Nestle India Limited. vs State of Uttarakhand and Others

V.K. Bist, J.—Heard Mr. Bharat Ji Agarwal, Senior Advocate assisted by Mr. S.K. Posti, Advocate & Mr. Shubham Agarwal, Advocate for the petitioner and Mr. K.P. Uppadhyay, Addl. Chief Standing Counsel for the State/respondents.

The petitioner is a Public Limited Company incorporated under Indian Companies Act. The petitioner company is carrying on sale of various goods including processed and preserved vegetable fruits, milk powder, baby food etc.

On 30th May, 2009 a Circular was issued by the Commissioner of Trade Tax, Uttarakhand addressed to all Additional Commissioners and Joint Commissioners with a direction that a copy of the Circular be sent to all assessing authorities and all lower authorities. In the Circular it was clarified that the Sauce is not covered under the entry of Schedule-H (B) of the Uttarakhand Value Added Tax, 2005 (for short the ''Act''). By the aforesaid Circular the assessing authorities were expected to take decision on their own level in the light of observation made in the Circular while imposing tax.

u/s 4(2)(b)(i) of the ''Act'' the goods which are specified in Schedule (ii A) are liable to tax @ 1%, while the goods specified in Schedule (ii B) are liable to tax @ 4% and the goods which have not been specified in any of the Schedule, are liable to tax @ 12.5%. On 19.06.2009 a show cause notice was issued to the petitioner by the Deputy Commissioner (Assessment), Rishikesh so show cause why the petitioner should not be subjected to tax @ 12.5% on the sale of Tomato Sauce, instead of 4% which was deposited by the petitioner alongwith its Return. The said notice appears to have been issued on account of Circular dated 30.05.2009 issued by the Commissioner Trade Tax. In reply to the aforesaid show cause notice the petitioner submitted a detailed reply on 29.06.2009 in which it was mentioned that assessment for the assessment year 2005-06 u/s 25(6) of the Act has become barred by limitation inasmuch as proviso to Section 25(6) clearly provides that no order u/s 25(6) shall be passed after expiry of three years from the close of the year to which the assessment relates. Thus, period of limitation for the Assessment Year 2005-06 had expired on 31.03.2009. It was also mentioned in the reply that no reason has been given by the authorities as to why Tomato Ketchup should be taxable @ 12.5%. Thereafter Assessing Authority passed an order on 08.07.2009 creating a demand of Rs. 3,52,647/-.

Shri Bharat Ji Agarwal, learned Senior Advocate submitted before the Court that the order dated 08.07.2009 passed by respondent No. 3 for the period 01.10.2005 to 31.03.2006 is clearly barred by limitation and, therefore, is absolutely illegal and without jurisdiction. According to him, even otherwise the Tomato Sauce cannot be put to tax @ 12.5%. Sri Agarwal, learned Senior Advocate submitted that the Circular dated 30.05.2009 issued by the Commissioner, Trade Tax, Uttarakhand which has been relied upon by the assessing authority, is absolutely contrary to law and assumption therein with regard to Tomato Sauce being not included in Item-6 of Schedule II (B) is without any basis. According to him, by means of Administrative Circular the classification of a commodity cannot be decided by the Commissioner. He argued that the Commissioner, Trade Tax, Uttarakhand has over looked the fact that Entry-6 of Schedule II (B) of the ''Act'' starts with the word "All" processed vegetable and fruits including illustrative items mentioned therein. Entry-6 of the Schedule II (B) of the ''Act'' is quoted hereunder:

All processed and preserved vegetables, vegetable mushrooms and fruits including fruit jams, jellies, fruit squash, paste, fruit drinks, fruit juices and achar (whether in sealed containers or otherwise.

Learned Senior Counsel further argued that all processed and preserved vegetable and fruits are covered by Entry-6 of Schedule- II (B) irrespective of the form in which it exist. He submitted that the character must remain intact and in the case of Tomato Sauce it is not changing the character of vegetable. The Characteristic of tomato continues to exist in Tomato Sauce even though the shape and identity of tomato undergoes the change upon processing. Tomato Sauce very much involves the processing of tomatoes which undergo change. According to him Entry-6 of Schedule II (B) is as illustrative entry of processed and preserved vegetable fruits irrespective of the form in which it exist. He submitted that the Tomato paste being specifically included in Entry-6 of Schedule- II (B) of the ''Act'' and the Tomato Sauce and Tomato Paste after dilution with water is nothing else except processed form of Tomato, hence illustrative Entry-6 of Schedule II (B) shall cover Tomato Sauce sold by the petitioner and the same cannot be subjected to tax as unclassified item.

Prima-facie, this Court is satisfied with the arguments advanced by learned Senior Counsel for the petitioner. Therefore, as an interim measure, it is directed that till the next date of listing, operation of the order dated 8th July 2009 passed by Deputy Commissioner (Assessment), Commercial Taxes, Rishikesh, (contained in annexure No. 3 to the writ petition) shall remain stayed.

Writ petition is admitted.

List this petition for orders in the week commencing 16th November, 2009. Respondents may file counter affidavit by that time.