OT.Appl 1/2007 BEFORE HON’BLE MR. JUSTICE RANJAN GOGOI HON’BLE MR. JUSTICE B.P.KATAKEY Ranjan Gogoi, J The core issue arising in this revision petition filed by the petitioner Company is whether ’potato chips’ manufactured and sold by the petitioner Compa ny under the brand name Lays and Uncle Chips would be covered by Entry 80 o Part A of the Second Schedule to the Assam Value Added Tax Act, 2003 (hereinaft er referred to as ’the Act’) or the said product would fall under the residuary entry covered by the Fifth Schedule to the Act. The aforesaid question arises ou t of an order dated 10.9.2007 passed by the Commissioner of Taxes, Assam on an a pplication filed by the petitioner Company under Section 105 of the Act. 2. The Assam Value Added Tax Act, 2003 has been brought into effect from 1.5.2005. The Act contains five schedules. The First Schedule enumerates g oods that are exempted from payment of tax. The second schedule consists of thre e parts-Part A, Part B and Part C which deal with different items chargeable to tax at the rate of 4%. The Third and the Fourth Schedule which would not be rele vant for the present adjudication deal with gold, silver, ornaments, jewellery e tc. etc. which are chargeable to tax at the first point of sale. The Fifth Sche dule includes within its fold, works contract, lease transactions and all other goods not covered by the first, second, third and fourth schedule . 3. Entry 80 of Part A of the Second Schedule at the relevant time w as in the following terms : 80. Processed or preserved vegetables & fruits including fruit jam, jelly, p ickle, fruit squash, paste, fruit drink and fruit juice. . 4. The petitioner Company, who claims to have consistently classifi ed the ’potato chips’ manufactured by it under the aforesaid Entry 80 of Part A of the Second Schedule and collecting and paying the Value Added Tax (VAT) at th e rate of 4% on the turn over relating to sale of ’potato chips’, received a com munication dated 5.2.2007 from the jurisdictional Superintendent of Taxes, Guwah ati seeking to raise a demand for payment of differential tax of 8.5% on the gro und that the ’potato chips’ manufactured by the petitioner Company are classifia ble under the residuary item included in the Fifth Schedule to the Act. In thes e circumstances, the petitioner Company filed an application under Section 105 o f the Act before the Commissioner of Taxes for determination of the classificati on of the ’potato chips’ manufactured and sold by it. The learned Commissioner h aving taken a view adverse to the petitioner Company and having held the ’potato chips’ manufactured and sold by it to be classifiable under Serial No.1 of the Fifth Schedule to the Act and, therefore, liable to tax at the rate of 12.5%, th e instant revision petition has been filed by the petitioner Company under Secti on 81 of the Act. 5. We have heard Mr CS Lodha, learned counsel for the petitioner an d Mr D Saikia, learned Standing Counsel, Finance appearing on behalf of the resp ondents. 6. Entry 80 of Part A of the Second Schedule to the Act as original ly enacted was in the following terms : Processed or preserved vegetables & fruits. With effect from 8.8.2005 to 4.12.2005, the aforesaid Entry read as follows: Processed or preserved fruits & vegetables excluding jam, jelly, pickle, fruit squash, paste, fruit drinks and fruit juice. Thereafter, from 5.12.2005 to 15.10.2008 Entry 80 was once again amended in the following terms : Processed or preserved fruits & vegetables including jam, jelly, pickle, fruit squash, paste, fruit drinks and fruit juice. Once again with effect from 16.10.2008, the said Entry was amend ed to read as follows: Processed or preserved vegetables and fruits including jams, jelly, pickles, fr uit squash, paste, fruit drinks and fruit juice but excluding ’potato chips’, ba nana chips and cooked preparation of the vegetables and fruits. 7. Sri CS Lodha, learned senior counsel for the revision petitioner apart from contending that the huge volume of materials placed by the petitione r Company before the learned Commissioner in support of its contention that ’pot ato chips’ would be classifiable under Entry 80 of Part A of the Second Schedule and not under residuary item included in the Fifth Schedule to the Act were ign ored by the said authority as the same do not find any consideration in the impu gned order, has also drawn the attention of the Court to the amendments made in respect of the said Entry. In this regard, the learned counsel has pointed out t hat processed or preserved fruits and vegetables at one point of time specifical ly excluded jams, jelly, pickles, fruit squash, paste, fruit drinks and fruit ju ice which items were, however, included with effect from 5.12.2005. The definiti on of processed or preserved fruit and vegetables, therefore, according to the l earned counsel, became an inclusive definition taking within its compass all oth er species including ’potato chips’ belonging to the common genus of ’processed vegetables’. This, according to the learned counsel, has been clearly manifested by the specific exclusion of the ’potato chips’ from the purview of Entry 80 wi th effect from 16.10.2008 while the said Entry continued to include jam, jelly, pickles etc. 8. Sri Lodha, learned senior counsel for the petitioner has further pointed out that if any particular item is classifiable under a specific Entry in a Schedule, such item or commodity must not be relegated to the residuary ent ry. The learned counsel further contended that in several States the same produc t has been classified under the specific entry of the VAT Act in force in the sa id States either by the revenue itself or under judicial/ quasi judicial orders. The learned counsel has further contended that though an entry in a fiscal stat ute has to be usually understood according to the ordinary or dictionary meaning of the words i.e. by adoption of the common parlance test, in situations where the application of such test would produce an absurd or inconsistent result or t here are indications that a special meaning is attached to the particular words in the statute then the ordinary or dictionary meaning would not be applicable b ut the special meaning ascribed to the particular goods in the market should be allowed to prevail. In this regard, reliance has been placed by Sri Lodha, learn ed counsel for the petitioner on a judgment of the Apex Court in Collector of Ce ntral Excise -vs- Krishna Carbon Paper Company Ltd., reported in 1989-(072)-STC- 0280-SC. 9. The learned counsel for the petitioner has further pointed out t hat the Government of India, Ministry of Finance (Department of Revenue) by Circ ular No. 6/88 had issued instructions for the purpose of classification of potat o wafers as preparations of vegetables and, therefore, as appropriately classifi able under Chapter 20 of the Central Excise Tariff Act. The learned counsel has further pointed out that the Ministry of Food Processing had also issued instruc tions that ’potato chips’ should be treated as a vegetable based product. In thi s regard, the attention of the Court has been specifically drawn to the specific Government Notifications issued. Relying on a judgment of the Apex Court in Sta te of Tamil Nadu -vs- Mahi Traders & Ors., reported in 73-STC-228-SC and that of Andhra Pradesh High Court in Concap Capacitors -vs- State of Andhra Pradesh & A nr., (2006) 148 STC 398 (AP), the learned counsel has submitted that the view ta ken by the Government of India with regard to classification of a product should act as a sufficient basis for the Court to hold in a similar manner. 10. Lastly, the learned counsel for the petitioner has contended tha t the definition of processed vegetable or fruit in Entry 80 of Part A of the Se cond Schedule to the Act is an inclusive definition and jam, jelly, pickles, fru it juices etc. having been included as items of processed vegetables or fruits, as may be, there is no reason why the inclusive definition should not cover ’pot ato chips’ as an item of processed vegetable. The purport and effect of an inclu sive definition has also been sought to be explained by the learned counsel on t he basis of several decisions of the Apex Court, specific details of which, howe ver, need not be noticed. The learned counsel for the petitioner has also relied on a recent decision of the Apex Court in Mauri Yeast India Pvt. Ltd. -vs- Stat e of Uttar Pradesh & Anr., reported in (2008) 5 SCC 680 to contend that in the p resent case even if there is any doubt as to which of the entries would attract the particular product in question, the benefit of such doubt, on the ratio of t he law laid down by the Apex Court in the above case, should go in favour of the assessee i.e. the revision petitioner herein. 11. The arguments advanced on behalf of the petitioner have been veh emently resisted by Sri D. Saikia, learned counsel appearing for the respondents . Placing before the Court certain literature circulated by the petitioner on it s web site, Sri Saikia has pointed out that it is the case of the petitioner tha t ’potato chips’ is a snack item and not a processed vegetable item. Sri Saikia has submitted that the process of preparation of ’potato chips’ is really a manu facturing process and the end product is a new item which in the market is bough t and sold as a snack item and not as a processed vegetable. Relying on a decisi on of the Apex Court in Commissioner of Income Tax, Kerala -vs- Tara Agencies r eported in (2007) 6 SCC 429, Sri Saikia has tried to demonstrate before the Cour t what is involved in a process of manufacture and further to show that ’potato chips’ involved in the present case undergoes such a process. Relying on another judgment of the Apex Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam -vs- M/s. Pio Food Packers reported in 1980 Supp SCC 174, Sri Saikia has submitted that there is a vast difference of identity betwe en the original commodity (potato) and the processed/ manufactured item (’potato chips’) and, therefore, the item processed or manufactured as ’potato chips’ do es not retain its original identity. Relying on several other judgments of the A pex Court i.e., M/s Saraswati Sugar Mills & Ors. -vs- Haryana State Board & Ors. reported in (1992) 1 SCC 418; Indo International Industries -vs- CST reported i n (1981) 2 SCC 528; Thailai Chidambara Nadar -vs- Addl. Appellate Assistant Com missioner reported in (1985) 4 SCC 30, Sri Saikia has submitted that in the abse nce of any definition of processed vegetable in the Act, the meaning of the said term must be understood by application of the common parlance test. Sri Saikia has further argued that ’potato chips’ in the market is understood by the consum ers as a snack item and not as a vegetable item. There is no sale or purchase of ’potato chips’ as a vegetable product. In such circumstances, according to Sri Saikia, by application of the common parlance test, which is the judicially appr oved test for determining the meaning of an item in a taxing statue in the absen ce of any specific definition, ’potato chips’ would be classifiable not as a pro cessed vegetable item under Entry 80 of Part A of the Second Schedule. Rather, t he said item would be more appropriately classifiable under the residuary item c ontained in Serial No.1 of the Fifth Schedule to the Act. 12. Sri Saikia has sought to counter the contention advanced on beha lf of the petitioner with regard to the inclusive definition of the expression ’ processed vegetable’ by contending that the reference to jams, jelly, pickle etc . is illustrative and comprehensive to include only the items specifically menti oned and no other item. In this regard, reliance has been placed on a judgment o f the Apex Court in the case of Reserve Bank of India -vs- Peerless General Fina nce & Investment Co. Ltd & Ors. reported in (1987) 1 SCC 424. Sri Saikia has fu rther submitted that the specific exclusion of ’potato chips’ from Entry-80 with effect from 16.10.2008 is merely clarificatory. According to Sri Saikia, the am endment of Entry-80 to the above effect has made it explicit what was always imp licit. 13. The rival submissions advanced on behalf of the parties have rec eived our most anxious consideration. The basic approach while dealing with claims and counter claims of classificatio n under the main and residuary item of tariff has been explained by the Apex Co urt in Dunlop India Ltd. & Anr. -vs- Union of India & Ors., reported in 1983 (13 ) E.L.T 1566 (S.C.) in the following manner:- when an article is by all standards classifiable under a specific item in the tariff schedule it would be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary class . The aforesaid aspect of the matter, therefore, need not detain the Court any fur ther. 14. We have also read through the contents of Entry-80 as originally enacted and the amendments made thereto from time to time. Originally Entry 80 of Part A of Schedule II to the Act was to the following effect: Processed or preserved vegetables and fruits. With effect from 8.8.2005, specifically jam, jelly, pickle, fruit squash, paste, fruit drinks and fruit juice were excluded from the purview of the said Entry. Again, with effect from 5.12.2005, jam, jelly, pickle, fruit squash, paste, frui t drinks and fruit juice were included with the purview of the aforesaid Entry-8 0. With effect from 16.10.2008, while jam, jelly, pickles, fruit squash, paste, fruit drinks and fruit juice continued to remain included, ’potato chips’, banan a chips and cooked preparations of the vegetables and fruits were excluded. In D eepak Agro Solution Limited -vs- Commissioner of Customs, Maharashtra reported i n (2008) 8 SCC 358 (Para 19) the Apex Court after considering the effect of incl usion and exclusion of items from the purview of specific entries in the Customs Tariff and Central Excise Tariff, laid down that it is well settled, what is n ot excluded would be held to be included . The effect of inclusion of jam, jelly , pickle etc. within the fold of Entry 80 and the absence of any specific exclus ion of ’potato chips’ from the purview of the said Entry until 16.10.2008 would, therefore, express a clear legislative intent of inclusion of ’potato chips’ un der Entry 80. 15. All items of vegetables or fruits that undergo any form of proce ssing so long such items have an acceptable degree of similarity, in our conside red opinion, would deserved to be classified as items of processed vegetables or fruits, as may be. A person buying jam or jelly or pickle does not buy such ite ms either as a fruit or vegetable item; yet, jam, jelly and pickle etc. have bee n included as items of processed vegetable or fruit under Entry 80. ’potato chip s’ processed or manufactured from potato, though it may be sold or purchased as a snack item, discloses certain common characteristics or features that are to b e found in fruit or vegetable items specifically included under Entry 80. In suc h a situation, we are of the view that it would be correct to hold that ’potato chips’, though not specifically included, yet, as the same has not been excluded either, would come within the inclusive definition of processed vegetable or fr uit so as to fall under Entry 80 of Part A of the Second Schedule to the Act. 16. The argument advanced by Sri Saikia, learned counsel for the res pondents by placing reliance on the decision of the Apex Court in Reserve Bank o f India -vs- Peerless General Finance & Investment Company Ltd. (supra) that in the present case the word including appearing in Entry 80 was intended not to expand the meaning of processed vegetable or fruit and such expansion must be u nderstood to be limited to the items specifically mentioned in the said Entry 80 , may now be considered. In the aforesaid case, the Apex Court laid down that th e legislative resorts to the inclusive definition are made : (1) to enlarge the meaning of words or phrases so as to take in the ordinary, p opular and natural sense of the words and also the sense which the statute wishe s to attribute to it, (2) to include meanings about which there might be some dispute, or, (3) to bring under one nomenclature all transactions possessing certain similar features but going under different names. However, the Apex Court also laid down that depending on the co ntext, in the process of enlarging, the definition may even become exhaustive . The context in which the above view was expressed by the Hon’ble Supreme Court m ust be understood to see whether the said view or logical extensions thereof can be made applicable to the present case. In Reserve Bank of India -vs- Peerless General Finance & Investment Company Ltd. (supra), the Apex Court was consideri ng as to whether the term includes appearing in Section 2(e) of the Prize Chit s & Money Circulation Schemes (Banning) Act, 1978 could legitimately be underst ood to encompass within the expression Prize Chit , an endowment scheme of the company so as to make the ban on prize chits applicable to the endowment scheme. The Apex Court answered the aforesaid question in the negative by holding that an endowment scheme, which does not include any offer of prize money determined by luck and chance, cannot be brought within the expression ’prize chit’ by virt ue of the inclusive definition. What is evident from a reading of the said judgm ent is that the word includes in that case was understood to include all speci es belonging to the same genus which is an essential principle of judicial inter pretation of an inclusive definition. As already held, in the present case, when the items which are not ordinarily understood to be items of processed vegetabl e or fruit i.e. jam, jelly, pickle etc. are included within the definition of pr ocessed fruit or vegetable, the other species of the same genus necessarily has to be understood to be included particularly, in the absence of any specific exc lusion. 17. Much arguments have been advanced on behalf of the rival parties as to whether, in the present case, the words processed vegetables or fruits should be understood by application of the common parlance test i.e. as to wheth er the words should be understood in the ordinary sense or the scientific or tec hnical meaning of the said words should be applied. The numerous precedents cite d by the learned counsels for the parties on the point have received our due and anxious consideration. There can be no manner of doubt that If a statute uses the ordinary words in every day use, such words should be construed according t o their popular sense & &.. This rule was stated as early as 1831 by Lord Tenterde n in Attorney-General v. Winstanley (1). Similarly, in Grenfell v. Inland Revenu e Commissioner(2), Pollock. B, observed, that if a statute contains language wh ich is capable of being construed in a popular sense such statute is not to be c onstrued according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning of course, by the wo rds ’popular sense’, that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it . (Commissioner of Sales Tax, Madhya Pradesh, Indore -vs- Jaswant Singh Charan Singh. 19 STC 469 (SC)). However, in Collector of Central Excise, Kanpur -vs- Krishna Carbon Paper Comp any (supra), the Apex Court after reiterating the aforesaid proposition hastened to add a note of caution to the effect that if it is discernible that an artifi cial definition is being given to the words or a special meaning is attached to such words, in such a situation, the ordinary or dictionary meaning would not be applicable and the special meaning must be allowed to prevail. The following ob servation of the Apex Court in the case of Collector of Central Excise, Kanpur - vs- Krishna Carbon Paper Co. reported in (1989) 1 SCC 150 would succinctly sum u p the situation : But there is a word of caution that has to be borne in mind in this connection, the words must be understood in popular sense, that is to say, these must be co nfined to the words used in a particular statute and then if in respect of that particular items, as artificial definition is given in the sense that a special meaning is attached to particular words in the statute then the ordinary sense o r dictionary meaning would not be applicable but the meaning of that type of goo ds dealt with by that type of goods in that type of market, should be searched. (Para 12) 18. The law laid down by the Apex Court in Collector of Central Exci se, Kanpur (supra), therefore, has to be understood to mean that in the normal c ourse the ordinary meaning according to the common parlance has to be ascribed b ut in a given case, if the situation so demands, a technical, scientific or spec ial meaning that may be discernible may have to be ascribed to the words used in the statute. 19. In the present case, the specific inclusion of items like jam, j elly, pickles etc., which in common parlance are not understood to be items of p rocessed vegetable or fruit, gives sufficient indication that processed vegetabl e or fruit appearing in Entry 80 has been given a special or technical meaning a s distinguished from the ordinary meaning. If a processed vegetable or fruit is to be understood in the ordinary way, none of the items specifically included in Entry 80 could have been so included. That apart, the Government of India has u nderstood ’potato chips’ to be a vegetable product for the purpose of classifica tion under the Central Excise Tariff Act. Such understanding has also been reite rated by the Ministry of Food Processing. As held by the Apex Court in State of Tamil Nadu & Ors. -vs- Mahi Traders (supra), Contemporaneous exposition by the administrative authorities is very useful and relevant guide to the interpretati on of the expressions used in a statute . Considering the above, we are of the v iew that the words processed vegetables or fruits appearing in Entry-80 must b e ascribed a fictional meaning to include items which in everyday use may not be vegetable or fruit items. 20. The net result of the above discussions leave no doubt in our mi nd that ’potato chips’ manufactured and sold by the petitioner Company would fal l under Entry 80 of Part A of Schedule II to the Assam Value Added Tax Act, 2003 , as contended by the petitioner and that the said item will not fall under the residuary item contained in Serial No.1 of the Fifth Schedule to the Act as clai med by the Revenue. Our above finding, naturally, has to be understood in the c ontext of the