Pepsico India Holdings Pvt. Ltd. vs Commissioner of Commercial Taxes, The Asst. Commissioner, Sri Raghavendra Enterprises and Rouch Fancy Store

H.L. Gokhale, C.J.—Heard Mr. C.S. Loda, learned Counsel appearing on behalf of Mr. R. Raghavan in support of this appeal. Mr. Haja

Naziruddin, learned Special Government Pleader (Taxes) appears for respondents 1 and 2. The appeal seeks to challenge the order passed by the

learned single Judge on 6.3.2009, whereby the learned single Judge has dismissed the writ petition filed by the appellant herein.

The appellant is a manufacturer of potato chips which are sold under the brand names ""Lays"" and ""Uncle Chips"". They had filed the writ petition

seeking twofold orders. One was that the clarification dated 29.3.2007 issued by the first respondent-Commissioner of Commercial Taxes, Tamil

Nadu, holding that branded chips are taxable at 12.5% under Part-C of Schedule-I to the Tamil Nadu Value Added Tax Act, 2006 be quashed

and set aside. The second prayer was that the first respondent be directed to classify ''Potato Chips'' sold under a brand name as taxable under

Entry 107 of Part-B of Schedule-I to the Tamil Nadu Value Added Tax Act, 2006.

Mr. C. Loda, learned Counsel appearing on behalf of the appellant submitted that there is a specific entry under No. 107 in Part-B of Schedule-

I to the Tamil Nadu Value Added Tax Act, 2006. The said entry reads as follows:

Entry 107 of Part-B of Schedule I

Processed fruits and vegetables including fruit jam, jelly, [*****]1, fruit squash, paste, fruit drink and fruit juice (whether in sealed containers

or otherwise), other than those specified in the Fourth Schedule.

It is submitted that there is also a residuary entry, which is Entry No. 69 of Part-C of Schedule-I to the Act, which is to apply to any other goods

not specified in any of the Schedules. As far as Entry No. 107 is concerned, the tax payable would be at the rate of 4%, whereas under Entry No.

69, the tax payable would be at the rate of 12.5%. The case of the appellant is that what they are selling are only potato chips which are fried chips

made out of potatoes and they would fall under the head ''processed vegetables''. It is submitted that even as far as unbranded items are

concerned, the tax payable is 4% under Entry 51 of Part-B of Schedule-I. That entry reads as follows:

Entry 107 of Part-B of Schedule I

Foods and food preparations and mixes including instant foods, coconut milk powder, pickles, sweets, cheese, confectionery, chocolates, toffees

and savouries like chips and popcorn sold without a brand-name other than those specified in the Fourth Schedule.

The short submission of the learned Counsel for the appellant is that when there is a specific entry, one has to follow only that and one is not

expected to go to the residuary item.

As far as this submission is concerned, there have been a number of judgments on this point. For a ready reference, one may refer to the

judgment of the Apex Court in M/s. Bharat Forge and Press Industries (P) Ltd. Vs. Collector of Central Excise, Baroda, Gujarat, , where the

Apex Court has clearly held in paragraph 3 that under a residuary entry, only such goods are covered which cannot be brought under the various

specific entries in the tariff. In other words, unless the Department can establish that the goods in question can by no conceivable process of

reasoning be brought under any of the tariff items, resort cannot be had to the residuary item. Recently, a similar view has been taken by the Apex

Court in Mauri Yeast India Pvt. Ltd. Vs. State of U.P. and Another, . That was in the context of the Uttar Pradesh Trade Tax Act, 1948 and the

entries thereunder.

We have also been shown the judgment of a Division Bench of the Guwahati High Court in Pepsico India Holdings Pvt. Ltd. v. State of Assam

reported in (2009) 25 V.S.T. 41 (Gau). In that matter, the potato chips sold by the appellant under the same brand name ""Lays"" and ""Uncle

Chips"" are held to be classifiable as processed vegetables and not to come under a residuary entry. The product is under the same brand name and

that is how the judgment is rendered with respect to the relevant entries under the Assam Value Added Tax Act, 2003. Learned Counsel for the

appellant, therefore, submits that the impugned clarification by the Commissioner of Commercial Taxes was totally erroneous and the second

prayer which was made by the appellant ought to have been entertained. The learned single Judge having rejected these submissions, the present

appeal has been filed.

The learned single Judge has taken a view in paragraph 25 of his judgment that these chips could not be classified as processed vegetables.

According to the learned single Judge, processed vegetables will not include vegetables fried in oil. This finding does not stand to reason. The term

''processing'' would take within its ambit any such process which would include frying, apart from cutting of the potatoes.

Mr. Haja Naziruddin, learned Special Government Pleader (Taxes), on the other hand, submitted that the better course that can be adopted is

that the appellants could go in for the alternative remedy of assessment and thereafter, if they are aggrieved, they may take further steps. He has

referred to the judgment of a Division Bench of the Punjab and Haryana High Court in the case of the present appellants reported in Pepsico India

Holdings (P.) Ltd. Vs. State of Punjab and Another, .

In our view, as far as the present case is concerned, once a clarification is given by the Commissioner of Commercial Taxes, that will bind the

subordinate assessing authorities and one cannot expect a different order from the assessing officers. In these circumstances, no fruitful purpose

would be served by directing the appellant to go for an assessment and for that reason, not to entertain the writ petition. That apart, in the present

case, for the very branded products, there is a well reasoned Division Bench judgment of another High Court. It is a settled proposition that in tax

matters, when there is a Division Bench judgment of another High Court on a similar provision, it has to be treated with due respect and in the

instant case, since the Guwahati High Court has taken a view, which is according to us also otherwise correct, there is no reason for us to take a

different view.

For all these reasons, the writ appeal is allowed. The order of the learned single Judge is quashed and set aside. The direction as sought for in

the writ petition is granted. There shall be no order as to costs. Consequently, M.P. No. 1 of 2009 is closed.