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2018 DIGILAW 581 (KER)

STATE OF KERALA v. HINDUSTAN LEVER LTD.

2018-07-19

ASHOK MENON, K.VINOD CHANDRAN

body2018
ORDER : Ashok Menon, J. The Revenue is in revision challenging the findings of the Kerala Sales Tax Appellate Tribunal, Ernakulam finding that 'premix coffee' is to be treated as 'coffee' coming under Entry 42 of the First Schedule to the Kerala General Sales Tax Act, 1963 ('The Act' for short) exigible to 8% tax and the product 'frozen dessert' is to be classified under the residuary entry. The questions of law framed in this revision are as follows: “(A) Ought not the Tribunal have found that coffee premix is to be classified under Entry 141 being a powder used for the preparation of a beverage? (B) Ought not the Tribunal have found that the product frozen dessert is chocolate coming under Entry 45 of the 1st Schedule of the KGST Act?” 2. Assessment for the year 1999-2000 was completed on best judgment basis. The Assessing Officer had assessed the turnover of 'premix coffee' at 20% classifying the same under Entry 141 of the First Schedule to the Act and with respect to the product 'frozen dessert', it was assessed at 12% coming under Entry 45 of the First Schedule to the Act. It was challenged in appeal by the assessee and the first appellate authority partially allowed the appeal modifying the assessment order vide Annexure-B. In further appeal before the Tribunal, it was found that the product 'premix coffee' would fall under Entry 42 of the First Schedule to the Act exigible to tax @ 8% following an earlier decision of the Tribunal in TA No.555/2004, whereas, 'frozen dessert' is to be classified under the residuary entry as there is no direct and specific entry available under the First Schedule. The order of the Tribunal at Annexure-D stands challenged by the Revenue. It is stated that the Tribunal had mistakenly relied on the earlier decision in TA NO.555/2004 produced at Annexure-C, which was with respect to 'french coffee', and did not deal with 'coffee premix'. It is submitted that the product is in the form of powder to be used for preparation of beverage, which comes squarely under Entry 141 of the First Schedule to the Act, while Entry 42 refers only to coffee and includes coffee beans, coffee seeds (raw or roasted) and coffee powder, except coffee power sold under a brand name. The Tribunal went wrong in finding that 'coffee premix' would come under the said classification. The Tribunal went wrong in finding that 'coffee premix' would come under the said classification. With respect to 'frozen dessert', the Tribunal observed that it would come under the residuary entry. The product itself is described as “Kwality Walls Feast Chocolate” which would bring it squarely under Entry 45 and not under the residuary entry. 3. The learned counsel for the respondent-assessee would contend that 'premix coffee' pertains to a mix of coffee powder, milk powder and sugar to be used in a vending machine and cannot therefore come under Entry 141 which is for beverages and would squarely come under Entry 42. Entry 42 and the Explanation thereunder reads as thus:- “Description of Goods Point of Levy Rate 42. Coffee, but not including coffee drink and french coffee (a) Purchased within the State All the point of first purchase in the State by a dealer who is liable to tax under Section 5 8 (b) Brought from outside the State At the point of first sale in the State by a dealer who is liable to tax under section 5 8 (c) Sold in auction At the point of sale in auction 8 Explanation:- Coffee includes coffee beans, coffee seeds (raw or roasted) and coffee powder except coffee powder sold under a brand name.” 4. A reading of the Explanation would clarify that the goods intended to be included in the Entry would only be coffee beans, coffee seeds (raw and roasted) and coffee powder, except coffee powder sold under a brand name. The assessee in this case was definitely not selling coffee beans or coffee seeds; but a part of the premix is coffee powder and therefore, it would definitely not come within the classification of Entry 42. The entry also makes it clear that it does not include coffee drink or French coffee. It is true that it is not a coffee drink, but it is a preparation for the drink, which only has to be mixed in a vending machine for being served as a beverage. Premix coffee contains coffee powder, milk powder and sugar. 5. A reading of Entry 141 is also pertinent, and it reads thus: “Description of Goods Point of Levy Rate 141. Premix coffee contains coffee powder, milk powder and sugar. 5. A reading of Entry 141 is also pertinent, and it reads thus: “Description of Goods Point of Levy Rate 141. Squashes, Sauces, fruit juices, fruit pulp, soda, mineral water, Horlicks, Boost, Bournvita, Complan, Glucose D, Glucovita and similar other items whether or not bottled, canned or packed At the point of first sale in the State by a dealer who is liable to tax under Section 5 20 Explanation:- Powders, tablets, granules and concentrates used for the preparation of beverages shall, whether or not they are bottled or canned, be liable to tax under this entry.” The Explanation makes it very clear that it includes all powders, granules and concentrates used for preparation of beverages, whether or not they are bottled or canned. Similar preparations like Boost, Bournvita, Complan, Horlicks would come within this classification. Hence, the Assessing Officer was perfectly justified in including 'premix coffee' under Entry 141 and not under Entry 42. The Tribunal went wrong in upsetting the assessment made by the AO. 6. Likewise, 'frozen dessert' is assessed by the AO as Chocolate coming under Entry 45 at the First Schedule, which reads as thus:- “Description of Goods Point of Levy Rate 45. Confectionery including toffee and chocolate and sweets of all kinds. At the point of first sale in the State by a dealer who is liable to tax under Section 5” 12 The learned counsel for the respondent-assessee submits that it cannot be included in this category because it is a 'dessert' and would therefore, come only under the category of residuary items. It has to be observed that the product itself is described as 'Kwality Walls Feast Chocolate'. Had it not been a chocolate or a sweet, it would not have been stated so. The mere nomenclature as 'frozen dessert' does not make it a dessert, to be served after food, taking it away from the provisions of Entry 45 because the said Entry includes chocolate and sweets of all kinds, and even a dessert is a sweet. We cannot, therefore, agree with the findings of the Tribunal and the same is liable to be set aside. The questions of law are answered in favour of the Revenue and against the assessee. The S.T. Revision is allowed setting aside the order of the Tribunal. No order as to costs.