Commercial Taxes Officer vs M/S Jalani Enterprises

Commercial Taxes Officer .... Appellant

Versus

M/s. Jalani Enterprises .... Respondent

WITH

CIVIL APPEAL NO. 2559 OF 2011

[Arising out of SLP (C) No. 15883 of 2008]

WITH

CIVIL APPEAL NO. 2561 OF 2011

[Arising out of SLP (C) No. 27432 of 2008]

WITH

CIVIL APPEAL NO. 2562 OF 2011

[Arising out of SLP (C) No. 27433 of 2008]

WITH

CIVIL APPEAL NO. 2563 OF 2011

[Arising out of SLP (C) No. 4304 of 2009]

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2. Since the issues involved in these appeals are identical, we

propose to dispose of all these appeals by this common

Judgment and Order.

3. In appeals arising out of SLP (C) Nos. 11358 of 2008 and

15883 of 2008 the issue which falls for our consideration is as to

whether Jaljira which is a product manufactured by the respondent

herein is only an appetizer and is not a masala and therefore liable

to sales tax at the rate of 10% and not 16%. In appeals arising out

of SLP (C) Nos. 27432 of 2008 and 27433 of 2008 a similar

question arises for consideration that as to whether Jaljira and

similar other products are not Masala and therefore they are liable

to be assessed to sales tax at the rate of 10% and not 16%.

4. In order to decide the aforesaid issues some factual aspects

are required to be mentioned. The respondent firm is a

manufacturer and seller of Jaljira and some other products but in

the present appeals we are concerned only with the product called

Jaljira. The respondent deposited sales tax at the rate of 10%

assuming that Jaljira is not a Masala and hence taxable at the

general rate of 10% as residuary entry 199, which reads as under:

"199. General rate, that is all goods that are not covered by

S. No. 1 - 198. 10%"

5. The counsel appearing for the appellant submitted that the

respondent is liable to pay sales tax at the rate of 16% on the

product manufactured by it and the assessing officer was justified in

treating the respondent liable to pay sales tax at the rate of 16%.

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6. On examining the entire matter it appears that a Notification

being notification dated 26.03.1999 was issued by the State

Government, which was to the following effect:

Sr. No. Detail of Goods Tax Rate

xxxxxx xxxxxx Xxxxxx

119 All kinds of eatables & non alcoholic potable 12%

liquids such as fruit syrups, distilled juices,

jams [chatni, murabbas], fruit juice, dry milk

power, drink concentrates of all types and

forms, essence, concentrates, corn flaks and

wheat flakes, custard powder, baking powder,

ice-cream powder and packed masala.

Subsequently another notification being notification dated

29.03.2001 was issued by the State Government to the following

effect:

Sr. No. Detail of Goods Tax Rate

xxxxxx xxxxxx Xxxxxx

82 Dry Fruits, Supari, Kirana items, Masala 4%

(different from packed masala) such as Mirch,

Dhanai, Saunf, Methi, Ajwain, Sua, Halsdi,

Kathodi, Amchur, Elaichi, Jeera (cumin seed)

184 All kinds of eatables & non alcoholic potable 16%

liquids such as fruit syrups, distilled juices,

jams [chatni, murabbas], fruit juice, dry milk

power, drink concentrate of all types and

forms, essence, concentrates, corn flaks and

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wheat flakes, custard powder, baking powder,

ice-cream powder and packed masala.

Subsequent thereto also a notification was issued by the appellant

herein on 22.03.2002 making the same effective from the date of

its issuance, wherein Entry 80 includes the following:

Sr. No. Detail of Goods Tax Rate

80 Dry Fruits, Supari, Kirana items, Masala 4%

([when sold in unmixed form, whether lose or

in polyethylene packs]) like Mirchi, Dhaniya,

sonf, methi, ajwain, suwa, haldi, kathodi,

amchoor and asalia, jeera (cumin seed)

Whereas Entry 186 includes the following:

Sr. No. Detail of Goods Tax Rate

186 All kinds of eatables & non-alcoholic potable 16%

liquids such as fruit syrups, distilled juices, jams

[chatni, murabbas], fruit juices, drink

concentrates of all types and forms, essences,

concentrates, corn flaks and wheat flakes,

custard powder, baking powder, ice-cream

powder and [multi-ingredient packed masala].

A letter dated 12.11.2001 was issued by the Deputy Secretary,

Finance Department, Tax Division, Government of Rajasthan to the

Commissioner, Commercial Taxes Deptt, Rajasthan, Jaipur, which

reads as follows:

"........I am to state that "Packed Masala" used in

entry number 184 means, a Masala where two or

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more ingredients are mixed and sold in packed

conditions. Spices sold singly will continue to be

taxed as per entry number 82......"

7. In the backdrop of the aforesaid facts, an assessment order

was passed by the assessing officer so far as respondent is

concerned. In the said assessment order it is sated that the

respondent has shown its product Jaljira, which is manufactured by

it, as liable to sales tax at the general rate of 10%. The officer,

however, referred to the contents of the notification dated

29.03.2001 holding that jaljira is a masala and the same falls in the

category of packed masala and therefore liable to be taxed at the

rate of 16% as mentioned under Entry No. 184 of rate notification.

8. On examining the entire matter the assessing officer held that

Jaljira manufactured by the assessee is spice, which is sold in

different types of packing due to which it would come within the

category of packed masala for which tax rate is 16%.

9. The respondent itself has described Jaljira as spice on the

packed containers of Jaljira marketed by it. The officer also

referred to the application dated 07.07.1984 filed by the proprietor

of the Respondent firm for registration under Rajasthan Sales Tax

Act as well as under the Central Sales Tax Act. In both the

applications it is sated as follows:

"Manufacturing of food products, mix MASALA,

AURVEDIC MEDICINES, all types of MEDICINES,

MEDICATED - NON MEDICATED food for sale."

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10. There are other materials also which are referred to by the

officer on record indicating that the assessee itself described the

product Jaljira as Masala. That is how the product is described in

the bill books of sale, even for the assessment year 2001-2002.

11. Placing reliance on all those facts the assessing officer held

that the product manufactured by the assessee known and called as

jaljira is a Masala falling under Entry 184. It is also undisputed fact

in the present case that except for the assessment year 2001-2002

with which we are concerned, the respondent assessee is paying

sales tax for subsequent assessment years for jaljira at the rate of

16% in view of the notification dated 22.03.2002 wherein it

categorically sated that multi-ingredient packed masala would carry

taxable rate of 16% in view of entry No. 186. The assessing officer

has specifically stated that jaljira is multi-ingredient packed masala

and therefore respondent is liable to pay sales tax on the

manufactured Jaljira at the rate of 16%. But the submission of the

Respondent is that for the assessment year in question, the said

notification dated 22.03.2002 being not applicable and the earlier

notification being applicable, rate of sales tax at the rate of 10% for

the same is only payable.

12. Being aggrieved by the aforesaid order passed by the

assessing officer, the respondent preferred an appeal before the

Deputy Commissioner (Appeals) Commercial Taxes, Ajmer

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challenging the order passed by the Commercial Tax Officer, Special

Circle-II, Jodhpur. The Deputy Commissioner (Appeals) by his

order dated 01.08.2005 held that Jaljira is not a Masala and

therefore tax levied at general rate of 10% was justified and he set

aside the demand raised by the Assessing Authority.

13. Appellant filed two appeals before the Rajasthan Tax Board,

Ajmer challenging the aforesaid order of Deputy Commissioner

(Appeals), Ajmer. The Rajasthan Tax Board, Ajmer by its common

order dated 11.12.2002 set aside the order dated 01.08.2005

passed by the Deputy Commissioner (Appeals) and restored the

orders passed by the Assessing Authority.

14. Being aggrieved by the said order the respondent herein filed

a Revision Petition before the Rajasthan High Court which came to

be allowed by the High Court under the impugned judgment and

order. Feeling aggrieved the appellant filed the present appeals on

which we heard learned counsel appearing for the parties and also

perused the records.

15. In the impugned judgment and order passed by the High

Court it was held that Jaljira cannot be termed as a Masala in itself,

but it is a mixture of masalas and other materials, which can be

used for digestion. The High Court therefore held that Jaljira is

nothing but edible preparation ready for use either directly or after

dissolving in water for human consumption and as it is not used as

additional constituent in any food substance, therefore, it cannot be

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termed as packed masala. The aforesaid findings were arrived at

by the High Court after referring to the contents of Jaljira shown to

be as follows:

Sr. No. Name of Item Percentage

1. Salt 40%

2. Kala Namak 1%

3. Nimbu Ka Sat (Citric Acid) 8%

4. Sonth 10%

5. Kalimirch 10%

6. Pudina 10%

7. Hing 1%

8. Jira 18%

9. Lalmirch 2%

According to the High Court Jaljira would therefore fall in the

residuary clause and therefore tax should be levied at the rate of

10% and not 16%.

16. The aforesaid findings of the High Court are challenged before

us by the appellant. The counsel appearing for the appellant had

taken us through all the documents on record. He submitted that

respondent has itself shown the product manufactured by it Jaljira

as Packed Masala and therefore the assessing officer was justified

in treating the respondent liable to pay sales tax at the rate of

16%.

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17. Each one of the contents of the product referred to above and

relied upon by the High Court would indicate that most of the items

used in the manufacture of Jaljira are nothing else but spices. They

are grinded and mixed. When spices are grinded and mixed, it

gives rise to a new product, which is a mixed masala. Different

ingredients are used in preparation of Masala after grinding and

mixing several ingredients and when they are so grinded they lose

their own identity and character and a new product separately

known to the commercial world comes into existence. Sales tax is

levied on sale of commercial commodities, therefore, individual

spices could be termed as different commercial commodities. When

they are grinded and mixed they give rise to a separate commercial

commodity altogether which could be taxed separately. It is settled

law that when one particular item is covered by one specified entry,

then the Revenue is not permitted to travel to the residuary entry.

If from the records it is established that the product in question

could be brought under a specific entry then there is no reason to

take resort to the residuary entry. There is no doubt that Jaljira is

a drink. The contents of Jaljira is put into water and taken as

digestive drink but when we look into the manner and method of

preparation of the product Jaljira, we find that it is a mixture of

different spices after grinding and mixing. Therefore, it is nothing

but a Masala packed into packets of different nature/quantity and

sold to the consumers. It would, therefore, for all practical

purposes would come within the Entry No. 184 and it cannot be

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said that it would come under the residuary entry as held by the

High Court.

18. The clarificatory letter dated 12.11.2001 which was issued by

the Deputy Secretary, Finance Department, Tax Division,

Government of Rajasthan is also placed on record which specifically

states that "Packed Masala" used in entry number 184 means, a

Masala where two or more ingredients are mixed and sold in packed

conditions. The said letter is in the nature of clarification of entry

number 184 with which we are concerned. Although the said letter

is an inter departmental communication, the revenue authorities,

namely, the appellant is governed and bound by the aforesaid letter

although the said letter may not have been circulated to the

respondent but it cannot be said that clarification given by the

Department cannot be made use of for interpreting the entry in the

notification.

19. Even otherwise, in our considered opinion the entries in the

notification by themselves are quite clear to include the product in

question within the ambit and parameters of the expression packed

masala and therefore the assessing officer was justified in

demanding sales tax from the respondent at the rate of 16%

holding that the product manufactured by the respondent falls

within the category of items included in Entry No. 184.

20. Therefore, appeals arising out of SLP (C) Nos. 11358 of 2008,

15883 of 2008, 27432 of 2008 and 27433 of 2008 are allowed and

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the judgment and order passed by the High Court is set aside. The

order dated 15.03.2004 passed by the Tax Assessment Officer is

restored.

21. Having held thus, we may now examine the facts of the appeal

arising out of SLP (C) Nos. 4304 of 2009. In this appeal, we are

concerned with the two financial years, namely, financial years of

1999-2000 and 2001-2002. The aforesaid discussion and the

findings and the conclusions arrived at would also be applicable so

far the products of the respondent herein are concerned but except

for product like Idli Mix and Dosa Mix.

22. Other products of the assessee such as Aachar Masala,

Jaljeera powder, Anar Masala, Methi Chatani, Pudina, Lehsoon

Chatni, Chat Masala, Kitchen Masala, Mangodi Masala, Sambhar

Masala, Dal Masala, Kasuri Methi, Heena Powder, Shikkai Powder,

Lahsoon powder, must be held to be Masala packed falling under

Entry No. 184 of the notification dated 29.03.2001.

23. So far as Masala and other products are concerned the same

principle would apply but at the same time Idli Mix and Dosa Mix

cannot be said to be Masala and therefore the same would be

excluded from being assessed for the purpose of sales tax

assessment as `masala'.

24. In view of the above, appeal arising out of SLP (C) No. 4304

of 2009 is also allowed and the judgment and order passed by the

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High Court is set aside. The order passed by the Tax Assessment

Officer is restored.

............................................J

[Dr. Mukundakam Sharma ]

............................................J

[ Anil R. Dave ]

New Delhi,

March 17, 2011.

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