Saturday, 13 May 2017

SC : 'Appy Fizz' not "aerated soft drink", upholds classification basis scientific & technical meaning

SC rules that ‘Appy Fizz’ is classifiable as “fruit juice based drink” under Entry 71 of Notification issued u/s 6(1)(d) of Kerala VAT Act, liable to VAT at 12.5% (now 14.5%); Rejects Revenue’s reliance on Kerala HC order in case of Trade Lines which applied the common parlance test to classify said product as “aerated branded soft drink” taxable at 20% u/s 6(1)(a); Perusing legislative
history of said provisions, SC states that Section 6(1)(a) always covered 'aerated branded soft drinks' excluding ‘soda' with tax liability of 20% while inclusion of fruit juice based drinks in Entry 71 clearly proved that such drinks were never treated to be included in “aerated branded soft drinks”; Goods enumerated u/s 6(1)(a) are tobacco based goods, pan masala, other manufactured tobacco and manufactured tobacco substitutes, and Legislature has indicated that higher rate of tax has been fixed for those goods which are harmful for environment and health; SC observes that State Govt.’s delegated legislative power to notify goods taxable at 12.5% u/s 6(1)(d) is restricted and can be exercised only when they do not fall u/s 6(1)(a) or 6(1)(c), whie stating that Rules of Interpretation annexed to the VAT Act are for interpreting items in Schedules I, II and III, not for Section 6(1)(a) or Entry 71 of Notification (S.R.O. No. 119 of 2008) issued in exercise of power u/s 6(1)(d); Holds that Committee of Jt. Commissioners and HC clearly erred in brushing aside certificates produced under Food Safety and Standards (Food Products Standards & Food Additives) Regulations, 2011 and Institute of Chemical Technology which clearly indicated that, product 'Appy Fizz' does not undergo aeration or carbonation but is thermally processed with carbon dioxide (CO2) which helps in preserving Apple Juice concentrate otherwise perishable in nature; Accepts assessee’s plea that doctrine of 'noscitur a sociis' is fully attracted in interpreting Item No. 5 of Entry 71 as ‘Appy Fizz’ is a fruit juice based drink more akin to other commodities included therein (i.e. fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp, and fruit cordial) other than what is included u/s 6(1)(a); Observes, by Notification S.R.O. No. 119 of 2008, residuary entry “similar other products not specifically mentioned under any other entry in this list” was added, which is potent enough to include fruit juice based drinks and it is clear that such drinks are subsumed in Item No. 5 of Entry 71 after the amendment; Further observes, “Aerated branded soft drinks which are referred to in Section 6(1)(a) cannot be drinks which are health drinks. Fruit juice based drinks can be regarded as health drinks as compared to other aerated branded soft drinks like pepsi cola, coca cola, etc”; SC criticizes HC for wrongly discarding scientific and expert opinion w.r.t. manufacturing process and contents of product, and orders of Food Safety Authority which were relevant for considering nature and contents of product  : SC

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