1

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6468­6469 OF 2017 (ARISING OUT OF SLP(C) NOS. 14697­14698 OF 2016)

M/S. PARLE AGRO (P) LTD. … APPELLANT VERSUS

COMMISSIONER OF COMMERCIAL  TAXES, TRIVANDRUM          … RESPONDNET

WITH

CIVIL APPEAL NOS. 6471­6472 OF 2017 (ARISING OUT OF SLP(C) NOS. 24460­61 OF 2016)

M/S. WE SIX TRADERS ETC.ETC. … APPELLANTS VERSUS

COMMERCIAL TAX OFFICER & ANR..      … RESPONDNETS

WITH CIVIL APPEAL NO.6470 OF 2017

(ARISING OUT OF SLP(C) NO. 9467 OF 2016)

ASSISTANT COMMISSIONER  (ASSESSMENT) &  ANR. … APPELLANTS

VERSUS M/S. PARLE AGRO (P) LTD.       … RESPONDENT

J U D G M E N T

ASHOK BHUSHAN, J.

Leave granted.

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2. The issues raised in these appeals being

inter­related have been heard together and the

appeals are being disposed of by this common

judgment.

3. Civil Appeals arising out of SLP(C) Nos.

14697­98 of 2016 are being treated as leading

case, the facts of which case shall be noted in

detail for deciding these cases.

4. Civil Appeals arising out of SLP(C) Nos.

14697­98 of 2016 and SLP(C) No.9467 of 2016 are

between the same parties whereas Civil Appeals

arising out of SLP(C) Nos.24460­61 of 2016 have

been filed by different appellants.

Civil Appeals arising out of SLP(C) Nos. 14697­98 of 2016

5. The appellant­M/s. Parle Agro (P) Ltd. is a

dealer engaged in fruit juice based drink known as

‘Appy Fizz’ which has obtained certificate of

registration under Kerala Value Added Tax Act,

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2003 (hereinafter referred to as “Act, 2003”). The

appellant was classifying the product as fruit

juice based drink under Entry 71 of the

notification issued under Section 6(1)(d) of Act,

2003 till 2007 and was paying @ 12.5% VAT.   One

M/s. Trade Lines (a distributor of appellant

Company) was assessed by the authorities under the

Act, 2003 holding that M/s. Trade Lines is liable

to pay tax @ 20% on the product. M/s. Trade Lines

filed OT Revision No.114/2013 in the High Court of

Kerala against the order passed by Kerala Value

Added Appellate Tribunal dismissing the appeal.

The High Court vide its judgment and order dated

17th  November, 2014 dismissed the revision

upholding the order passed by the Assessment

Officer and the First Appellate Authority. Special

Leave Petition was filed by M/s. Trade Lines

against the judgment of Kerala High Court which

was, however, permitted to be withdrawn by order

dated 19th  January, 2015 of this Court. On 4th

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August, 2015 the assessment notices were issued to

the appellant for Assessment Year 2009­15

proposing classification of ‘Appy Fizz’ under

Section 6(1)(a)of the Act, 2003 as “aerated

branded soft drink” and tax liability @ 20% .

After receipt of the notices appellant filed an

application dated 24th  August, 2014 under Section

94 of the Act, 2003 seeking clarification of

product ‘Appy Fizz’. In the clarification

application the appellant claimed that product

‘Appy Fizz’ had rightly been clarified as ‘fruit

juice based drink’ and which has tax liability of

12.5%.   Along with the clarification application

appellant has filed certificates and expert

opinions. Writ Petition No.26279/2015 was filed by

the appellant before Kerala High Court seeking

direction to the Commissioner of Commercial Taxes

to consider and pass order on the application for

clarification within a specified time and the

proceedings initiated by the Commissioner of

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Commercial Taxes by different notices be kept in

abeyance. Learned Single Judge by its judgment and

order dated 31st August, 2015 disposed of the writ

petition directing the Commissioner of Commercial

Taxes to consider and pass orders on the

clarification application within a period of one

month from the date of receipt of the judgment and

liberty was given to the appellant to produce all

material on which it intends to place reliance to

substantiate its clarification with regard to the

classification of the product, further proceedings

in various notices were kept in abeyance. The

Assistant Commissioner and Commissioner of

Commercial Taxes filed a writ appeal against the

judgment of the learned Single Judge before

Division Bench of the Kerala High Court. The

Division Bench of Kerala High Court vide its

judgment dated 5th October, 2015 dismissed the writ

appeal by affirming the decision of the learned

Single Judge.

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6. After the above judgment of the Division Bench

dated 5th  October, 2015, the Committee of Joint

Commissioner passed the clarification order dated

6th  November, 2015 classifying the product as

‘aerated branded soft drinks', at the rate of 20%.

Against the order passed under Section 94 of Act,

2003, the appellant filed O.T. Appeal No.7 of 2015

in the Kerala High Court. The Division Bench by

its judgment and order dated 5th  February, 2016

dismissed the appeal filed by the appellant

upholding the order dated 6th  November, 2015. A

review application was also filed by the appellant

to review the judgment dated 5th  February, 2016

which has been dismissed on 23rd March, 2016.

7. Civil Appeals arising out of SLP(C)No.14697­98

of 2016 have been filed against the aforesaid

order dated 5th February, 2016 and the review order

dated 23rd March, 2016 by the appellant.

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Civil Appeal arising out of SLP(C)No.9467 of 2016

8. The Assistant Commissioner (Assessment) and

the  Commissioner of  Commercial Taxes have filed

this appeal challenging the judgment dated 5th

October, 2015 by which writ appeal filed by the

Assistant Commissioner(Assessment) and another

against the direction of the learned Single Judge

dated 31st August, 2015 has been dismissed.  

Civil Appeals arising out of SLP(C)Nos.24460­61 of 2016

9. M/s. We Six Traders Etc.Etc. is a dealer in

fruit juices and other drinks manufactured by M/s.

Parle Agro (P) Ltd.  Assessment Commissioner  has

issued notices for assessment years 2010­11 to

2013­14 and April to June 2015 proposing to

classify the product ‘Appy Fizz’ as ‘aerated

branded soft drink’ @ 20%   VAT.   After the

judgment of the High Court dated 5th February, 2016

in the case of M/s. Parle Agro (P) Ltd. order of

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assessment was issued against which the assessee

filed appeal before Kerala Value Added Tribunal in

which appeal the Tribunal directed the assessee to

deposit 30% as pre­condition to hear the matter on

merits. The assessee filed writ petition in the

High Court challenging the aforesaid order passed

by the Tribunal on the stay petition. The assessee

submitted before the High Court that against the

judgment of the High court dated 5th February, 2016

in the case of M/s. Parle Agro (P) Ltd. SLP has

already been filed, hence, the assessee should not

have been called to remit the entire amount. The

High Court vide its judgment and order dated 14th

July, 2016 disposed of the writ petition directing

the demand made in the above cases shall remain

stayed till disposal of the appeals on condition

of assessee depositing 50% of the amount involved.

Civil Appeals arising out of SLP(C)Nos. 24460­61

of 2016 have been filed against the aforesaid

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judgment and order of the Kerala High Court dated

14th July, 2016.

10. We have heard Shri K.K. Venugopal, learned

senior counsel for the assessee. Shri Jaideep

Gupta, learned senior counsel has appeared for the

Revenue.

11. Shri K.K. Venugopal, learned senior counsel,

submits that both High Court and Committee of

Commissioners erred in not classifying the product

of 'Appy Fizz' under Entry 71 of S.R.O.No.119 of

2008. Classification of  the  product  as 'aerated

branded soft drinks, excluding soda' under Section

6(1)(a) is not the correct classification. It is

submitted that the Revenue itself till 2007 has

classified the product under Entry 71 with tax

liability of 12.5%. He submits that judgment of

Division Bench of Kerala High Court in M/s. Trade

Lines cannot be binding precedent since the said

judgment was rendered in the revision proceedings

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in which appellant was not a party and the

revision proceedings were confined to the

assessment order on the basis of facts on the

record of that case. Prior to 2007 the product was

covered under Entry 71. When in 2008 Entry 71 was

amended, there was no amendment to the schedule

under Section 6(1)(a). He submits that had the

intention of the legislation was to pick up the

certain  products earlier covered under Entry 71

and place them in Schedule under Section 6, then

entry 'aerated branded soft drinks, excluding

soda' which earlier did not cover the said

product, would also have been amended at the same

time. He submits that if prior to 2007, 'Appy

Fizz' could not be considered as an 'aerated

branded soft drink' then there is no identifiable

logic that the product would be so covered after

2007. Especially, there was no indication that the

said product had been removed/ejected from Entry

71 after the amendment in 2007.

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12. Further, he submits that common parlance test

which has been applied by the High Court is not

the correct test to determine the classification

to include the product, as entries under the VAT

Act are technical or scientific in nature. Soft

drinks under Kerala VAT would be those drinks that

are synthetic whether or not aerated. The product

in question is not a synthetic product. It

contains more than 10% fruit juice. It is fruit

juice based drink and not covered by Section

6(1)(a). A fruit juice based drink is more akin to

fruit juice than soft drink. Sub­clause (5) of

Entry 71 covers similar other products not

specifically mentioned under any other entry   in

this list or any other schedule. The product  is

fully covered under alone entry. He further

submits that Food Safety Authorities have

recognized the product as a 'fruit drink'.

13. Shri Venugopal has placed reliance on the

order dated 18.03.2008 of the Customs, Excise and

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Service Tax Appellate Tribunal where

classification of the product was upheld as 'fruit

based drink' and the Revenue's appeal was

dismissed by this Court on 18th  July, 2009. Shri

Vanugopal further submits that neither the

Committee of Commissioners nor the High Court has

adverted to the technical evidence and certificate

filed by the appellant along with proceedings

under Section 94 of Act, 2003. The scientific

evidence fully proved that products do not undergo

aeration or carbonation; the product is thermally

processed with  CO2  which help in preserving the

Apple Juice concentrate which is otherwise

perishable in nature. The certifications fully

proved the product as 'Thermally processed fruit

juice based drink'.  

14. Learned counsel further submitted that

products which are covered under Section 6(1)(a)

are all those products which are dangerous to

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health.  They have deliberately been  included on

higher tax  slab of 20% and lower tax slab on the

products under Entry 71 was with object to promote

the products under Entry 71.

15. Shri Jaideep Gupta,  learned  senior counsel,

appearing for the State of Kerala refuting the

submissions of Shri K.K. Venugopal contends that

High Court has rightly held that product is an

'aerated branded soft drink' within the meaning of

Section 6(1)(a). He submits that after deletion of

Entry 71(4) by S.R.O.No.119 of 2008 which provided

“Fruit pulp or fruit based drink”, it was clear

indication of the legislation that the 'fruit

based drinks' are out of Entry 71 and have to be

covered into 'aerated branded soft drinks' under

Section 6(1)(a). He submits that it is not

disputed that 'Appy Fizz' is a branded drink and

further it is aerated by  CO2, hence, it is aerated

drink. He submits that amendment of Entry 71 by

S.R.O.No.119 of 2008 made the legislative intent

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clear and the High Court has rightly relying on

the said amendment has held that product is not

covered under Entry 71 and is liable to tax @ 20%

under Section 6(1)(a). Learned   counsel for the

respondent, further, submits that CESTAT   ruling

has no relevance with regard to the classification

under Act, 2003, since, the CESTAT ruling

considered the different headings under Central

Excise Tariff Act, 1975 which is not relevant.

Learned counsel submitted that under the Rules of

interpretation as contained in the Act, 2003, the

product being not covered with any of HSN number

common parlance  or commercial parlance test  has

rightly been applied by the High Court. Under the

common parlance even if the product contained more

than 10% fruit concentrate it is a soft drink as

commonly known and tax liability @ 20% has rightly

been imposed.

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16. Learned counsel for the parties have placed

reliance on various cases which shall be referred

to while considering the submissions in detail.

17. We have considered the submissions made by the

learned counsel for the parties and perused the

records.

18. From the submissions of learned counsel for

the parties and the pleadings of the parties

following are the main issues which arise for

consideration in these appeals:

(1) What is inter­relation between Section

6(1)(a) and Section 6(1)(d) of Act, 2003?

(2) What is scope and ambit of Item 5 of   

Entry 71 as amended ?

(3) Whether common parlance test is the only  

test to be applied for understanding the  

different entries under Section 6(1)(a)  

and Section 6(1)(d)?

(4) Principle of Noscitur a Sociis.

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(5) Whether the Division Bench of Kerala High

Court in  M/s. Trade Lines  can preclude   

the Committee of Joint Commissioners to  

examine the materials filed by the   

appellant along with Clarification   

Application under Section 94.

(6) Whether CESTAT decision dated 18.03.2008  

has any relevance with regard to the   

classification of product in question ?

(7) Whether decision and opinion of Food   

Safety Authorities on the product in   

question were relevant ?

(8) Whether the Committee of Joint   

Commissioners as well as the High Court  

has rightly discarded technical and   

expert opinion relied by the appellant ?

(9) Conclusions.

19. Before we proceed to consider the submissions

of the learned counsel for the parties, it is

necessary to look into the statutory scheme and

the relevant entries prior to amendment by

S.R.O.No.119 of 2008. Section 6 of the Kerala

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Value Added Tax Act, 2003 provides for levy of tax

on sale or purchase of goods. Section 6(1)(a)

which is relevant for the present case as existed

before 1st April, 2007, was as follows:

"6(1)(a) in the case of goods specified in the [Second, and Third Schedules] at the rates specified therein and at all points of sale of such goods within the State (and in the case of goods specified below at the rate of twenty percent, at all points of sale of such goods within the State, namely:­

Sl.          Description of goods        HSN No.                                      Code

(1)                 (2)                  (3)

1.    Aerated Drinks                2201.10.10

     (1) Mineral Water                ***

     (2) Packaged drinking water   2202.10

     (3) Branded soft drinks,      8415           excluding soda

2.    Air conditioners

3.    Building Materials        

"

20. The State by various notifications under

Section 6(1)(d) has notified list of goods taxable

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at the rate of 12.5%. Entry 71 which is relevant

for the present case as notified by the State as

existing prior to amendment by the S.R.O.No.119 of

2008 is as follows:

"71. Non­alcoholic beverages and their powders, concentrates and tablets including (I) aerated water, soda water, mineral water, water sold in sealed containers or pouches (ii) fruit juice, fruit concentrate, fruit squash, fruit syrup and fruit cordial [x x x] (v) other non­alcoholic beverages; not failing under any other entry in this List or in any of the Schedule.

(1) Water not containing added sugar or  other sweetening matter; [x x x]

(b) Aerated water

(2) Water containing added sugar or   other sweetening matter.   2201.10.20

(3) Fruit juices and vegetables juices, unfermented and not containing   added spirit, whether or not   containing  added  sugar of   other sweetening  matter    

     2009

(4) Fruit pulp or fruit juice based  drinks  

2202.90.30

(5) Soft drink concentrates

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(a) Sharbat 2106.90.11; (b) other  2106.90.19

(6) Beverages containing milk 2202.90.30

20. The words “(iii) soft drinks of  all  varieties” omitted by S.R.O. No. 543/2007 dated 20­6­07 published in Kerala Extraordinary No.1167 dt.  21.6.07

21. Omitted by S.R.O. No.543/2007   dt, 20­6­07 published in Kerala  Gazette Extraordinary  No.1167   dt.21­6­2007. Prior to the  omission it read as under:

“(a) Mineral water 2201.10.10” ”

21. Now, we come to Section 6(1)(a) and (d) which

exists as on date as:

“6. Levy of tax on sale or purchase of goods

 (1) Every dealer whose total turnover for a year is not less than ten lakhs rupees and every importer or casual trader or agent of a non­resident dealer, or dealer in jewellery of gold, silver and platinum group metals or silver articles or contractor or any State Government, Central Government or Government of any Union Territory or any department thereof or any local authority or any autonomous body or

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any multi­level marketing entity, their distributor and/or agent engaged in multi­level marketing, whatever be his total turnover for the year, shall be liable to pay tax on his sales or purchases of goods as provided in this Act. The liability to pay tax shall be on the taxable turnover,­

(a)in the case of goods specified  in the Second and Third Schedules at the rates specified therein and at all points of sale of such goods within the State and in the case of goods specified below, mentioned in column (4), at all points of sale of such goods within the   States namely;  

S.No. Description of Goods HSN Code

Rates of Tax in

percentage

(1) (2) (3) (4)

1. Cigars, Cheroots,  cigarillos and  cigarattes, of tobacco  or of tobacco  substitutes

2402 [30]

2. Aerated branded soft  drinks, excluding soda

*** 20

3. [Carry bags made of  plastic including  polypropylene, which  have a vest type self  carrying feature to  carry commodities]

*** 20

21

[3A. Disposable plates, cups and leaves, made of  plastic 3[including  Styrofoam and Styrofoam sheets]

*** 20]

[3B. Printed banners,  hoardings and leaflets  of Poly Vinyl  Chloride/Polyethylene  and other plastic  sheets]

*** 20]

4. Pan Masala 2106. 90.20

22.5

5. Churna for pan 2106. 90.70

22.5

6. Pan chutney *** 22.5

7. Other manufactured  tobacco and  manufactured tobacco  substitutes homogenized or reconstituted  tobacco; tobacco  extracts and essences

2403 22.5

Explanation: The ‘Rules of Interpretation of the Schedules’ appended to the Schedules of this Act shall apply to the interpretation of the HSN codes mentioned in this clause.

xxx xxx xxx xxx

(d) in the case of goods not falling under clause (a) or (c) at the  rate of 14.5% at all points of

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sale of such goods within the   State, Government may notify a  list of goods taxable at the   rate of 14.5%;”

22. A legislative history of Section 6(1)(a)

clearly indicates that Section 6(1)(a) always

covered 'aerated branded soft drinks' excluding

soda' with tax liability of 20%.

23. By S.R.O.No.119 of 2008 Entry 71 has been

substituted by another Entry. Entry 71 after

amendment by S.R.O.No.119 of 2008 w.e.f. 1st

April, 2007 is as follows:

"NON­ALCOHOLIC BEVERAGES AND THEIR POWDERS, CONCENTRATES AND TABLETS IN ANY FORM INCLUDING;

(1) Aerated water, soda water,   Mineral water, water sold in   sealed containers or pouches.

(2) Fruit juice, fruit concentrates, fruit squash, fruit syrup and   pulp, and fruit cordial.

(3) Soft drinks other that aerated  branded soft drinks.

(4) Health drinks of all varieties.

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(5) 'Similar other products not   specifically mentioned under any other entry in this list or any  other schedule'.”

24. As noted above the application was filed by

the appellant under Section 94 of Act, 2003 on 24th

August, 2014 which has been decided by the

Committee of Joint Commissioner by order dated 6th

November, 2015. Section 94 of the Act, 2003 is as

follows:

“Section 94.  Power of Authority to issue clarification.­ (1) If any dispute arises, otherwise than in a proceedings before any appellate or revisional authority or in any court or tribunal, as to whether, for the purpose of this Act, ­  

(a) any person is a dealer; or  

(b) any transaction is a sale; or (c) any particular dealer is required to be registered; or  

(d) any tax is payable in respect of any sale or purchase, or if tax is payable, the point and the rate thereof; or

(e) any activity carried out in any goods amounts to or results in the manufacture of goods;

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such dispute an authority consisting of three officers in the rank of Joint Commissioner or Deputy Commissioner nominated by the Commissioner on application by a dealer or any other person.  

(1A) If the dispute relates to the tax rate of a commodity, the details of the first seller, or the manufacturer of such goods in the State, as the case may be, shall be furnished by the applicant and they shall be made necessary parties to such application.  

(2) The Authority shall decide the question after giving the parties to the dispute a reasonable opportunity to put forward their case and produce evidence and after considering such evidence and hearing the parties. Pass orders within three months or within such time as may be extended by the Commissioner. The Commissioner may considering the fact in issue decide whether such orders have prospective operation only.

...  ... ... ...

...  ... ... ...”

25. We, thus, have to examine the classification

of product in the light of provisions of Section

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6(1)(a) and Entry 71 as existing after 1st  April,

2007.

Issue Nos.1 and 2

26. We consider both the issues together.

According to Section 6(1) liability to pay tax

shall be on the taxable turnover of every dealer

as enumerated in sub­clause (a) to sub­clause (f).

Sub­clause (a) provides that in the case of goods

specified in the Second and Third Schedules tax

shall be liable to be paid at the rate specified

therein at all points of sale of such goods within

the State. Sub­clause (a) further provides that in

the case of goods specified in sub­clause (a) tax

liability shall be at rate of specified in column

(4). Sub­clause (a) contains chart which includes

Sl.No., Description of goods, HSN Code and Rate of

tax in percentage. The rate of tax as mentioned in

in Section 6(1)(a) is 20% or more. The goods

enumerated in Section 6(1)(a) are tobacco based

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goods, pan masala, other manufactured tobacco and

manufactured tobacco substitutes. Other category

contains plastic goods and goods made of

polypropylene, Chloride/ Polyethylene and other

plastic  sheets.  All  goods enumerated in  Section

6(1)(a) by the Legislature itself indicates that

higher rate of tax has been fixed for those goods

which are harmful for environment and health.

Aerated branded soft drinks, excluding soda is

also in the company of the above goods described

in Section 6(1)(a). Section 6(1)(a) also refers to

Schedule I, Schedule II and Schedule III. Tax in

Schedule I is exempted and rate in Schedule II is

1% whereas rate of tax in Schedule III is 5% in

contrast to  legislative  policy in fastening  tax

liability at very high level on goods under

Section 6(1)(a) is thus clear and categorical.

Those goods which are not congenial to health and

environment are charged with higher tax level,

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which is the purpose and object clear from the

legislative scheme.  

27. Now we come to Section 6(1)(d). Section 6(1(d)

empowers the State to notify a list of goods which

are taxable at the rate of 12.5% (at present at

14.5%) which does not fall under clause (a) and

(c). The delegated legislative power of  issuing

notification to the State Government is thus

restricted and can be exercised only when goods do

not fall under Section 6(1)(a) or Section 6(1)(c).

The State of Kerala exercising its delegated

legislative power has issued notification under

Section Section 6(1)(d).

28. Now, we proceed to examine the legislative

history of both Section 6(1)(a) and Entry 71 and

the legislative changes effected from time to

time. Prior to substitution of Section 6(1)(a) by

Kerala Finance Act, 2007 w.e.f. from 1st  April,

2007. Section 6(1)(a) read as follows:

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"(a) in the case of goods specified in the [Second, and Third Schedules] at the rates specified therein and at all points of sale of such goods within the State (and in the case of goods specified below at the rate of twenty percent, at all points of sale of such goods within the State, namely:­

Sl.         Description of goods         HSN No.                                      Code

(1)                 (2)                  (3)

1.    Aerated Drinks                2201.10.10

     (1) Mineral Water                ***

     (2) Packaged drinking water   2202.10

     (3) Branded soft drinks,      8415           excluding soda

2.    Air conditioners

3.    Building Materials        

29. The aerated branded soft drinks, excluding

soda were always covered under Section 6(1)(a)and

prior to 1st  April, 2007 it bears HSN Code

2201.10.10. Entry 71 Item 4 also reads as “fruit

pulp or fruit juice based drinks with HSN Code

2202.90.20”. When fruit  juice based  drinks were

covered under Entry 71 the State Government knew

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that fruit juice based drinks were not covered by

Section 6(1)(a). Applicability of the power of

State to issue notification under Section 6(1)(d)

arises only when goods were not covered by Section

6(1)(a). Fruit juice based drinks, thus, were

never treated as 'aerated branded soft drinks'

which was the understanding of State of Kerala

while issuing notification under Section 6(1(d).

Had fruit juice based drinks were also to be

covered by aerated branded soft drinks, there was

no occasion for subordinate legislative authority,

i.e., the State Government, to include such

products in notification under Section 6(1)(d).

30. Now, we come to Entry 71 which was substituted

by S.R.O. No.119 of 2008 dated 24.1.2008 w.e.f.

01.04.2007, which is to the following effect:

"71. Non­alcoholic beverages and their powders, concentrates and tablets in any form including:

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(1) aerated water, soda water, mineral water, water sold in sealed containers or pouches;

(2) Fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp and fruit cordial;

(3) Soft drinks other than aerated branded soft drinks;

(4) Health drinks of all varieties;

(5) Similar other products not specifically mentioned under any other entry in this list or in any other Schedules.”

31. A bare perusal of Entry 71 as above indicates

that the Entry covers non­alcoholic beverages and

their powders, concentrates and tablets in any

form including ­ Item No.2 contains fruit juice,

fruit concentrates, fruit squash, fruit syrup and

pulp and fruit cordial. Soft drinks other than

aerated branded soft drinks are included in Item

No.3. Health drinks of all varieties are included

in Item No.4 and similar other products not

specifically mentioned under any other entry in

this list or in any other Schedules were included

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in Item No.5. The Entry of fruit juice based

drinks got subsumed in the residuary entry and the

amendment by S.R.O. No.119 of 2008 did not change

or affect the character and content of the

products which were included in Entry 71.

Issue No.3

32. The High Court while interpreting the entries

under Section 6(1)(a) and Entry 71 of the

notification S.R.O.No.119 of 2008 had applied

common parlance test. The High Court has also

relied on Rules of Interpretation as contained in

the  Appendix to Schedule to Act, 2003. From the

Appendix following Rule of Interpretation was

extracted:

“RULES OF INTERPRETATION OF SCHEDULES

The commodities in the schedules are allotted with Code Numbers, which are developed by the International Customs Organization as harmonized System of Nomenclature (HSN) and adopted by the Customs

32

Tariff Act, 1975. However, there are certain entries in the schedules for which HSN Numbers are not given. Those commodities which are given with HSN Number should be given the same meaning as given Customs Tariff Act, 1975. Those commodities, which are not given with HSN Number, should be interpreted, as the case may be, in common parlance of commercial parlance. While interpreting a commodity, if any consistency is observed between the meaning of a commodity without HSN Number and the meaning of a commodity with HSN Number, the commodity should be interpreted by including it in that entry which is having the HSN Number.”  

33. Applying the common parlance test, the High

Court has concluded that product in question is

covered by 'aerated branded soft drink'. Strictly

speaking the Rule of Interpretation which is given

in the Appendix to Act, 2003, are the Rules of

Interpretation of Schedules that is Schedule

Nos.I, II and III. Thus, for interpretation of any

item in the Schedule, Rules of Interpretation as

given in the Appendix are applicable. The items

33

which fall for consideration in the present case

is Item No.6(1)(a) as well as Entry 71 of S.R.O.

No.119 of 2008 issued in exercise of power under

Section 6(1)(d), which are the entries which are

not mentioned in the Schedule. One more provision

which is relevant to notice is the explanation to

Section 6(1)(a). The explanation to Section 6(1)

(a) provides as follows:

“Explanation: The 'Rules of Interpretation of the Schedules' appended to the Schedules of this Act shall apply to the interpretation of the HSN codes mentioned in this clause.”

34. Although the above Explanation applies the

Rules of Interpretation of the Schedules to the

interpretation of the HSN codes mentioned in

Section 6(1)(a) but Explanation does not say

anything about the items where HSN code is not

there. The Rules of Interpretation of the

Schedules, thus, directly are not attracted with

regard to the interpretation of the entry which

34

does not mention with HSN code in Section 6(1)(a)

although principle contained in such Rules of

Interpretation may apply. Had the legislation

intended the Rules of Interpretation of the

Schedules should be made applicable both to the

interpretation of the Schedules or those

commodities which are not given with HSN code, the

Rules of Interpretation of Schedules should have

been in toto made applicable for interpretation of

clause (a) of Section 6(1). Thus, common parlance

test or commercial test which are to be applied on

the commodities in the Schedules which are not

given with HSN code is directly not applicable

under Item 6(1)(a), hence, applicability of other

Rules of Interpretation which were required to be

applied is not ruled out. Hence, in the

appropriate case apart from common parlance test

or commercial test any other test can be applied

for interpretation of the commodities included in

35

Section 6(1)(a) apart from those which are given

HSN code.

35. The principle of statutory interpretation with

regard to a word in taxing statutes are well

established. This Court in  Porritts & Spencer

(Asia) Ltd. vs. State of Haryana, 1979(1) SCC 82,

has laid down following in paragraph 6:

“6.....Where a word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by the Legislature.”  

36. This Court had also occasion to interpret the

entries in taxing statute which has also technical

meaning. In this context, reference is made to

judgment of this Court reported in  Collector of

Akbar Badruddin Jiwani vs. Collector of Customs,

1990(47)ELT 161,the Court had occasion to consider

a term as occurring in Tariff Item No.25.15 of

36

Appendix I­B, Schedule 1 to the Import (Control)

Order, 1955. The Court held commercial

nomenclature or trade understanding inapplicable

to the term. While considering the aforesaid case

the Court had occasion to consider several earlier

cases of this Court. Following was stated in

paragraphs 36,37,40,41,42, 43:

“36. In deciding this question the first thing that requires to be noted is that Entry 25.15 refers specifically not only to marble but also to other calcareous stones whereas Entry 62 refers to the restricted item marble only. It does not refer to any other stones such as ecaussine, travertine or other calcareous monumental or building stone of a certain specific gravity. Therefore, on a plain reading of these two entries it is apparent that travertine, ecaussine and other calcareous monumental or building stones are not intended to be included in ‘marble’ as referred to in Entry 62 of Appendix 2 as a restricted item. Moreover, the calcareous stones as mentioned in ITC Schedule has to be taken in scientific and technical sense as therein the said stone has been described as of an apparent specific gravity of 2.5 or more. Therefore,

37

the word ‘marble’ has to be interpreted, in our considered opinion, in the scientific or technical sense and not in the sense as commercially understood or as meant in the trade parlance. There is no doubt that the general principle of interpretation of tariff entries occurring in a text (sic tax) statute is of a commercial nomenclature and understanding between persons in the trade but it is also a settled legal position that the said doctrine of commercial nomenclature or trade understanding should be departed from in a  case where the statutory content in which the tariff entry appears, requires such a departure. In other words, in cases where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the said word was used then the said principle of interpretation should not be applied. Trade meaning or commercial nomenclature would be applicable if a particular product description occurs by itself in a tariff entry and there is no conflict between the tariff entry and any other entry requiring to reconcile and harmonise that tariff entry with any other entry.

37.  In Union of India v. Delhi Cloth & General Mills1  the question arose as to how the term “refined oil” occurring in the tariff was to

38

be construed. There was no competition between that tariff entry with any other, nor was there any need to reconcile and harmonise the said entry with any other provision of the tariff. This Court, therefore, considered the term “refined oil” by applying the commercial meaning or trade nomenclature test and held that only deodorised oil can be considered to be refined oil. This Court also referred to the specification of “refined oil” by the Indian Standards Institution and held that:

“This specification by the Indian Standards Institution furnishes very strong and indeed almost incontrovertible support for Dr Nanji’s view and the respondents’ contention that without deodorisation the oil is not “refined oil” as is known to the consumers and the commercial community.”

… … … … …

40.  It may be pointed out that this Court has clearly and unequivocally laid down that it is not permissible but in fact it is absolutely necessary to depart from the trade meaning or commercial nomenclature test where the trade or commercial meaning does not fit into the scheme of the commercial statements. This Court referring to

39

the observation of Pullock, B. in Grenfell v. Inland Revenue Commissioner  observed: (quoted at SCR p. 724)

“that if a statute contains language which is capable of being construed in a popular sense such statute is not to be construed 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 words ‘popular sense’, that sense which people conversant with the subject matter with which the statute is dealing would attribute to it.” But “if a word in its popular sense and read in an ordinary way is capable of two constructions, it is wise to adopt such a construction as is based on the assumption that Parliament merely intended to give so much power as was necessary for carrying out the objects of the Act and not to give any unnecessary powers. In other words, the construction of the words is to be adapted to the fitness of the matter of the statute.”

41.  The court has also referred to the observation of Fry, J. in Holt & Co. v. Collyer. The observation is: “If it is a word which is of a technical or scientific character then it must be construed according to that which is

40

its primary meaning, namely, its technical or scientific meaning.”

Referring to the above decisions this Court held that:

“[W]hile construing the word ‘coal’ in Entry I of Part III of Schedule II, the test that would be applied is what would be the meaning which persons dealing with coal and consumers purchasing it as fuel would give to that word. A sales tax statute being one levying a tax on goods must in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance.”

42.  This Court in K.V. Varkey v. Agricultural Income Tax and Rural Sales Tax Officer specifically declined to apply the popular or commercial meaning of ‘Tea’ occurring in the sales tax statute holding that the context of the statute required that the technical meaning of ‘a product of plaint life’ required to be applied and therefore green tea leaves were tea even though they might not be tea as known in the market.

43.  In Cannanore Spinning and Weaving Mills Ltd. v. Collector of Customs and Central Excise, Cochin

41

this Court held that the word ‘hank’ occurring in a Central Excise Notification could not be interpreted according to the well settled commercial meaning of that term which was accepted by all persons in the trade, inasmuch as the said commercial meaning would militate against the statutory context of the said exemption notification issued in June 1962. The word ‘hank’ as used in the notification meant a ‘coil of yarn’ and nothing more.”

37. In the cases as noted above this Court

departed from construing the entry from its normal

commercial meaning but had adopted a technical or

scientific meaning. Ultimately, in paragraph 53 of

this judgment, the Court gave the technical and

scientific meaning to the entry and common

parlance and commercial parlance test was not

adhered to:

“53. It is apparent from all these reports that the calcareous stone of specific gravity of 2.5 is not marble technically and scientifically. The finding of the Appellate Tribunal is, therefore, not sustainable. It is, of course,

42

well settled that in taxing statue the words used are to be understood in the common parlance or commercial parlance but such a trade understanding or commercial nomenclature can be given only in cases where the word in the tariff entry has not been used in a scientific or technical sense and where there is no conflict between the words used in the tariff entry and any other entry in the Tariff Schedule.”  

38. In the present case, the Entry 2 under Section

6(1)(a) uses the word 'aerated'. This is

scientific term and has been repeatedly used in

different statutes including the Central Excise

Tariff and different HSN codes also uses the term

'aerated'. The word  'aerated' is scientific  and

technical word used under different statutes and

the scientific and technical meaning of the word

'aerated' can be looked into for finding out the

real import of the Entry.

39. In view of the above, we are of the opinion

that common parlance and commercial parlance test

was not the only test which could have been

43

applied for interpreting the entries in items

mentioned in Section 6(1)(a) and the entries which

contain scientific and technical word were also to

be looked into in technical and scientific

meaning. Both the High Court and the Committee of

Joint Commissioners discarded the evidence of

technical and scientific meaning of word. The

appellant has rightly relied on the technical

evidence brought on the record which indicate that

use of carbon dioxide to the extent of 0.6 per

cent was only for the purpose of preservative in

packaging the commodities and the product was

thermally processed and carbon dioxide was added

to as the preservative.

Issue No.4: Principle of 'Noscitur a Sociis'

40. The appellants before the Committee of

Commissioners as well as High Court have pleaded

that Entry 71 Item 5 mentioned “similar other

products not specifically mentioned under any

44

other entry in this list or any other schedule”,

was required to be considered in the light of

commodities as included in other items mentioned

in Entry 71. It was submitted that 'Appy Fizz'

which a fruit juice based drink is more akin to

other commodities included in the Entry 71 other

than that which was included in Section 6(1)(a).

In interpreting Item 5 of Entry 71 the doctrine of

'noscitur a sociis'  is fully attracted.  Justice

G.P.Singh  in 'Principles of Statutory

Interpretation, 14th  Edition, has explained the

'noscitur a sociis' in the following words:  

"(b)Noscitur a Sociis

The rule of construction noscitur a sociis as explained by LORD MAC­MILLAN means: “The meaning of a word is to be judged by the company it keeps”. As stated by the Privy Council: “It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them”. It is a rule wider than the rule of ejusdem generis; rather the latter rule is only an application of the

45

former. The rule has been lucidly explained by GAJENDERAGADKAR, J., in the following words: “This rule, according to MAXWELL, means that when two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sence analogous to a less general. The same rule is thus interpreted in Words and Phrases.” “Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of the doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis.” In fact the latter maxim “is only an illustration or specific application of the broader maxim noscitur a sociis'. It must be boren in mind that noscitur a sociis, is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the Legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present

46

rule of construction can be usefully applied.”

41. This Court in Pardeep Aggarbatti Vs. State of

Punjab, 1997 (96) E.L.T. 219(S.C.),  considering

Entry 16 of Schedule A of Punjab General Sales Tax

Act, 1948, in paragraph 9 has laid down following:

“9. Entries in the Schedules of Sales tax and Excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the Entry draws colour from the other words therein. This is the principle of noscitur a sociis.”

42. Applying the aforesaid principle of

construction of  'noscitur a sociis'  on Entry 71,

it is clear that clause 5 of Entry 71 has to take

colour and meaning from the other items included

in Entry 71. Item 5 of Entry 71 uses the words

“similar other products not specifically mentioned

under any other entry in this list or any other

schedule”. Thus, the products which are to be

47

covered under Item No.5 are similar other

products. When Item No.2 of the Entry 71 that is

fruit juice, fruit concentrates, fruit squash,

fruit syrup and pulp, and fruit cordial and item

No.4 that is health drinks of all varieties, are

kept in mind the fruit juice based drink shall

fall in Item No.5. Both High Court and   

Committee of Commissioners overlooked this

principle while  interpreting item No.5 of Entry

71.

Issue No.5

43. The appellant in application under Section 94

of the Act, 2003 filed several materials, expert

opinions and pleadings for classifying the product

in question. The Committee of Commissioners

although in its order has noted several

contentions raised by the appellant but the

Committee of Commissioners mainly relying on the

judgment of Division Bench of Kerala High Court in

48

OT Revision No.114 of 2013­M/s. Trade Lines

finalised the assessment by levying tax on the

product 'Appy Fizz' at the rate of 20% against

which M/s. Trade Lines has filed an appeal which

was dismissed and thereafter Revision was filed in

the High Court and the High Court dismissed the

Revision affirming the assessment made at the rate

of 20% tax. Proceeding under Section 94 of Act,

2003 is a separate and specific proceeding. In the

present case when the appellant has filed

application under Section 94 the judgment of

Division Bench in  M/s. Trade Lines  was already

rendered and in a writ petition filed by the

appellant learned Single Judge has issued a

direction on 31st  August, 2015 for deciding the

application under Section 94. The direction issued

by the learned Single Judge to decide the

application was challenged by the Revenue before

the Division Bench and the Division Bench

contending that Single Judge ought not to have

49

issued the direction since the matter had been

decided in the High Court in  M/s. Trade Lines

(supra).  The Division Bench rejected the said

contention and dismissed the writ appeal on 15th

October, 2015 and in paragraph 4 of the judgment

has dealt with  the judgment of M/s. Trade Lines

to the following effect:

4....The so­called revisional order passed by this Court in yet another case would not also have the efficacy of depleting the jurisdiction of the authority under Section 94 of the KVAT Act to issue clarification. The very purpose of the provision in the form of Section 94 and clothing authority with power to make different nature of considerations to conclude such issues, necessarily, show that no revisional order of this Court in an earlier proceedings could conclude the issues which could be considered in an application for clarification by the competent authority under Section 94 of the KVAT Act.”

44. The order passed by the Division Bench in

M/s. Trade Lines  was a case of assessment of

another assessee which decision was based on the

50

materials brought on the record by the said

assessee and could not have precluded the

appellant from filing the application under

Section 94 and when the Division Bench by its

judgment of 5th October, 2015 dismissed the appeal

of the Revenue, the Committee of Commissioners

ought to have followed the observation given by

the Division Bench in paragraph 4 quoted above.

Thus, we are of the view that the judgment of the

Division Bench of Kerala High Court in M/s. Trade

Lines did not conclude the issue and the Committee

of Commissioners was not absolved from its duty of

deciding the same in accordance with the materials

brought on the record by the appellant and

although the Committee noticed all the pleadings

and contentions but mainly relying on the ruling

of M/s. Trade Lines   dismissed the clarification

application which cannot be sustained.

51

Issue No.6.

45. Appellant had relied on the order of CESTAT

dated 18.03.2008 reported in 2008 (226) ELT

194(Tribunal­Delhi) which was in appeal filed by

the Commissioner of Central Excise, Bhopal against

the M/s. Parle Agro Pvt. Ltd. regarding

classification of the same product 'Appy Fizz' and

the order passed by the Commissioner(Appeals)

whereby it was held that product 'Appy Fizz' is

classifiable under sub­heading No.22029020 of

Central Excise Tariff on the ground that the

product is fruit juice based drink. Revenue

challenged the order on the ground that the same

is classifiable under sub­heading No.22021010 of

Central Excise Tariff as 'aerated water'. The

Tribunal vide its judgment dated 18.03.2008

dismissed the appeal. The order in paragraph 5

has referred to relevant sub­heading No.220210 and

52

22029020 on which Revenue had relied is to the

following effect:

“2202 10 Waters, including mineral waters and aerated waters,

containing added sugar or other sweetening matter or flavoured:

22029020 Fruit pulp or fruit juice based drinks “

46. The Revenue has contended that product in

question is aerated. The contention of the Revenue

was noted in paragraph 3 of the judgment which is

to the following effect:

"3. The contention of the Revenue is that the Commissioner (Appeals) has ignored the chemical examiner's report and Ministry of Food and Processing Industries opinion and which was on record and Ministry of Food and Processing Industries opinion and which was on record and held in favour of the respondents. The contention of the Revenue is that since the product in question is aerated, therefore, is classifiable as flavoured aerated water. The Revenue also relied upon

53

the HSN Explanatory notes in support of their claim.”

47. The above contention was rejected by the

CESTAT and following was held in paragraph 6:

"6. The Revenue relied upon HSN Explanatory Notes of Chapter 22. WE find that our tariff is not fully aligned with the HSN Explanatory Notes. In the HSN Explanatory Notices there are two sub­headings under Heading No.2202 one is “water including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured” and second is in respect of others. Whereas Central Excise Tariff under Sub­heading No.2202 there are specific headings in respect of soya milk, drinks etc. As per the Central Excise Tariff, the waters; including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured are classifiable under sub­heading No.2202.10. The drinks based on fruit juice are specifically classifiable under Heading No.22029020 of the Tariff. In the present case, there is no dispute regarding the contents of the product. Revenue is not disputing the certificate given by the Ministry of Food and Processing Industries, New Delhi rather they are relying it in the ground of

54

appeal, and as per the certificate, the product in question contains 23% of apple juice, therefore, we find no infirmity in the impugned order. The appeal is dismissed.”

48. The Revenue had also filed Civil Appeal

No.5354 of 2008 against the order of CESTAT which

was dismissed by this Court on 8th  July, 2009

affirming the order of CESTAT.

49. The judgment of CESTAT and the order of the

Supreme Court were specifically relied by the

appellant before the High Court. The High Court

without giving cogent reason has refused to rely

on the said adjudication. It may be said that the

adjudication by the CESTAT was with regard to the

HSN Code which found place in Central Excise

Tariff Act. The competent entry under which CESTAT

authorities were to adjudicate regarding the

product has already been extracted “Fruit pulp or

Fruit juice based drink” on which CESTAT had

ruled that product is not included in aerated

55

water and was included in entry as fruit juice

based drink. The product was not held to be

aerated water was a relevant fact to be considered

even though in the entries under the Act, 2003,

now there are no HSN Codes mentioned.

50. Even though the order of CESTAT did not

conclude the controversy in favour of the

appellant but fact that the CESTAT did not hold

the product to be under the “aerated water” was a

factor which necessitated a more deeper

consideration by the High Court to find out as to

whether the product is 'aerated branded soft

drink' or not. The High Court in its judgment

found that since the product charged with air or

carbon dioxide was an aerated drink. From the

manufacturing process which was on the record, it

is clear that carbon dioxide to the extent of 0.6

percent was added as preservative. Technical note

submitted on behalf of the appellant clearly

56

mentioned that use of carbon dioxide was only as a

preservative of 'Appy Fizz'.

Issue Nos.7 & 8

51. The appellant had been granted the licence to

manufacture the product under Fruit Products Order

1955. The appellant has been labelling the product

as 'Fruit Drink' under the Food Safety and

Standards (Food Safety & Standards and Food

Additives) Regulations, 2011. The statutory

regulations require that beverages must contain

minimum of 10% fruit juice to be called a Fruit

Drink. Regulation 2.3.10 of 2011 Regulations

described as 'Thermally Processed/Fruit Beverages/

Fruit Drink ready to serve Fruit Beverages to the

following effect:

“2.3.10: Thermally Processed Fruit Beverages/Fruit Drink/ Ready to Serve Fruit Beverages

1. Thermally Processed Fruit Beverages/Fruit Drink/ Ready to Serve Fruit Beverages (Canned, Bottled, Flexible Pack And /Or

57

Aseptically Packed) means an unfermented but fermentable product which is prepared from juice or Pulp/Puree or concentrated juice  or pulp or sound mature fruit. The substances that may be added to fruit juice or pulp are water, peel oil, fruit essences and flavours, salt, sugar, invert sugar, liquid glucose, milk and other ingredients appropriate to the product and processed by heat, in an appropriate manner, before or after being sealed in a container, so as to prevent spoilage.

2. The product may contain food additives permitted in these regulations including Appendix A. The product shall conform to the microbiological requirements given in Appendix B. The product shall meet the following requirements:­

(i) Total Soluble Solid (m/m) Not less than 10.0 percent

(ii) Fruit Juice content (m/m)  

(a) Lime/Lemon ready to serve beverage Not  less than 5.0 percent

(b) All other beverage/drink Not less than 10.0 percent

... ... ... ...”

58

52. It is on the record that the contents of food

product of 'Appy Fizz' are more than 10%. In

Section 94 proceedings the appellant has filed

letter of the Government of India dated 28.03.2005

containing the “Subject : Opinion for the product

as 'Appy Fizz'”. In the letter the Government

stated the following:

“This is with reference to your letter No. KS­DEL­PAL dated 4th

March, 2005 on the above mentioned subject. There are three categories of products specified under the Fruit Products Order, 1955 which are relevant to your products.

1. Ready to serve beverages including aerated waters containing Fruit Juice. The product should contain a minimum of 10% of fruit juice. The product is commonly known as fruit drink.

2. Flavored sweetened aerated waters. The product which contains less than 10% of ..sic.. & vegetable extractives is included in this category. The product is commonly known as soft drink such as Pepsi Cola, Coca Coin etc.

3. Sweetened aerated mixtures   containing fruit juice or bits.  The product should contain a   maximum of 10% of fruit juice or

59

pulp or bits. This category of  product technically is same as  at serial no.1.”

53. Thus, according to the Government of India,

Ministry of Food Processing Industries the product

containing 10% of fruit juice are commonly known

as fruit drinks. The appellant has also filed the

order of 19th  August, 2015 issued by the Food

Safety and Standards Authority of India, Ministry

of Health & Family Welfare where following

permission was granted by Food Safety and

Standards Authority of India, Ministry of Health &

Family Welfare by order dated 19th August, 2015:

“It is to inform you that you are now allowed to Manufacture, Store and Sale the product ‘Appy Fizz’ in pet bottles under the category2.3.10 i.e. Thermally Processed Fruit Beverages/Fruit Drink/Ready to serve Fruit Beverages of Food Safety and Standards (Food Product Standards & Food Additives) Regulations, 2011 with name of the food item as Fruit Pulp or Fruit Juice based Drinks for which you are already holding a license.”

60

54. The Committee of the Joint Commissioners while

deciding the application under Section 94 has

noted the aforesaid orders passed by the Food

Safety Authorities which were relied by the

appellant but it discarded the above said orders

and opinion relying on the order passed by the

Kerala High Court in the case of M/s. Trade Lines

decided on 17.11.2014 and held that the product is

taxable at the rate of 20% as per Sl.No.2 of

Section 6(1)(a).

55. What is the process for manufacture in

accordance with the Food Safety and Standards Act,

2011 and the Regulations framed therein and what

is the nature and characteristic of the product

which has been licensed to be manufactured to the

appellant cannot be said to be an irrelevant

factor while examining the nature and contents of

the product. Whether the product is an aerated

branded soft drink or can be covered by residuary

61

of clause (5) of Entry 71 is a question on which

the manufacture licence, orders issued by Food

Safety and Standards Authority of India were

relevant facts which were although cited before

the Committee of Joint Commissioners but were

brushed aside relying on the Kerala High Court's

order in M/s. Trade Lines. We, thus, are of the

opinion that the manufacture licence dated 19th

August, 2015 granted to appellant and the opinion

of the Government of India, Ministry of Food

Processing Industries dated 28.03.2005 were

relevant for finding the nature of the product of

the  appellant for the purpose of classification

and the Committee of Joint Commissioners as well

as High Court erred in not adverting to and

considering the aforesaid material.

56. The appellant has also before the Committee of

Joint Commissioners produced the technical

certificates. The Food Safety and Standards (Food

Products Standards & Food Additives) Regulations,

62

2011 in clause 2.3.10 deals with thermally

processed fruit beverages/fruit drink ready to

serve fruit beverages which has already been

extracted above. The appellant has filed a

certificate dated 11.06.2015 from the Institute of

Chemical Technology. It is useful to refer to the

above certificate which is to the following

effect:

“INSTITUTE OF CHEMICAL TECHNOLOGY

ICT/FET/USA/1590 June 11, 2015

TO WHOMSOEVER IT MAY CONCERN

Technical opinion on the product Appy Fizz manufactured by  

PARLE AGRO PVT LTD.

Appy Fizz is a fruit product manufactured using apple juice concentrate as a fruit juice source. The ingredients declared on the label include Water, Sugar, Apple Juice concentrate, Carbon dioxide(290), malic acid, citric acid, preservatives(sodium benzoate, potassium metabisulphite and potassium, sorbate),   ascorbic acid and added nature identical flavouring substances and natural

63

colour. The juice content of APPY FIZZ is 12.7% m/m and Total solids content is 13%. The product is manufactured under FSSAI licence category ­   Ready to Serve fruit beverage/drink.

The manufacturing process involves the following steps:­

1. Addition of all the ingredients to treated water, except carbon dioxide and making a batch.

2. Thermal Process (Pasteurization) of the product at 950 C for 30 seconds and cooling to 40 C.

3. Purging Carbon dioxide gas into the product.

4. Filing the product into bottles/cans followed by sealing/seaming.

5. Filed bottles/cans are then passed through warmer to increase the temperature to room temperature followed by labeling and coding.

The technical  opinion  is  given  with considering following two points:

POINT NO. 1:

Technical Opinion on why the category of  the  product  should  be  FSSAI(Food Product Standards and Food Additives) Regulations, 2011 chapter 2.3.10(Thermally processed Fruit Beverages/Fruit drink/Ready to serve fruit beverage)

• It is made from apple juice concentrate.

64

• It compiles with respect to the juice content and solids content percentage which is more than 10% required as per the 2.3.10.

• It mentions CONTAINS APPLE JUICE on the label.

• It is thermally processed beverage. • It has substances mentioned ..sic.. other

ingredients appropriate to the product. • After the Thermal processing the

ready ..sic.. as required in 2.3.10 Carbon Dioxide is purged in the beverage FRUITS action of preservation to create an environment which will help to prevent spoilage during itself life.

POINT NO. 2:

Technical Opinion on why the category of the product should NOT be classified under FSSA (Food Product Standards as Food additives) Regulation, 2011 chapter 2.3.30 (Carbonated Fruit beverage / drink) OR 2.10.6.1 (Carbonated Fruit beverage/drink) OR 2.10.6.1 (Carbonated Water)

• APPY FIZZ is not a synthetic carbonated wate.

• APPY FIZZ contains reconstituted natural apple juice made from apple juice concentrate.

• APPY FIZZ is thermally processed (Pasteurization).

• Thermal process is not mentioned in 2.3.30 and 2.10.6.1

• APPY FIZZ are not contain artificial sweeteners/caffeine as allowed in 2.10.6.1.

65

Carbon dioxide(INS 290/E 290) is mentioned as a Packing gas/propellant/carbonating agent/preservative/foaming agent by CODEX ALIMENTATIRUs and its use is allowed as per GMP.  

Carbon dioxide along with other preservatives help in extending the shelf life of the product as the product is filed in PET bottles/cans and is not filled aseptically.

Conclusion:

In view of the above mentioned points, I am of the opinion that the APPY FIZZ is a THERMALLY PROCESSED FRUIT BEVERAGE/READY TO SERVE FRUIT BEVERAGE complying with category 2.3.10 as per FSSAI Regulations, 2011 despite having carbon dioxide as an ingredient which is used for preservation purpose only. This opinion is purely based on scientific and technical information however ICT will not be part of any court conflicts.

Sd/­11.6.2015 Dr. Uday S. Annapure, Associate Professor, Dept. of Food Engineering & Technology, Institute of Chemical Technology Matunga, Mumbai­400 019.”

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57. The above technical opinion clearly mentioned

that carbon dioxide is used for preservation

purpose only. Before the Committee of

Commissioners the entire process of manufacture of

the product was explained along with all relevant

orders and certificates of Food Safety

Authorities. It was stated that the Experts in

their opinions and certifications have mentioned

that product is commercially and technically

distinct from products which have classified as

'aerated branded soft drinks'. The certifications

which were relied by the appellant indicate that

in the case of 'Appy Fizz' the product does not

undergo  aeration or  carbonation; the product is

thermally processed with CO2  which help in

preserving the Apple Juice concentrate which is

otherwise perishable in nature.

58. In the application which was filed for

clarification, which has been brought on the

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record at page 138­Annexure P­13, in paragraph 3.1

elaborate process of manufacture was mentioned.  

59. Other relevant materials which were part of

the clarification application were mentioned in

clause 6 which are to the following effect:

“VI. OTHER RELEVANT MATERIAL

(a) Technical opinion dated 28.02.2005 issued by the authority under Fruit Processing Order, 1955 i.e. Director Food & Vegetable Processing Industry working as licensing officer under Fruit Product Order 1955 in ministry of Food Processing Industries, Government of India.(Copy of the said certificate is enclosed herewith as Exhibit H)

(b) Permission given for manufacture, storage and sale of product to the factory at Varanasi issued by Central Licensing Authority having their office at Lucknow under letter dated19.08.2015 confirming the classification of product “Appy Fizz” under category 02.03.2010 i.e. Fruit Juice based Drink and also held that we are already holding a license. (Copy of the said letter is enclosed herewith as Exhibit I)

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(c) Technical expert opinion issued by Professor Dr. Uday S. Annapure dated 11.06.2015 classifying the said product as ready to serve Fruit beverage falling under the category of 02.03.2010 of FSSAI Regulation 2011 and specifically stated that “Appy Fizz” is not Carbonated Water. Exhibit J.

(d) Technical Note and Photographs explaining the use of impregnated Carbon Dioxide for the purpose of preservation as well as for the strengthening the wall of PET bottles due to expansion of Carbon Dioxide from inside providing the strength to wall of PET bottle during the transit so as to withstand with the handling hazards while delivering the product to remote area. Note and photocopies are enclosed herewith as Exhibit K and L Colly.

(e) Classification of the product “Appy Fizz” has been recognized by a legislative body of Kerala Government based on the white paper issued by empowered committed of state Finance Minister while introducing the White Paper on 17.01.2005 and has issued the Original Notification SRO 82 of 2006 dated 21.01.2006 and classified the product based on Central Excise Tariff which inter­alia is based on HSN at Entry no.71 Sr. No.4 as Fruit Juice Based Drink. Copy of the said Notification and White Paper is

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enclosed herewith as Exhibit M and Exhibit N Colly.

(f) The said classification under Entry No.71 sr.No.4 of the product under Kerala VAT remained in Entry No.71 at Sr.5 despite the substitution brought by Notification SRO 119 of 2008 dated 24.01.2008.(Copy of the said Notification is enclosed herewith as Exhibit O)

(g) The Kerala VAT dept. had raised an issue regarding the classification of the product Appy Fizz in 2009. However, the Company had explained the reason as to why the product Appy Fizz has been classified as a fruit juice based drink. The said explanation of the company has been accepted and no order has been passed by the KVAT Department, accepted assessment order passed by assessing officer Exhibit P.

(h) The said assessment orders have attained the finality being not challenged by the department.

(i) As per sub­section(1A) of Section 94 of Kerala VAT Act, 2003 which inter­alia contemplates that if the dispute relates to tax rate of a commodity the details of first seller or the manufacturer of such goods in the state as the case may be shall be furnished by the applicant. Accordingly, we are submitting sales tax Assessment order under Tamilnadu VAT Act since

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the manufacturer is located in Tamilnadu, Exhibit Q. Hence, the said party may please be made a necessary party.

(j) The issue of classification of the product “Appy Fizz” is decided by Hon’ble Kerala High Court in case of other dealer namely Trade Lines. However, Hon’ble Kerala High has decided that in Revision and the facts of our case are totally different and therefore, as per the settled law the decision is binding only when the facts are same and not when the facts are different and therefore, in our case the facts which are totally different were not subject matter of consideration before Hon’ble High Court.”

60. The above materials which were filed by the

appellant before the Clarification Authority were

relevant materials for understanding the

manufacture process and the nature and contents of

ultimate product. The expert authority and its

opinion which were relied by the appellant were

required to be adverted to both by the

Clarification Authority as well as by the High

Court and we are of the opinion that expert

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opinion and materials have been erroneously

discarded.  

61. It is further relevant to note that Revenue

has not filed any material on the record either

before the Clarification Authority or before the

High Court in support of its view that product is

covered under Section 6(1)(a) that is 'aerated

branded soft drink'. This Court in several cases

has observed that onus to prove that particular

goods fall in particular tariff item is on the

Revenue. In this context, in the judgment of this

Court in  Hindustan Ferodo Ltd. vs. Collector of

Central  Excise,  Bombay,  1997(89) ELT 16(SC), in

paragraph 3 it was laid down:

“3. It is not in dispute before us,as it cannot be, that the onus of establishing that the said rings fell within Item 22F lay upon the Revenue. The Revenue led no evidence. The onus was not discharged. Assuming therefore, that the Tribunal was right in rejecting the evidence that was produced on behalf of the appellants, the appeal

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should, nonetheless, have been allowed.”

62. We, thus, conclude that orders of Food Safety

Authority and expert opinion regarding process of

manufacture relied by the appellant were relevant

materials and Clarification Authority and High

Court erred in law in discarding these materials.

Issue No.9 : CONCLUSION

63. While referring to Section 6(1)(a) and Section

6(1)(d) we have already noticed that the power of

the State Government to issue notification under

Section 6(1)(d) arises “in the case of goods not

falling under clause (a) or (c)”. After enactment

of Act, 2003 Section 6(1)(a) from the very

beginning included 'aerated branded soft drink'.

The inclusion of fruit juice based drinks in Entry

71 clearly proved that fruit juice based drinks

were never treated to be included in 'aerated

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branded soft drinks'. Had fruit juice based drinks

were also included in 'aerated branded soft

drinks', the State could not have exercised its

power under Section 6(1)(d) to include such

products in Entry 71. Whether after amendment of

Entry 71 by S.R.O. No.119 of 2008 something which

was earlier included in Entry 71 shall now stand

transferred to Section 6(1)(a) is the question to

be answered. Even though Entry 71 has been amended

but there is no amendment in Entry 2 of Section

6(1)(a), so as to include something not included

in Section 6(1)(a). By S.R.O. No.119 of 2008,

residuary entry by Item No.5 is added which is

“similar other products not specifically mentioned

under any other entry in this list” which is

potent enough to include fruit juice based drinks

and it is clear that fruit juice based drinks are

subsumed in Item No.5 of Entry 71 after its

amendment. We have already observed that items

which have been grouped under Section 6(1)(a) are

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all those items where higher tax slab has been

fixed looking into the nature of the goods. It is

well settled that all tobacco based goods which

are now included in Item No.6(1)(a) are dangerous

to health, the use of the plastic, polythene etc.

which have also adverse  effect on the health and

environment.  In contrast to 'aerated branded soft

drinks' which are included in Section 6(1)(a),

health drinks of all varieties are included in

Entry 71 as amended. 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, coka cola, etc. We are, thus, of the

opinion that the appellant has successfully proved

by relevant scientific and technical materials

that the product in question that is 'Appy Fizz'

is a commodity which is fully covered by Item No.5

of Entry 71 as amended by S.R.O. No.119 of 2008.

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The High Court discarded scientific and expert

opinion with regard to manufacturing process and

contents of the product. The orders of Food Safety

Authority were also discarded which were relevant

for considering the nature and contents of

product. The adjudication by CESTAT was relevant

at least on the aspect that the 'Appy Fizz' is not

aerated which was also discarded by the High Court

as well as by the Committee of the Commissioners.

In view of the aforesaid discussion, we are of the

considered opinion that the appellant has

successfully proved from the materials brought on

the record that the product 'Appy Fizz' was

required to be classified under Item No.5 of the

Entry 71 as amended with tax liability at 12.5%

after amendment by S.R.O. No.119 of 2008 (now at

the rate of 14.5%).

64. Now, coming to the appeal arising out of

SLP(C)No.9467 of 2016. The appeal has been filed

by the Revenue challenging the judgment of learned

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Single Judge and Division Bench by which direction

was issued to the Committee of the Commissioners

to decide the application filed by the appellant

under Section 94 of Act, 2003. Learned Single

Judge has issued directions dated 31st August, 2015

directing the Commissioner of Commercial Taxes to

pass orders on the clarification application. The

appellant was also given liberty to produce all

material, on which the appellants intend to place

reliance to substantiate their contention with

regard to the classification of the product   in

question. In writ petition filed by the Revenue

before the Division Bench, the Division Bench

affirmed the order and while referring to

sub­section (4) of Section 94 stated following:

"Sub­section(4) of Section 94 states that where any question arises from any order  already passed  or any proceedings recorded under the KVAT Act, or any earlier law, no such question shall be entertained for determination under Sub­section (1). Insofar as the issue raised by the

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respondent through the application before the authority is concerned, there is no order that has already been passed or there is no proceedings recorded as against it which could be treated as a final one. All what has been done is the issuance of notice as noted above as a proposal in relation to the assessment proceedings. The so­called revisional order passed by this Court in yet another case would not also have the efficacy of depleting the jurisdiction of the authority under Section 94 of the KVAT Act to issue clarification. The very purpose of the provision in the form of Section 94 and clothing authority with power to make different nature of considerations to conclude such issues, necessarily, show that no revisional order of this Court in an earlier proceedings could conclude the issues which could be considered in an application for clarification by the competent authority under Section 94 of the KVAT Act.”

65. The Division Bench did not commit any error in

dismissing the appeal and observing that no

revisional order of this Court in an earlier

proceedings could conclude the issues which could

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be considered in an application for clarification

by the competent authority under Section 94 of

Act, 2003. We do not find any error in the

judgment of the learned Single Judge as well as of

Division Bench and this appeal deserves to be

dismissed.

66. Now coming to Civil Appeals arising out of

SLP(C)Nos.24460­61 of 2016. These appeals have

been filed by the assessee against an order of

learned Single Judge by which order the learned

Single Judge disposed of the writ petition by

following orders:

"Accordingly, these writ petitions are disposed of in the following manner:

(i) The demand made in the above cases shall remain stayed till disposal of the appeals, on condition of the petitioners depositing 50% of the amount involved.

(ii) The petitioners are granted four weeks time to remit the amount.

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(iii)The Appellate Authority shall endeavour to dispose of the appeal as expeditiously as possible.”

67. The learned Single Judge has noted about the

pendency of SLP(C)Nos.14697­98/2016 in this Court

where classification of the product was under

challenge. By this judgment we are also disposing

of the Civil Appeals arising out of

SLP(C)Nos.14697­14698 of 2016. Further proceedings

in case of the assessee that is M/s. We Six

Traders Etc.Etc.   has to be, thus, concluded in

accordance with our decision in Civil Appeals

arising out of SLP(C)Nos.14697­14698 of 2016. Any

amount deposited in pursuance of the interim order

of the High  Court dated  14th  July, 2016   shall

abide by the consequential orders to be passed in

the proceedings against the assessee. We, thus, do

not find it necessary to interfere with the order

dated 14th  July, 2016 of the learned Single Judge

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and the Civil Appeals are disposed of with

direction that in proceedings against the assessee

consequential orders shall be passed including an

adjustment of the amount deposited, if necessary,

as per our judgment in Civil Appeals arising out

SLP(C)Nos.14697­14698 of 2016.  

In the result

(1) Civil Appeals arising out of

SLP(C)Nos.14697­14698 of 2016 are allowed,

judgment of the Division Bench as well as order

passed in the Review Application are set aside. OT

Appeal filed by the appellant is allowed and the

order passed by the Committee of Joint

Commissioners dated 06.11.2015 is set aside. It is

declared that product of the appellant 'Appy Fizz'

is required to be classified as under Item No.5 of

Entry 71 as amended by S.R.O. No.119 of 2008.

(2)  Civil Appeal arising out of SLP(C)No.9467 of

2016 is dismissed.

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(3) Civil Appeals arising out of

SLP(C)Nos.24460­61 of 2016 are disposed of

directing the proceedings against the assessee be

decided in the light of our judgment in Civil

Appeals arising out of   SLP(C)Nos.14697­14698 of

2016 and necessary consequential orders be passed

accordingly.

.........................J. ( A.K. SIKRI )

.........................J. ( ASHOK BHUSHAN )

NEW DELHI, MAY 09, 2017.

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ITEM NO.1D                COURT NO.7               SECTION III (For judgment)                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS

Civil Appeal Nos.6468-6469 of 2017 (Arising out of SLP (C) Nos. 14697-14698 of 2016)

M/S. PARLE AGRO (P) LTD.                        ... Appellant(s) VERSUS

COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM    ... Respondent(s)

WITH

Civil Appeal Nos.6471-6472 of 2017 (Arising out of SLP(C) No. 24460-24461 of 2016)

Civil Appeal No.6470 of 2017 (Arising out of SLP(C) No. 9467 of 2016)

Date : 09/05/2017 These matters were called on for hearing today.

For Petitioner(s) Mr. Aditya Bhattacharya, Adv. Mr. Victor Das, Adv. Mr. M. P. Devanath, Adv. Ms. L. Charanya, Adv.

Mr. Ramesh Babu M. R., Adv.

For Respondent(s) Mr. G. Prakash, Adv. Mr. Jishnu M. L., Adv. Ms. Priyanka Prakash, Adv. Ms. Beena Prakash, Adv. Mr. Manu Srinath, Adv.

                     Mr. Rajesh Kumar, Adv.

Hon'ble  Mr.  Justice  Ashok  Bhushan  pronounced  the

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judgment  of  the  Bench  comprising  Hon'ble  Mr.  Justice A.K.Sikri and His Lordship.

Leave granted. Civil Appeals arising out of SLP (C)Nos. 14697-14698

of  2016  are  allowed,  Civil  Appeal  arising  out  of  SLP (C)No. 9467 of 2016 is dismissed and Civil Appeals arising out of SLP (C)Nos. 24460-61 of 2016 are disposed of in terms of the signed reportable judgment.

     (Nidhi Ahuja)       (Mala Kumari Sharma)      Court Master      Court Master

[Signed reportable judgment is placed on the file.]