Hellios Food Additives Private Limited vs State of Karnataka

M.F. Saldanha, J.—Once again, this Court is faced with the familiar dispute that arises under the Karnataka Sales Tax Act, 1957, relating to classification of a particular item. The petitioner-company manufactures a product under the brand name "Lite-N-Soft Gel". According to the material available before us, this product is used exclusively as a bakery product and is known in the trade as a cake improver. It provides sponginess to the cake, improves its consistency and the shelf life. The petitioners had contended that it should be categorised under item 10A under Part "C" of the Second Schedule under the head of "chemicals of all types". It did surprise us slightly that this contention was taken up before the department initially because the petitioners have filed several reports and certificates before us and these unequivocally indicate that this gel essentially consists of an emulsifier which is really a vegetable based fat. Whatever be the reason for it, perhaps as pointed out by the learned Senior Counsel Sri Sarangan who appears on behalf of the petitioners, it was due to mistaken advice, that this plea was canvassed; we are not at all surprised at the fact that the department rejected this contention but the error committed appears to have been that without any application of mind, the product was straightaway relegated to the residuary category. There is a very detailed order passed by the Karnataka Appellate Tribunal which in our considered view was nothing short of a waste of time because a couple of hundred cases have been referred to in support of the elementary proposition that the item in question cannot be classified as a chemical. The present petition assails the correctness of that order.

Mr. Sarangan, learned Senior Counsel who represents the petitioner-company at the commencement of his arguments sought the permission of the court to contend that the item in question should be classified under the Second Schedule, Part E1(iii) "hydrogenated oils and cooking medium". What he pointed out on the basis of documentary evidence before us was that this gel is manufactured out of hydrogenated vegetable oil (77.09 per cent), 2 per cent vegetable fat based emulsifier/stabilizer and 18 per cent of water. The material produced before us further establish that the gel resembles margarine which is of a similar composition, i.e., the hydrogenated vegetable oils/fats emulsifier/stabilizer and water. He also produced before us the evidence of the Central excise authorities having classified for the last several years this product under chapter 15, item 1508.90 which governs vegetable fats and oils and their cleavage products and in our view, very rightly so. Mr. Sarangan relied heavily on the analysis report of the product issued by the Bombay Municipal Corporation which confirms the position that it consists of 77.9 percent oils/vegetable fats with the remaining 22.1 per cent accounting for moisture and emulsifier. Learned Senior Counsel then produced an order of the Commercial Taxes Department of the Andhra Pradesh Government classifying this product gel under oils and fats as per their order dated December 23, 1999. The court which would establish that the product which is an edible item is no different from any other form of hydrogenated oils and other cooking mediums despite which the department has wrongly classified it under the residuary category on the ground that this class of gels are not specifically listed under any of the Schedules. Mr. Sarangan''s contention was that as a result of this wrong classification that the petitioners have been required to litigate all these years and that they have been paying to the department the tax at the higher rate as demanded by the department even though they have not collected the sales tax at this rate from their customers, which position is undisputed. This last contention was found fault with by the learned Government Advocate who submitted that irrespective of what is the correct position, whenever and wherever the department, even if wrongly, insists on tax being paid at a higher rate, that the assessee invariably passes on the burden to the customer and that there is no reason for the court to accept that the position was otherwise in this case. Mr. Sarangan pointed out that the reason for the non-collection at the higher rates from time to time was because the petitioners maintained that the KST could only be levied at the lower rate as contended by them and pending the final decision in the litigation they were advised not to collect tax at the higher rate as this would go against their stand in the litigation in so far as the department would contend that, they have accepted the classification. Mr. Sarangan produced before us the company''s records which do establish that the tax was only being collected at the lower rate from the customers and that the company has pointed out to the department that the balance to make up the higher rate of taxation was being paid by the company under protest and that the same would be liable for refund with interest in the event of their succeeding in the litigation. In this particular case therefore, it is clear to us from the material produced that the differential tax was paid by the company and that consequently, they would be entitled to a refund if it is held that they are entitled to a lower rate. Before we address ourselves to the main controversy, we need to deal with one unusual aspect of the ease and to give our ruling on the preliminary objection canvassed by the learned Government Advocate.

The learned Government Advocate vigorously contended that the moment the learned Senior Counsel applied to the court for a reclassification of the item that he was immediately conceding that the rejection by the department at all levels of the petitioner''s case that the gel should be classified as a chemical stands undisturbed. It was his submission that consequently the petition is liable to be straightaway dismissed in so far as even assuming without admitting that the petitioners were justifiably entitled to classification under some other head that this issue would have to be agitated departmentally and could not be done in the present proceedings. In response to this preliminary objection Mr. Sarangan submitted that the basic material such as the analysis reports of the product, the chemical evidence, the evidence regarding its user, etc., is the very same record on the basis of which he is founding his present arguments. The learned Senior Counsel submitted that an assessee will invariably raise whatever plea is available or is most beneficial and it is not unusual for the department to reject such a contention if the classification applied for is untenable. He raised a novel argument before us, namely, that it is the basic duty of the State and its authorities to correctly classify the item and this is a principle with which we are in total agreement. He next contended that if a wrong plea canvassed by the assessee is rejected the department would not be justified in straightaway relegating the item to the residuary category to the prejudice of the assessee if it could correctly and legitimately be classified under anyone of the other existing items. The learned counsel drew our attention to a recent division Bench decision of this Court of which one of us Saldanha, J., was a party and while considering this very issue, in S.T.A. No. 93 of 1997 decided on January 31, 2001 (Belaire Refrigeration Services v. Additional Commissioner of Commercial Taxes, Bangalore [2001] 123 STC 463 ap, the division Bench had occasion to observe as follows :

"6. Very briefly, we need to reiterate the position that in matters relating to classification undoubtedly the authorities and the courts will be faced with a rather difficult or problematic situation in so far as it would rarely be possible for the authorities to have such an extensive list of all items and commodities that specifically answer to the description of a particular entry. The law is now well-settled in so far as it would not be permissible to virtually drag an item and classify it Under a particular entry by adopting what we may define as an over-stretching process unless it clearly answers to the description of that item. Also, what we need to take into account is the well-settled principle in law that where there may be a clear ambiguity, that the view, which benefits the assessee will have to prevail. The Supreme Court in the decision reported in The Commissioner of Income Tax, West Bengal 1, Calcutta Vs. Vegetables Products Ltd., and the courts in several other decisions have consistently taken this view. Also what we need to restate is that merely because there is some difficulty in the process of what we may call ''correct or absolute fitment'' as far as the entries are concerned, that the mechanical process of straightaway consigning the item to the residuary entry may not always be the correct method of deploying the taxation process in so far as the test of categorising must be under the ''next best head'' provided it answers rationally and generally to that description and this would be the correct formula that is required to be applied. We have very briefly recounted and restated the principles as far as this aspect of the law is concerned for the limited reason that it would be necessary for the department in particular to bear these in mind while classifying different items."

Calling on the principles that emerge from the observations of the court which in turn are based on the earlier decision of the Supreme Court, Mr. Sarangan submitted that he is most certainly entitled to insist that if the department has failed in his duty to correctly classify the item that it is not necessary for him to have to reagitate the issue from its inception once again and he was quick to point out to us that this would cause a real prejudice and damage to the assessee because the plea would only be available prospectively and that the assessee would stand to loose for all the earlier years during which the department has charged a higher tax on the basis of its own wrong through erroneous classification. Consequently, his submission was that if there is enough material before the court on the basis of which without any ambiguity the product could clearly, correctly and Safely be bracketed under one of the existing items that there would be no necessity of referring the case back to the Tribunal. Furthermore, Mr. Sarangan submitted that the assessee is not precluded from advancing an alternate submission before the High Court if the same is available and in this regard, he cited a few decisions before us. We do not consider it necessary to burden the record with a reproduction of these citations. The law is more than well-settled, that it is always open to a party to advance an alternate or better plea or for that matter to give up one or more contentions that may have been canvassed at an earlier point of the proceedings.

We have very carefully evaluated the preliminary objection canvassed by the learned Government Advocate because it is important that no wrong precedents should be created. At first blush we would have been inclined to straightaway uphold the preliminary objection on the ground that the petitioner has given up the old case but the real question that arose was as to whether it is a totally new case that has been pleaded. The answer to this question is in the negative because Mr. Sarangan is right when he points out that it is on the basic material that is already on record that he has advanced a new argument because on a total reconsideration of the case and the law as now laid down by the High Court of the next best categorisation formula that it is open to this Court to consider the alternate plea. It is not unusual for courts to permit a new or different argument at a subsequent stage of the proceedings and furthermore, what we have taken serious note of is the important question as to which of the parties before us is the defaulter and on whom would the consequences be visited. We have no hesitation in holding that while the department is justified in concluding that the product could not be categorised as a chemical it was equally wrong on its part to have straightaway relegated the product to the residuary category. The main reason for this is because the item in question is a vegetable based edible cooking medium used in the production of cakes and from its chemical composition and consistency there could straightaway be little dispute of the fact that it was almost on par with hydrogenated vegetable oils and in this background if the department has wrongly classified the item and they demanded and collected tax at a higher rate, then the department who is the defaulter cannot insist that at this late point of time the petitioners should be relegated to the rigors of a fresh classification dispute, with the obvious handicap of losing the benefit they would otherwise derive for all the preceding years. It will not only be unfair and unjust but down-right illegal in this background, to uphold the preliminary objection and direct the classification to be reconsidered by the department. This is one of the main reasons why we have rejected the preliminary objection.

The learned Government Advocate then contended that, the department is taken by surprise because of the contentions raised by Mr. Sarangan in respect of reclassification and that this is unfair to the respondents. Mr. Sarangan submitted that they could be given enough time to consider their position and to deal with these contentions. We have virtually upheld this objection raised by the learned Government Advocate and adjourned the hearing for a period of two weeks so that the department could consider its case on facts or on law and make its submissions. Initially, we were, not inclined to do this because the department has not filed any return and everything stated on behalf of the petitioners has gone uncontroverted. Even though we adjourned the hearing for two weeks the department still did not file any return disputing anything that was pointed out on behalf of the petitioners.

Taking advantage of the break in the hearing we decided to conclusively satisfy ourselves with regard to the correct consistency of the product in question and we therefore directed that a sealed sample should be forwarded to the CFTRI, Mysore wherein the analysis regarding vegetable oil and fat contents done. It is relevant to point out here that the learned Government Advocate had on the basis of a dictionary definition contended that the term "gel" is a short form of "gelatin" which is a product made out of animal bones. We desired to satisfy ourselves with regard to this contention though, it is common knowledge that the gel and gelatin are two different products altogether and the petitioners produced before us enough material to establish that the petitioner''s product was edible oil based (nothing to do with animal products or proteins). In view of the breaks in the hearings we gave the petitioners an option of producing analysis reports from any other reputed reliable laboratories if they so desire. The petitioners were also directed to furnish a copy of their affidavit along with the test reports to the department well in advance so that it was open to them if they so desire to refute or dispute any of that material. The petitioners have complied with these directions and it is a matter on record that the department has not either refuted or disputed any of the averments in the subsequent affidavit which in turn establishes that the gel in question is a vegetable oil based product which compares with margarine or any other hydrogenated edible oil. This being the position, it is not open to the department to contend that by virtue of the alternate submissions canvassed on behalf of the petitioners that the department has either been handicapped or prejudiced in any manner whatsoever. It was open to the department to dispute the documents or to effectively oppose all the averments through a reply, none of which have been done and consequently this Court would be fully justified in relying on all that material.

Along with the affidavit that has been filed the petitioners have produced before us the analysis report from the CFTRI at Mysore. It gives the fat content percentage by weight as 49.90. It clarifies that the protein content is nil and that since the protein is absent in the product it is free from gelatin. As regards this report the learned Government Advocate was quick to point out to us that whereas all the other reports produced by the petitioners earlier and now give the vegetable fat content at about 80 per cent that this report indicates that it is 49.50 per cent. This apparent variation was set at rest by Mr. Sarangan who apparently is better informed with the science of chemistry to explain to us the modes of tabulating the readings and pointed out that if the result is reflected on weight basis and not on percentage analysis basis that the reading figures would be entirely different but if the same figures are to be converted to the scale of any of the other cases that it would still come to 80 per cent. This virtually overrules the technical objection canvassed by the learned Government Advocate.

More importantly, the petitioners have sent two sealed samples of the gel to two of the country''s most reputed institutions, the first of them is the Veermata Jijabai Technological Institute, Mumbai, which is the Central Technological Institute of Maharashtra State. This is one of the country''s most reputed institutions of its type being almost a decade old and which was formerly named as the Victoria Jubilee Technological Institute at Mumbai. The certificate in turn establishes that the fat content is 79.35 per cent, the percentage of lipid is 90.01 per cent and that the fat is of vegetable origin and resembles margarine. The other certificate is produced on the basis of a sealed sample and is from the Deputy Director of Health Service, State Public Health Laboratory, Pune, which is also a very highly rated and reputed institution. Here again the certificate establishes that the vegetable oil content is of the order of 80 per cent. One of the reasons why we have referred to these documents is because we desire to assess as to whether there can be any doubt or any dispute with regard to the contention raised on behalf of the petitioners or whether this is an area which requires better or more detailed examination. Had this been the position this Court would not have even embarked on the exercise of evaluating this material and recording any findings if any disputed questions of fact would certainly have had to be agitated at the departmental level. Secondly, we are guided by no less than 16 decisions most of them of the Supreme Court and a few of the High Courts wherein in every case relating to disputes concerning classification even at the level of the Supreme Court, the court has looked at the most reliable evidence such as analysis reports from reputed laboratories or certificates from the accepted authorities and recorded its findings. This, in our considered view is very necessary because the experience of the courts, whenever cases are remanded, has been most unsatisfactory. We need to mention that the whole purpose of remand has been totally frustrated in almost everyone of this class of cases because the department at all levels apparently gets annoyed because of the remand and impertinently passes the same order as on the earlier occasion and ultimately it is on the second round that this Court has to evaluate and decide. One of the reasons why the courts often refuse a remand is because they have a foresight to anticipate as to what is likely to happen and if the purpose of the remand is going to be an empty exercise a remand is perfectly contraindicated. More importantly, if the material or evidence produced before the court unambiguously leads to a definite conclusion the necessity of remand is obviated. This is one of such case.

The learned Government Advocate did bring it to our notice that there are some variations with regard to the readings which have been taken at different points of time and that it would be wrong for the petitioner''s learned counsel to contend that they have unequivocally made out a case that their product is on par with hydrogenated oils and cooking media. This argument overlooks something very basic, namely, the fact that in all the analysis reports what we are really concerned with is the true nature and composition of the product and, what we do find emerging through everyone of these reports that the vegetable fat content is the predominant component and that it is edible vegetable oil based and that it resembles margarine which is nothing but an emulsified oil product and is used as a medium for cooking. Depending on the quality and type of analysis, the percentage figures do vary but that in our considered view does not make any difference because the dual test that one has to apply is firstly the question as to what are the constituents of the product and secondly, the user test and having examined both these angles, we are more than satisfied that the product requires to be classified under the entry as indicated by us.

Since there was a very violent debate on the question as to whether the petitioner can be permitted to plead an alternate case in this proceeding we have elaborately dealt with this point and held on the basis of well-settled judicial authorities that since the question of classification is really a point of law that it is well within the province of a party to contend that it is entitled to come under some other entry. We are conscious of the fact that the powers in revision are more restricted than the appellate powers but, we find that this distinction is a relatively narrow one. u/s 23 of the Act the powers of the High Court are extremely wide and the court has the power to reverse, affirm or amend the order in question or for that matter to remand the case. We have elaborately set out as to why this is a case which does not warrant or qualify for a remand and that there is good reason for disposing of the case at this stage itself. That is within the scope of the revisional powers because the essential purpose of a revision is to correct an error apparent on the face of the record and to consequentially modify the earlier order. It is a fine distinction and in the majority of cases it would be limited to deciding a purely academic legal issue but the case law on the point clearly postulates that even a mixed question of fact and law wherein an order requires to be revised is within the scope of revisionary powers of the High Court. It is true that many a time the High Court will not take on the role of the initial or appellate authority and would remand the case with appropriate directions but here again we have indicated cogent reasons why such a procedure is contraindicated. Modern thinking which lays emphasis on expediency of disposal and frowns upon remands requires a slight change of approach in appropriate cases. Undoubtedly, it involves a level of discretion which we have consciously exercised as this is a case which warrants it. The length of the litigation, the number of years that have elapsed and the consequences to the assessee are all factors which have been evaluated by us while arriving at this conclusion.

Having very carefully evaluated the records and the material before us and the legal position we have no hesitation in holding that the lower authorities were wrong in relegating the petitioner''s product to the residuary category. We further hold that the department was in error in having failed in their duty to classify the product under any of the available heads if they were factually and legally permissible. Having thoroughly evaluated the documentary evidence produced before us we have no hesitation in upholding the contention canvassed on behalf of the petitioners that their product at all times ought to have been classified under the head "hydrogenated oil and cooking medium". As a necessary consequence the department will be required to recompute the tax payable by the petitioners and if it is disclosed that any excess amount has been received from them, the whole of the excess amount will have to be refunded. Since it has been established that the petitioners have paid the amount under protest and out of their own resources the department is directed to work out the refund within a period of 3 months from today and to make the payments to the petitioners. Since it is our sad experience that judicial orders are neither respected nor complied with by the department we need to provide for a penalty for any default by prescribing that if the refunds are not effected within the stipulated period of time for whatever reason, that the department will be liable to pay to the petitioners interest at the rate of 18 per cent per annum compounded annually from the date of receipt by the department of each of the excess payments until the date of refund.

The petition accordingly succeeds on merits and stands disposed of. In the circumstances of the case there shall be no order as to costs. We need to add here that since the point referred for the decision has changed complexion, it is answered in favour of the assessee and against the revenue.

R. Gururajan, J.—I had the benefit of reading of the judgment of my learned brother but I find myself unable to agree with the same and hence this judgment.

Petitioner-assesses is before this Court in a proceeding initiated u/s 23(1) of the Karnataka Sales Tax Act, 1957, aggrieved by the order of the Karnataka Appellate Tribunal, Bangalore, dated December 29, 1997 for the assessment year 1994-95.

Petitioner an assessee, registered under the Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956, deals in bakery raw materials like cakes, cake improver, etc. The assessee filed his annual return in form 4 declaring his total and taxable turnover. Petitioner was heard by the assessing authority. The assesses/petitioner has effected sales of cake improver taxable at the rate of 4 per cent as sales as "chemical". The assessing authority ruled that the products manufactured by the assessee cannot be termed as chemical and therefore it is to be taxed at 8 per cent. Objections were considered and after considering the same the assessing authority rejected the contention of the petitioner. A first appeal was filed before the Joint Commissioner, Commercial Taxes, who did not accept the contention of the petitioner. Thereafter a second appeal was filed before the Karnataka Appellate Authority (KAT). The KAT also dismissed the appeal. Petitioner is now before this Court by way of a revision petition u/s 23(1) of the Act challenging the order of the KAT. Petitioner has raised the following question of law for decision of this Court in this revision. It reads :

"Whether, on the facts and in the circumstances of the case, the products manufactured by the petitioner under the brand name Lite-N-Soft gel are chemical/chemicals falling under the item No. 10A of Part C of the Second Schedule or are taxable u/s 5(1) of the Karnataka Sales Tax Act as general goods ?"

Notice was issued and the respondents are represented by the State Counsel.

We have heard Sri. G. Sarangan, learned Senior Counsel appearing for the assessee and the Government Advocate appearing for the respondents.

Counsel relies on Central Excise Laws and the certificate issued by the Office of the Commercial Tax Department, Hyderabad and the certificate issued by the Bombay Municipal Corporation and the dictionary meaning of "gel".

This Court during the pendency of the petition directed the Central Food and Technological Institute to obtain a sealed envelope and send to this Court the test certificate for consideration. The CFTI submitted a test certificate. After the same was obtained the petitioner has filed an affidavit stating that though the report supports the case of the petitioner but a scientific analysis has not been carried out by CFTI in terms of the order. Petitioner also files a report submitted by the State Public Health Laboratory, Pune, and test report submitted by Veermata Jijabai Technological Institute, Bombay. Petitioner''s counsel contends that though the petitioner throughout has pleaded that his product is to be treated as chemical still it is open to the petitioner to contend that the product is not a chemical but it is hydrogenated oil and cooking medium. Petitioner''s counsel also says that the department is wrong in not properly appreciating the material facts while considering his case.

Per contra the learned Government Advocate argues that it is not open to the petitioner now to take a different stand altogether. He contends that no new case can be allowed for the first time in this Court in a revision petition. He supports the order.

After hearing the learned counsel on either side the following order is passed.

From the pleadings placed before the court it is clear that the petitioner''s claim to tax at the rate of 4 per cent is on the ground that the commodity gel is an emulsifier based on vegetable constituents and chemicals like lead, copper, etc., used in the preparation of the goods for preparing of cakes to improve the structure. The product gel could not be mistaken as test chemical covered in Part C of the Second Schedule to the Act. This was the specific stand taken before the assessing officer. Before the first appellate authority the petitioner reiterated that the products of the petitioner is nothing but chemicals falling under the entry 10A of the Second Schedule to the Act.

In the second appeal before the Tribunal also the petitioner specifically contended that the authorities had failed to appreciate the scope of entry 10A of Part C of the Second Schedule. The said entry is very wide and the entry reads :

"Chemicals other than caustic soda."

Petitioner''s specific stand was that these goods fall under this item only. Petitioner further contended that the goods dealt by the petitioner that is "gel" must be considered only as chemical for the chemical reaction it does with the substance used. The item must be interpreted as chemicals and nothing else. The Tribunal based on these facts framed the following questions in para 4 in page 9 reading as under :

"Whether the appellant deals in chemicals or non-chemicals or whether the appellant''s claim is goods as being ''chemicals'' only on the ground that these chemicals create chemical reaction and therefore these cake improvers must be reckoned to be ''chemicals''."

The Tribunal after referring to various case laws and the basic facts placed before it ruled that this is not a case of chemical in its order.

Petitioner even before this Court has contended that the Tribunal had failed to take note of the fact that the chemicals of all kinds including copper sulphate, caustic soda, dyes and sulphur. According to him it has a wide classification and Section 5(1) being the residuary clause cannot be made applicable to its product.

From the facts narrated above it is absolutely clear that the petitioner throughout was contending that the manufacture of gel has to fall under entry 10A qualifying 4 per cent tax. Surprisingly for the first time petitioner gives a go by to a consistent stand taken by him and takes an altogether different stand that too at the argument stage and contends that their product is on par with hydrogenated oils which is not the case pleaded at any point of time except for the first time that too after filing of the petition. In this connection it is useful to refer to Section 23(1) of the KST Act which provides for a revision by the High Court in certain cases. It reads Section 23 :

"Within sixty days from the date on which an order under Sub-section (4) or Sub-section (6) or Sub-section (6A) of Section 22 was communicated to him, the appellant or the respondent may prefer a petition to the High Court against the order on the ground that the Appellate Tribunal has either failed to decide or decided erroneously any question of law : (underlining* by me)

Provided that the High Court may admit a petition preferred after the period of sixty days aforesaid if it is satisfied that the petitioner had sufficient cause for not preferring the petition within that period."

A reading of the provision would show that the appellant or the respondent may prefer a petition to the High Court against the order on the ground that the Appellate Tribunal has either failed to decide or decided erroneously any question of law. Court has to take note of the order passed by the Appellate Tribunal and to consider as to whether the Appellate Tribunal has either failed to decide or decided erroneously any question of law. Jurisdiction of this Court is confined to either failure to decide or erroneous decision by the Tribunal in an order passed u/s 22. In the case on hand the Tribunal has passed an order based on a contention that the products of the petitioner is not a chemical falling under entry 10A of the Act on the pleadings placed before it. Therefore the present stand of the petitioner to the effect that the product falling under hydrogenated gel cannot be permitted to be a basis in considering the order of the Tribunal in this revision.

In the circumstances and in the light of the petitioner giving a complete go by to earlier stand of his product falling u/s 10A, the Tribunal is right in passing the impugned order.

In this connection it is useful to notice a decision of this Court while interpreting Section 23 of the Act. A division Bench of this Court in the case of Calicut Trading Co. v. Deputy Commissioner of Commercial Taxes, Intelligence, Mysore Zone, Mysore reported in [1998] 110 STC 195 Mys, while considering the scope of Section 23, in para 9 has ruled that :

"We have heard the learned counsel for both the parties and perused the impugned orders. We do not find any error in the inference drawn by the Tribunal on the basis of the materials placed before it. Neither the Tribunal has taken into account any extraneous material nor any relevant material has been ignored in coming to the conclusion. The inference drawn cannot also be accused as being perverse or impermissible. In the said view of the matter, this Court cannot interfere with the finding of the fact arrived at by the Tribunal. This Court''s jurisdiction u/s 23 is restricted only to the question of law arising out of the order of the Tribunal which, in our opinion, does not arise in the present case." (underlined* by me).

This Court has ruled categorically with regard to jurisdiction of this Court u/s 23 which is restricted only to question of law arising out of the order of the Tribunal.

In the circumstances I am not inclined to agree with the counsel that a new case can be made out before this Court in a revision u/s 23 of the Act while challenging the order of the Tribunal. The argument of the Government Advocate has to be accepted in the light of the restricted jurisdiction u/s 23 while considering the order of the Tribunal based on the material placed before it. Any consideration on the basis of any additional/ fresh material before the High Court for the first time would result in deprivation of an opportunity to the State and also would result in deprivation of materials to the Tribunal while passing an order u/s 22 of the Act. Therefore, the petitioner cannot be permitted to develop a new case before us for the first time in a revision petition.

Petitioner''s counsel relies on a judgment of this Court in S.T.A. No. 93 of 1997 decided on January 31, 2001 Reported in [2001] 123 STC 463 sc (Belaire Refrigeration Services v. Additional Commissioner of Commercial Taxes).--Ed. That was a case of an appeal under the Sales Tax Act and not a revision proceedings. The appellate jurisdiction is much wider and therefore that judgment cannot come to the aid of the petitioner.

Petitioner is also not consistent with the composition of "gel" as a chemical. In the affidavit filed at annexure D this is what he states :

"I submit that our company manufactures the products under the brand name Lite-N-Soft Gel. The composition of the gel is water (29 per cent), emulsifier (35 per cent), (monoglycerides and propylene glycol ester), polyvalent alcohols 27 per cent (glycerine and propylene glycol), soap 3 per cent and fat 6 per cent. The product is nothing but a chemical used by the bakers for baking cakes."

In the petition also the same is reiterated in terms of annexure D. The Central Food Technological Research Institute has given the fat content 49.50 per cent. The same is not fully accepted by the petitioner. The Veermata Jijabai Technological Institute report shows the percentage of fat is 79.35 per cent. The State Public Health Laboratory, Pune, has given the fat content as 80 per cent.

These materials show that there is inconsistency in the readings submitted by the different institutes. It is not safe to place reliance on this contradictory readings.

In the result I do not find any merit in the revision. Revision stands dismissed.

[In view of the difference of opinion between SALDANHA, J, and GURURAJAN, J., the revision petition came on for hearing before BHARUKA, J., and the learned Judge delivered the following judgment on December 13, 2002.]

G.C. Bharuka, J.—It is rather amazing that despite the law relating to interpretation of goods in statutes like sales tax legislations having been well-settled by the Supreme Court holding that it is the popular meaning of the commodity as understood in the trade by those who sell, purchase and use them, difference of opinion has surfaced between the two learned Judges of this Court on the issue leading to seeking of third Judge opinion.

The simple question is as to whether the commodity sold by the assessee under the brand name "Lite-N-Soft Gel" can be held to fall in the category of "chemicals" or "hydrogenated edible oil" or remains as an unclassified goods under the provisions of the Karnataka Sales Tax Act, 1957 (in short "the Act") ?

This revision petition has been filed by the assessee u/s 23(1) of the Act assailing the order of the Appellate Tribunal, which has held that the gel manufactured and sold by the assessee is an unclassified goods and thus liable to sales tax u/s 5(1) of the Act. Section 23 of the Act unambiguously mandates that the only plea available to the petitioner approaching this Court under revisional jurisdiction can be that the Appellate Tribunal has either failed to decide or has decided erroneously any question of law. Therefore, this Court, in its revisional jurisdiction, can only inquire about the correctness of a question of law which had fallen for consideration before the Appellate Tribunal and cannot harp on a question of fact by entertaining fresh evidence as has been done in the present case. Curiously, in the present case, the assessee was permitted to lead fresh evidence to alter its stand on composition of gel so as to make out a completely new case for the first time before this Court. This is one of the major aspects leading to difference of opinion among the learned Judges. According to Saldanha, J., such a course is open to this Court. Whereas, Gururajan, J., found it difficult to agree on this score and has expressed dissenting opinion.

The assessee is a private limited company. It is a registered dealer under the provisions of the Act. Its head office is situate at Bombay. It has its manufacturing unit at Chiplun, Maharashtra. According to the assessee, it has branch offices all over India including the one at Bangalore. According to the petitioner, it is engaged in manufacture of bakery raw materials like cake improvers, cake mixers, etc. These goods are branded as "Helios gel" and ''''Helios mix". The specific and consistent stand of the assessee before the departmental authorities and the Appellate Tribunal had been that it manufactures "gel" (a) by dissolving the emulsifier blend in polyvalent alcohol at desired temperatures ; (b) potassium/sodium stearate is mixed with fat in water separately; (c) the mixture of (a) and (b) is mixed under controlled conditions with agitation ; (d) the finished product gels on cooling and then packed.

As could be found from the order of the Appellate Tribunal, the composition of gel manufactured by the assessee consists of water 29 per cent, emulsifier 35 per cent, polyvalent alcohols 27 per cent, soap 3 per cent and fats 6 per cent. Admittedly, the gel manufactured as above, is sold to confectioneries and bakers. It is also not in dispute that "gel" is used as a cake improver and is known as such in the trade. It is an edible substance. It provides sponginess to the cakes, improves its consistency and the shelf life. In the trade, i.e., persons conversant in dealing with gel, it is neither regarded or called as chemical or edible oil. Still the plea of the assessee before the authorities and the Appellate Tribunal was that it should be treated as "chemical" and before this Court by changing its earlier stand as "hydrogenated edible oil".

Before proceeding further, I may briefly indicate the reasons as to why and how the controversy cropped up. The present proceedings relate to the assessment year 1994-95. Under the scheme of the Act, as stood at the material time, unless goods are found mentioned in the Second Schedule with rates of tax applicable to those, they were liable to suffer tax at the rate of 8 per cent. Further, at the material time, chemicals other than caustic soda, being item 10A of Part "C" to the Second Schedule was liable to tax at the rate of 4 per cent. Similarly, "hydrogenated oils and cooking medium", being item 1(iii) of Part E to the Second Schedule was liable to tax at 10 per cent. But, from 1995-96, this rate was reduced to 4 per cent. Therefore, the assessee found it advisable and beneficial to claim its product "gel" to be classified as "chemicals" or in the alternative, realising the future benefits for the period April 1, 1995 onwards, to claim it as "hydrogenated oils and cooking medium".

The Appellate Tribunal by applying the user test, i.e., the use for which the commodity is sold in the market, took the view that the gel manufactured by the assessee cannot by any stretch of imagination be treated as "chemical" as claimed. It further held that since it does not fall in any of the classified goods mentioned in the Second Schedule to the Act, therefore it has to be taxed only u/s 5(1) of the Act as unclassified goods. Being dissatisfied with the order of the Appellate Tribunal, the present revision petition was preferred. Acceding to the prayer of the petitioner that the product sold by it should be sent for analysis to the Central Food Technological Research Institute, Mysore (in short the "CFTRI"), with a specific direction to ascertain its fat/vegetable oil composition. Report dated March 22, 2001 sent by the CFTRI, was produced by the assessee through I.A. No. 1. According to this report, in the gel manufactured by the assessee, the fat content was 49.50 per cent by weight. This report by itself can hardly be of any assistance in ascertaining as to whether the commodity in question is to be treated as classified or unclassified goods under the Act. Anyhow, Saldanha, J., by relying on this report, accepted the assessee''s case and held that the gel manufactured by the assessee falls under the head "hydrogenated oils and cooking medium". But, Gururajan, J., has recorded dissenting opinion, because according to him, it is impermissible on the part of this Court to allow assessee to build up a new case on fact and thereupon grant the desired relief.

There are innumerable cases laying down the principles governing classification of goods for fiscal statutes including those which are "law" under Article 141 of the Constitution and binds all including this Court. It clearly says that the goods, the sale of which, are to be taxed under the sales tax laws, have to be construed in the sense in which they are popularly understood by those who deal in them and who purchase and use them. (See Commissioner of Sales Tax, U.P. Vs. S.R. Brothers, Kanpur, . In this case, the Supreme Court has further held that "the extreme, peculiar and scientific meaning of the goods which might sometimes deviate from the popular meaning, cannot prevail". Reliance was placed on the judgment of 5-Judge Bench in the case of Ramavatar Budhaiprasad Etc. Vs. Assistant Sales Tax Officer, Akola, , in which "betel leaves" were not considered as "vegetable". In Commissioner of Sales Tax, Madhya Pradesh Vs. Jaswant Singh Charan Singh, , the Supreme Court held "while interpreting items in statutes like the Sales Tax Acts, resort should be had not to the scientific or technical meaning of such terms, but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense".

The Supreme Court again in the case of Mukesh Kumar Aggarwal and Co. Vs. State of Madhya Pradesh and Others, has held that :

"In a taxing statute, words which are not technical expressions or words of art, but are words of everyday use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance, i.e., ''that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it''. Such words must be understood in their ''popular sense''. The particular terms used by the Legislature in the denomination of articles are to be understood according to the common commercial understanding of those terms used and not in their scientific and technical sense ''for the Legislature does not suppose our merchants to be naturalists or geologists or botanists''."

Even, Sri Sarangan, learned Senior Counsel appearing for the assessee, could not dispute that the gel manufactured by the assessee was neither sold nor used either as hydrogenated vegetable oil or cooking medium nor it was identified by the trade or its users as a "chemical". The word chemical used in entry 10A of Part C to the Second Schedule essentially refers to non-edible commodity because all edible commodities are specified specifically either in one or the other entry of the Second Schedule.

In the case of Commissioner of Sales Tax, U.P. Vs. S.R. Brothers, Kanpur, , the point at issue was whether the "food colors" and "syrup essences" which were edible goods, could be said to be covered by the generic entries "dyes and colors and composition thereof and "scents and perfumes" as specified in the U.P. Sales Tax Act. The Supreme Court held that the food colors and syrup essences cannot be taken as included in the latter two entries which comprised non-edible commodities.

Furthermore, "gel" manufactured by the assessee, may have fats as one of its nutrient component but that by itself can hardly be of any consequence in classifying it in one or the other entry of the statute like the Act. All edible substances will have "fats" in varying percentages. This can hardly be a ground for classifying goods for taxing purposes. The courts have taken the view that even ice and water, which have the same and exact chemical composition, i.e., two atoms of hydrogen and one atom of oxygen, are commercially different commodities for the purpose of taxing statute. There cannot be a better illustration than this to demonstrate the fallacy in identifying the commodity by basing the reasoning on chemical compositions, and similarly the nutrient value of edible goods.

12a. Further, the emulsifying agents and stabilising agents have been defined in Rule 60 of the Prevention of Food Adulteration Rules, 1955 (in short, "the Rules"). These are defined to mean "substances which, when added to food, are capable of facilitating a uniform dispersion of oils and fats in aqueous media, or vice versa, and/or stabilising such emulsions".. Rule 61 of the Rules puts restriction on use of emulsifying or stabilising agents in any food, except where the use of emulsifying or stabilising agent is specifically permitted. The second proviso to Rule 61 provides that polyglycerol esters of fatty acids and polyglycerol ester of inter sterilized ricinoleic acid may be used in bakery products and in chocolate to the extent of 0.2 per cent by weight. This proviso also shows that "gel" which is an emulsifying agent is an article of established and independent identity and cannot be classified as either chemical or hydrogenated oil.

12b. It may also be noticed here that for long hydrogenated oil has acquired definite identity. In the case of Tungabhadra Industries Ltd. Vs. The Commercial Tax Officer, Kurnool, the Supreme Court has held that hydrogenated oil is prepared from refined oil by the process of passing hydrogen into heated oil in the presence of a catalyst (usually finely powdered nickel), two atoms of hydrogen are absorbed. A portion of the oleic acid which formed a good part of the content of the groundnut oil in its raw state is converted, by the absorption of the hydrogen atoms, into stearic acid and it is this which gives the characteristic appearance as well as the semi-solid condition which it attains. The "gel", manufactured by the assessee, nowhere fits in with the process of manufacturing hydrogenated edible oil. For that matter, the "gel" can never be used for cooking purpose in the kitchen.

It may be of relevance to notice here that if the gel manufactured by the petitioner could at all appropriately fit anywhere in the Second Schedule, then it can only be under entry 21 of Part C which reads "confectionery, cakes and biscuits". But, since neither the department nor the assessee has taken up any such stand, there is no occasion for me to hold so. So far as the view taken by Gururajan, J., that it is impermissible for the assessee or the department to make out a new case on facts in the revision is concerned, I am in entire agreement with him.

For the aforesaid reasons, I hold that the assessee is not entitled to any relief as claimed in the revision petition, which is accordingly dismissed.