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Judgment
Jayant Patel, J. - The present appeal is directed against order dated 18/2/2012, passed by the Commissioner of Commercial Taxes, in exercise of his revisional power, whereby, order dated 28/3/2007 of the Advance Ruling Authority is set aside and it is, further, clarified that Mango Juc-Fit in liquid form and Mango Fruit Booster, Rasna Utsav and Orange Juc-up in powder form are unscheduled goods liable to tax under Section 4(1)(b) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as "the KVAT Act").
The brief facts of the case are that the appellant is a dealer under KVAT Act dealing in processed fruit products. The appellant sought a clarification from the Authority for Clarification and Advance Ruling (hereinafter referred to as "the Advance Ruling Authority" for the sake of convenience), by application dated 9/3/2007. The Advance Ruling Authority, vide order dated 28/3/2007, observed that the rate of tax shall be 4% under Entry 3 of Third Schedule. The case of the appellant is that it acted upon the said decision of the Advance Ruling Authority. Subsequently, the matter was taken up in revision by the Commissioner of Commercial Taxes (hereinafter referred to as "the Commissioner) and show-cause notice was issued. The appellant herein replied to the notice and ultimately, on 18/2/2012, the impugned order was passed as referred to above. Under the circumstances, the present appeal is before this court.
We have heard Mr. B.P. Gandhi, learned counsel appearing for the appellant and Mr. K.M. Shivayogiswamy, learned Addl. Government Advocate appearing for the respondent.
The contention raised on behalf of the appellant is that as per Entry 3 of the Third Schedule of KVAT Act, processed fruits and vegetables are included in the said entry and therefore, Mango Juc-Fit in liquid form as well as Mango Fruit Booster and Orange Juc-up in powder form would also stand included. The revisional authority has not properly considered the said aspects while excluding the said products from the said entry.
The additional contention raised on behalf of the appellant, which can rather be said to be a preliminary contention is that the position and status of the Advance Ruling Authority is higher than Commissioner of Commercial Taxes. When the Advance Ruling Authority comprises of more than one Commissioner, which is comprising of three Commissioners, the Commissioner of Commercial Tax cannot exercise the revisional power. He submitted that the impugned order can also be said to be without jurisdiction.
In furtherance of this contention, learned counsel relied upon certain decisions which shall be referred to by us hereinafter at the appropriate stage to the extent found relevant. But the principal contention on interpretation of the Entry is the same as mentioned by us herein above. Learned counsel appearing for the respondent, supported the order by contending that the exercise of power by the Advance Ruling Authority under Section 60 of the KVAT Act is subject to the revisional power under Section 64 of the KVAT Act and therefore, it cannot be said that the Revisional Authority or the Commissioner, who has exercised revisional power, has no jurisdiction to set aside the decision taken by the Advance Ruling Authority under Section 60 of the KVAT Act.
On the aspect of interpretation of the entry, learned counsel for the respondent submitted that the view taken by the revisional authority is correct. The contention was two fold. One, is that Mango Juc-Fit cannot be equated with the other items prescribed in Entry No. 3. Further, it was contended that Mango Fruit Booster, Rasna Utsav and Orange Juc-up are in powder form which in any case, cannot be included in Entry No. 3 since in Entry No. 3 all the items are in liquid and semi liquid or paste form and cannot be considered in powder form. It was, therefore, submitted that the decision of the revisional authority calls for no interference and the appeal be dismissed.
Before we examine the contention regarding the interpretation of the entry, we find it appropriate to deal with the preliminary contention on the point of jurisdiction raised by the learned counsel appearing for the appellant. Section 60 of the KVAT Act providing for Clarification and Advance Ruling reads as under:
"60. Clarification and Advance Rulings. (1) The Commissioner may constitute an "Authority for Clarification and Advance Rulings", consisting of at least three Additional Commissioners, to clarify the rate of tax in respect of any goods or the eligibility to tax of any transaction or eligibility of deduction of input tax or liability of deduction of tax at source under the Act, in respect of any case or class of cases as the Commissioner may specify.
(2) Any registered dealer seeking clarification or advanced ruling under this Section, shall make an application to the Authority in such form, accompanied by proof of payment of such fee, paid in such manner as may be prescribed.
(2-A) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the assessing or registering authority concerned and call for its finding on the clarification sought or question raised and also any information or records.
(2-B) The Authority may, after examining the application and any records called for, by order either, admit or reject the application:
Provided that the Authority shall not allow the application where the question raised in the application.--
(i) is already pending before any officer or authority of the Department or Appellate Tribunal or any Court;
(ii) relates to a transaction or issue which is designed apparently for the avoidance of tax:
Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard and where the application is rejected, reasons for such rejections shall be recorded in the order.
(2-C) A copy of every order made under subsection (2-B) shall be sent to the applicant and the officer concerned.
(2-D) Where an application is admitted under sub-section (2-B), the Authority shall after examining such further material as may be placed before it by the applicant or obtained by the authority, pass such order as deemed fit on the questions specified in the application, after giving an opportunity to the applicant of being heard, if he so desires and also to the Assessing Authority or Registering Authority concerned. The Authority shall pass an order within ninety days of the receipt of any application and a copy of such order shall be sent to the applicant and to the officer concerned.
(3) No officer or any other authority of the Department or the Appellate Tribunal shall proceed to decide any issue in respect of which an application has been made by an applicant under this Section.
(4) The order of the authority shall be binding, only on the applicant who seeks clarification and only in respect of the goods or transaction in relation to which a clarification is sought and also only in the proceedings before officers of the department (other than the Commissioner) and the Appellate Tribunal, relating to such applicant.
(5) The order of Authority under this Section shall be binding as aforesaid unless there is a change in law or facts on the basis of which the order was passed.
(6) Where the authority finds, on a representation made to it by any officer or otherwise, that an order passed by it was obtained by the applicant by fraud or misrepresentation of facts, it may, by order, declare such order to be void ab initio and thereupon all the provisions of this Act shall apply to the applicant as if such order had never been made.
(7) Subject to the provisions of sub-section (4) of Section 59, sub-section(2) of Section 64 and Section 66, every order passed under this Section shall be final.
(8) Notwithstanding any clarification or any ruling given by the "Authority for Clarification and Advance Rulings" under subs-section (2-D) pertaining to any particular goods, the rate of tax payable in respect of such goods by the applicant shall be at such rate as may be clarified by the Commissioner under subsection (4) of Section 59, from the date of its publication in the Official Gazette."
As per the aforesaid provision, the Commissioner may constitute the authority for Clarification and Advance Ruling consisting of at least three Additional Commissioners for clarifying the rate of tax in respect of any goods or eligibility to tax of any transaction or eligibility of deduction of input tax or liability of deduction of tax at source under the Act. Therefore, it is trite that the constitution of the Advance Ruling Authority may comprise of at least three additional Commissioners. Sub-section (2) of Section 60 provides for making of any application by any dealer. Sub-section (2-A) to (2-D) provides for consideration of the application. Sub-section (3) provides that no officer or any authority of the Department or the Appellate Tribunal shall proceed to decide any issue in respect of the application, which is made in this section. Sub-section (4) provides that the order of the authority shall be binding on the applicant who seeks clarification. Sub-section (5) provides that the order of the authority will be binding as aforesaid unless there is a change in law or facts on the basis of which the order was passed. Subsection (6) provides that where the authority finds that there was any fraud or misrepresentation, it may declare such order void ab initio and thereupon all the provisions of this Act shall apply to the applicant as if such order had never been passed. Sub-section (7) of the Act provides that subject to the provisions of Section 64(2) and Section 66, every order passed under this section shall be final. However, the aforesaid is by amendment of 2013, which is not applicable to the present case. Additionally it has been provided that the finality of the order shall also be subject to Section 59(4) of the KVAT Act. Since sub-section(8) is based on the amendment brought about for inclusion of Section 59(4) and sub-section (7) of Section 60, it would be relevant for the purpose of the present case.
The aforesaid makes one aspect clear that the finality attached to the order of the Advance Ruling Authority under Section 60 is subject to the provisions of sub-section(2) of Section 64.
Section 64 of the KVAT Act reads as under:
"64. Revisional powers of Additional Commissioner and Commissioner.-
(1) The Additional Commissioner may on his own motion call for and examine the record of any order passed or proceeding recorded under this Act and if he considers that any order passed therein by any officer, who is not above the rank of a Joint Commissioner, is erroneous in so far as it is prejudicial to the interest of the revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the person concerned an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment or directing a fresh assessment.
(2) The Commissioner may on his own motion call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by any officer subordinate to him [or the Authority for Clarification and Advance Rulings constituted under Section 60] is erroneous in so far as it is prejudicial to the interest of the revenue, he may if necessary, stay the operation of such order for such period as he deems fit and after giving the person concerned an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment or directing a fresh assessment.
(3) The Additional Commissioner or the Commissioner shall not exercise any power under sub-section (1) or sub-section (2), as the case may be, if-
(a) the time for appeal against the order has not expired;
(b) the matter has been subject to an appeal under Section 63 or a revision in the High Court; or
(c) more than four years have expired after the passing of the order sought to be revised.
[Provided that in the case of an order passed by the Appellate Authority under Section 62 allowing the appeal preferred in full, the conditions specified in clause (a) shall not apply.]
(4) Notwithstanding anything contained in sub-section (3), the Additional Commissioner or the Commissioner may pass an order under sub-section (1) or (2), as the case may be, on any point which has not been raised and decided in an appeal or revision referred to in clause (b) of sub-section (3), before the expiry of a period of one year from the date of the order in such appeal or revision or before the expiry of a period of four years referred to in clause (c) of that sub-section, whichever is later.
(5) Every order passed in revision under subsection (1) shall, subject to the provisions of sub-section (2) of this Section and Sections 66 and 67, be final.
(6) Every order passed in revision under subsection (2) shall, subject to the provisions of Sections 65 and 66, be final.
(7) If the order passed or proceedings recorded by the appropriate authority referred to in sub-section (1) or (2), involves an issue on which the High Court has given its decision adverse to the revenue in some other proceedings and an appeal to the Supreme Court against such decision of the High Court is pending, the period spent between the date of the decision of the High Court and the date of the decision of the Supreme Court shall be excluded in computing the period referred to in clause (c) of sub-section (3).
(8) In computing the period of limitation for the purpose of sub-section (3), any period, during which any proceeding under this Section is stayed by an order or injunction of any court, shall be excluded.
(9) For the purposes of this Section, ''record'' shall include all records relating to any proceedings under this Act available at the time of examination by the Additional Commissioner or the Commissioner."
Sub-section (1) of Section 64 provides that the revisional powers of Additional Commissioner may be exercised on his own motion and he may call for and examine the record of any order passed or proceeding recorded under the KVAT Act and if he finds that the order therein passed by any officer, who is not above his rank of Joint Commissioner is erroneous and is also prejudicial to the interest of the Revenue, he may exercise power as provided under sub-section (1). Sub-section(2) further provides that the Commissioner may on his own motion call for and examine the record of any proceedings under this Act and if he finds that the order passed by any officer subordinate to him or authority for Clarification and Advance Ruling constituted under Section 60 is erroneous and prejudicial to the interest of the Revenue. He may pass further order and exercise the power as provided under sub-section (2).
We may record that the words "Authority for Clarification and Advance Rulings" constituted under Section 60 of the KVAT Act is already inserted by Act No. 6 of 2005 with effect from 19/3/2005. Therefore, upon consideration of sub-section (7) of Section 60 read with sub-section (2) of Section 64, it cannot be said that the Commissioner will have no revisional power against the order of the Advance Ruling Authority.
On the contrary, express provision of statute on the decision of the Advance Ruling Authority is subject to Section 64(2) of the Act and it is only thereafter finality is attached to the said decision.
The fact that the Advance Ruling Authority comprises of three Additional Commissioners or the fact that the power is exercised by the Commissioner under sub-section (2), against the decision of the Additional Commissioners, would hardly assume any significance when the statute expressly provides a mechanism whereby finality can be attached to the order of the said Authority subject to the revisional power with the Commissioner under sub-section (2) of Section 64 of the Act. The statute expressly confers the revisional power upon the Commissioner under sub-section (2) of Section 64 of the Act against the decision of the Advance Ruling Authority under Section 60 of the Act.
The fact that the Advance Ruling Authority comprises of three Additional Commissioners or the fact that the power is to be exercised by the Commissioner under sub-section (2) of Section 64 of the Act against the decision of three Addl. Commissioner would hardly be relevant, since finality is attached to the decision of the Advance Ruling Authority under Section 60, subject to the power of the Commissioner under sub-section (2) of Section 64 of the Act. When the statute expressly confers the power upon the Commissioner under sub-section (2) of Section 64 against the decision of the Advance Ruling Authority under Section 60 of the Act, the contention raised by the learned Counsel for the appellant with regard to jurisdiction of the revisional authority cannot be accepted. Hence, the said contention fails.
One other contention raised by the learned counsel for the appellant was that since the Commissioner himself is exercising power for constituting Advance Ruling Authority, he cannot in revisional jurisdiction upset the order and therefore the revisional jurisdiction cannot be exercised.
In our view, the contention is ex-facie misconceived as it runs counter to the scheme of the provisions. In any case, even if administrative power is exercised by the Commissioner under Section 60 of the Act for constitution of the Advance Ruling Authority, power under Section 64(2) of the Act would not get nullified on the ground as sought to be canvassed, since under Section 64(2) of the Act the power exercised is quasi-judicial in nature, which is different and distinct than that of exercise of an administrative power. Hence, the aforesaid contention also cannot be accepted.
The aforesaid would lead us to examine the merits of the matter. Entry No. 3 of Third Schedule of the Act for ready reference is reproduced and the same reads as under:
"3. All processed fruit and vegetables including fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice (whether in sealed container or otherwise)."
On a plain reading of the aforesaid entry, it transpires that all processed fruits and vegetables including fruit jams, jelly, pickles, fruit squash, paste, fruit drinks and fruit juice (whether sealed in container or otherwise) are included in the said entry. The basis of the aforesaid entry is that the items contained therein must be processed fruit or processed vegetables. Further, if the colour or the meaning of the expression "processed fruit or vegetables" is to be considered, one may be required to consider the other parts of the entry which may throw light on the intention of the legislature. Jams, jelly, pickles, squash, paste, drink, juice, would show that such processed foods may be in liquid or semi-liquid form or in the form of a paste in contra-distinction to the concentrated power form.
The attempt made on the part of the learned counsel for the appellant is that when the words used are "all processed" it would include all form of processed fruit and vegetables and it is not necessary that it should be in the form of liquid, semi liquid, paste or squash or in powder form. Therefore, the submission was that concentrated powder form would also get included in the entry. It was also contended in furtherance thereto that the definition is an inclusive definition and an expansive one and hence widest meaning may be given to the entry and if widest meaning is given, then concentrated powder of any fruit or vegetable would also get included in the entry.
The contention may prima facie be of substance and attractive but upon further scrutiny, it appears that whenever any entry is to be interpreted, the said entry is to be read as a whole and not by segregating the entry into different parts and by picking up certain words from the entry the meaning cannot be stressed.
In our view, if the earlier part of the entry viz., "all processed fruits and vegetables" is to be considered and given meaning, one has to also keep in mind the other words following the aforesaid expression used by the legislature for inclusion of certain specified items. It is true that the items which are specified in the entry may not be exhaustive but the character and composition of those items included have a commonality. It is on an understanding of the common features of those specified items an appropriate meaning can be given to the earlier portion of the entry "all processed fruit and vegetables". Thus, the meaning of the aforesaid expression is restricted by the words, which follows it. Further, if the meaning as understood in common parlance which is one of the prime tests for interpreting any entry is considered, then concentrated powder form of any fruit which is marketed is always different in comparison to any liquid or semi-liquid or paste form of any fruit or vegetable. Not only that, if the composition and form of any processed fruit or vegetable is considered as liquid or semi liquid or paste or squash form of any fruit or vegetable, it is different from the concentrated powder form of any fruit or vegetable.
Further in order to test the submission of learned Counsel for the appellant, the other entries in the Third Schedule itself could be considered so as to interpret the intention of the legislature. The other schedule providing for the other entries can be considered at this stage.
Entry No. 7 provides for Arecanut and powder, which is a processed or powder form of arecanut. Entry No. 24 provides for coffee beans and seeds, green tea leaf and chicory. Entry 31 provides for edible oils which are extracted from nuts. Entry 45 provides for husk and bran of cereals and pulses extracted after a process from vegetable plants.
If certain entries are considered of the First Schedule which is for exempted goods then Entry 25 provides for fresh plants, saplings; Entry 30 provides for jaggery which is made out of sugarcane juice; Entry 33 provides for leaf plates which is made out of plants; Entry 51 provides for toddy, neera and arrack which is extracted from fruit. If the contention of the learned Counsel for the appellant is accepted, the resultant effect would be, that all such aforesaid entries would be redundant if the said items are included in Entry No. 3 of the Third Schedule, unless exempted from the payment of tax.
Under the circumstances, we find that unless a strict meaning is given to the expression "all processed fruit and vegetables" in the form of liquid, semi-liquid paste or squash form, they would not get included in Entry No. 3 of Second Schedule. In any case, concentrated powder form, by applying the common parlance test would stand on an altogether different position than any fruit or vegetable found in liquid or semi liquid, paste or squash form. Under circumstances, the contention raised that "all types of processed fruits and vegetables" would also include concentrated form of powder cannot be accepted.
Learned Counsel for the appellant relied upon the decision of this Court in the case of D.A. Sons, Bangalore v. The Addl. Commissioner of Commercial Taxes, Zone-I, Bangalore, reported at 2013 (75) Kar. LJ page 101, wherein it was held that mango chutney and curry paste would get included in the entry and the same analogy must be applied to the present case also.
In our view, even if the said decision is considered, the distinguishing circumstance is that mango chutney and curry paste of different varieties are in paste form in contradistinction to the concentrated powder form of any fruits or vegetables. Therefore, the items are not analogous.
Another decision relied upon by the learned Counsel for the appellant is the case of G.D. Sunagar & Brothers v. Commissioner of Commercial Taxes reported at 1991 (1) KAR.LJ page 179, which was a case concerning lime water and the question was that whether it is a chemical or not. The said decision also cannot be applied to the facts of the present case, as the issue herein is totally distinct.
We may not burden our judgment with other decisions relied upon by learned Counsel appearing for the appellant for the simple reason that in none of the decisions cited, the question was for inclusion of any concentrated powder form as against the liquid or semi liquid, paste or squash form of any fruit or vegetable.
In view of the above, if the impugned decision of the revisional authority is considered, it can be said that in so far as liquid form of Mango Juc Fit is concerned, the revisional authority has committed an error in excluding the same from Entry 3 of Third Schedule, since it is a concentrated form of mango fruit juice which is in liquid form. In view of the discussion and observation made by us herein above the said item would be included in the entry. However, insofar as Mango Fruit Booster, Rasna Utsav, Orange Juc-up in powder forms are concerned, since all such items are in concentrated powder form, as per the observation and discussion made by us herein above, such would not get included in Entry No. 3 of Third Schedule. The decision of the revisional authority cannot be said to be erroneous or illegal on this aspect of the matter.
In view of the aforesaid observation and discussion, the impugned order of the Commissioner of Commercial Taxes insofar as it relates to excluding Mango Juc-Fit in liquid form from Entry 3 of Third Schedule is set aside but is confirmed so far as it relates to Mango Fruit Booster, Rasna Utsav and Orange Juc-up, which are in concentrated powder form.
However, it is clarified that if any of the aforesaid products is sold in liquid, semi liquid, paste or squash form, the same shall get included in the entry of Third Schedule of the Act.
The appeal is partly allowed to the aforesaid extent. Considering the facts and circumstances, there is no order as to costs.