dated 22.2.2008 held that Margarine being a food item was liable to tax @ 4 % covered by entry No.C-107 (11)(F) from 1.2.2006 to 31.1.2008 and @ 12.5% w.e.f 1.2.2008 in terms of entry E-1 of MVAT Act of 2002. Margarine was earlier covered under the Act by entry C-107 (11)(FF) attracting tax @ 4% for the period from 1.2.2006 ( the date on which VAT came into force) to 31.1.2008. In the present case, Tribunal held that the margarine manufactured by the respondents is classifiable under entry C-100 taxable @ 4%. Validity of the order of the Tribunal is challenged in this appeal. 3 We heard learned Counsel appearing for the appellant- revenue and also respondents at length. The submissions of both the parties can be summarised in brief. 4 It was argued on behalf of the appellants that Margarine is made out of hydrogenated oil and so it is neither vegetable oil nor 4 STA26.10.sxw a vegetable hydrogenated oil i.e vanaspati. Vanaspati is made after hydrogenation of the vegetable oil and vanaspati is included in entry C-100 and so it is taxable @ 4%. Though vanaspati and margarine both are obtained by the process of hydrogenation, Margarine needs to undergo further process of emulsification. Vanaspati is in grainy form and margarine is pasty. While manufacturing bakery margarine, water and teel oil is added as per PFA (Prevention Food Adulteration) requirement. Margarine though is manufactured from vegetable oil, it ceases to be hydrogenated vegetable oil in common parlance after conversion. The chemical properties of vanaspati and margarine are different and vanaspati is not used as a bakery product. It was argued that therefore, though in the case of Tungabhadra Industries Limited, Kurnol 1960 Sales Tax SS Vol-11 page-827, hydrogenated groundnut oil which is commonly called as vanaspati is held as groundnut oil within the meaning of rule 18(2) of the Madras General Sales Tax (Turn Over and Assessment Rules 1939), Vanaspati is given a separate entry in Maharashtra Sales Tax Act as C-100 as a hydrogenated vegetable oil and therefore, ratio in 5 STA26.10.sxw Tungabhadra (supra) is not relevant in this case. Margarine is totally different product from the vegetable oil and from hydrogenated vegetable oil i.e vanaspati in respect of its properties and composition. While interpreting entries in Taxing Statutes for calculating taxes, Common Parlance Test is to be applied and not Chemical or Laboratory test. In common parlance, the margarine is known as vanaspati i.e hydrogenated vanaspati oil or not, is to be answered and the Tribunal has failed to appreciate this point especially as per the ratio laid down in M/s. Ramavatar Budhaiprasad Vs. Asstt. STO reported in 12 STC 286(SC) and in Commissioner of Central Excise, Nagpur and Ors. Vs. Shri Baidyanath Ayurved Bhavan Limited and ors., reported in 2009(237) ELT 225, wherein it was held that wherever the term is not defined in the Statutes, Common Parlance Theory is to be adopted. Margarine is not defined in MVAT Act 2002. The individual products molecular structure or composition is also to be considered. The addition of moisture or water and fatty acid by emulsification, essentially result a material change and product margarine is a distinct commodity from vanaspati, a hydrogenated 6 STA26.10.sxw vegetable oil. Hence it was rightly decided by the Commissioner of Sales Tax (CST) that it falls under entry E-1 and taxable @ 12.5 %. 5 Per contra, it was argued that Margarine contains the similar ingredients of vanaspati which is obtained by process of hydrogenation and further emulsification. The emulsifying agents, anti oxidant, salt, water, fatty acid, do not change the basic component and nature of hydrogenated vegetable oil. These agents are mixed to make margarine usable for the purpose of bakery products which helps to make the bakery items more crispy and fluffy. Vanaspati and Margarine both are semi solid substance resembling butter in consistency. It was argued that as per the Vegetable Oil Products Control Order 1947, Margarine could not be labelled and marketed as vegetable ghee (vanaspati) in view of the specification laid down in the Vegetable Oil Products Control Order 1947 of Government of India. One of the conditions is that vegetable oil shall not contain moisture exceeding 0.25% and therefore, the product which was marketed as `Saras Margarine’ where water percentage from 5% to 15% , cannot be 7 STA26.10.sxw marketed as vanaspati. It was submitted that vanaspati is called as Indian margarine because of its use, contents and nature. 6 The opinion of Scientist Dr.D.N.Bhowmick who is working as a Professor and Head of the Department of Oils, Oleochemicals and Surfactants Technology of Mumbai University, Department of Chemical Technology (UDC), Matunga, Mumbai is produced to explain the issue. Professor Bhowmick has discussed the chemical composition of hydrogenated vegetable oils and margarine and has opined as follows :- (A) Molecular structure of triglycerides in Edible Oil, Vanaspati and Margarine are same (B) Margarine is Vanaspati (Hydrogenated Vegetable Oil) with about 12-16% water and other additives (C) Edible oils, HVO and Margarine can be interchangeably used as cooking medium 7 Reliance is placed by the respondents on Tungabhadra (supra) Ramavtar (supra), Hindustan Ferodo Ltd., Vs. Collector of 8 STA26.10.sxw Central Excise, Bombay reported in 106 STC 214 (SC) on the point that the onus is on the revenue to prove that an item falls in a particular entry. He also relied in the case of Commissioner of Central Excise Vs. Simplex Mills Co-operative Ltd., reported in 140 STC 125 (SC) wherein the Supreme Court has interpreted the word ”made up” for the purpose of classification. (Made up goods & Non made up goods). 8 Learned Counsel for the respondents submitted that facts in State of Kerala Vs. Aluva Sugar Agency reported in 8 VST 726 (Ker), are distinguishable. In the said case a margarine was classified under entry 19 of the 1st schedule of Kerala General Sales Tax Act which deals with oil, edible or inedible oil and margarine. It was held that bakery margarine is not edible oil covered by the Notification and so the concession which was given to edible oil was not given to margarine. It was argued that this case is not applicable in Maharashtra because in Kerala margarine was put in the category of oil. However, it is prayed margarine under MVAT is not put in the category of oil, so it is to be included in C-100 9 STA26.10.sxw wherein vanaspati is differently classified. 9 Learned Counsel for the respondents pointed out that margarine which is sold by Kamani Oil Industries Pvt. Ltd., is taxable @ 4%. M/s. Velani & Co., Kamani Oil Industries Pvt. Ltd., - Margarine camy. Margarine produced by Godrej Hershby Ltd., Margarine which is also taxable @ 4% vat. He relied on Merind Ltd., Vs. State of Maharashtra reported in 136 STC 462 (Bom) on the point that if at all it is a settled view, it is not to be disturbed. 10 Vanaspati is an independent product made out of vegetable oil and margarine is basically a western product made out of vegetable oil. Thus both the products originate from edible vegetable oil and both the products have to undergo process of hydrogenation of the vegetable oil. Emulsification is further process which is carried out to obtain margarine. Vanaspati is popularly known as Dalda ghee and it has replaced the pure ghee as it is cheap compared to pure ghee and it is a supplement to edible oil. Margarine is mainly used for bakery products rather in the western countries bakery products i.e bread, biscuits, donuts, 10 STA26.10.sxw muffins are the main food items used everyday. Margarine makes the food item crispy & fluffy. Vanaspati and margarine both are used for the purpose of cooking and both are used as replacement of ghee and vegetable oils. Though vanaspati is grainy and margarine is pasty, both are semi solid white/creamish oil based substances. Due to 20% antioxidents, permitted emulsifying agents and water contents in margarine the desired results of baked product is facilitated. 11 It was argued by the learned Counsel for the Revenue that under the Central Excise Tariff Act, margarine is covered by excise heading (1517) whereas, vanaspati is included under excise heading (1516) under the description of animal or vegetable fats and oils and their fractions particularly or wholly hydrogenated. Learned Counsel though endeavoured to point out that vanaspati and margarine are classified differently under the Central Excise Act; we cannot accept such classification under Central Excise Tariff Act as it is to be independently decided under MVAT. For better and clear understanding of the ingredients, composition 11 STA26.10.sxw and the nature of the margarine, we rely on the opinion of the expert i.e a certificate given by Dr. Bhowmick, wherein he has stated that margarine is a food in plastic form or liquid emulsion containing not less than 80% fat. “Aqueous phase ingredient is water and milk products”. Oil, vanaspati and margarine, all are essentially mixed triglycerides of the fatty acids. Oil and vanaspati contained moisture only in trace quantities whereas, margarine being a formulated product contained about 12 to 16% moisture and other additives. Margarine is formulated using hydrogenated vegetable oil and essentially consists of five operations :- 1) emulsification 2) cooling 3) working 4) resting and 5) packaging and margarine is vanaspati with about 12 to 16% water with other additives. 12 We take into account the fact that the Margarine produced by other manufacturers viz. Kamani or Godrej is taxable @ 4% so under principle of parity Margarine which is produced by the respondents is rightly made taxable @ 4% by Tribunal by its judgment dated 9.7.2010. 12 STA26.10.sxw 13 We would like to point out that during the period 2006-2008 after introduction of MVAT, margarine produced by the respondents was classified in entry C-100 as vanaspati and was taxable @ 4% till the decision of the A.O. Since long period, view taken by the Tribunal holds the field so we fail to understand what made A.O to change his view. We place reliance on the judgment in the case of Merind Ltd., Vs. State of Maharashtra reported in (2004) Vol-136 Sales Tax Cases, page-462, that once a particular view is taken by the authority, it should not be disturbed. 14 Thus we hold that the view taken by the Tribunal that margarine is vanaspati and it is to be classified under entry C-100 and taxable @ 4% is a legal and correct view and cannot be faulted out. (MRS.MRIDULA BHATKAR,J) (J.P.DEVADHAR,J) 13 STA26.10.sxw