PEPSICO India Holdings Pvt. Ltd. V. The Assessing Authority-I & ors.

CWP/1506/2009

AI Insights

The case revolves around the classification of potato chips under the Himachal Pradesh Value Added Tax Act, 2005. PEPSICO India Holdings Pvt. Ltd. argued that their product, potato chips, should be taxed at 4% under the category of processed vegetables. However, the state contended that these chips should be taxed at 12.5% under the residuary entry as they are not specifically listed under the lower tax rate categories. The court examined various schedules of the VAT Act, legislative intent, and comparative analysis with other states' VAT laws, ultimately deciding in favor of the higher tax rate.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 799854 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 09-09-2010
• Assessment Year: misc
• Other Referred Cases: PEPSICO India Holding Pvt. Ltd. Versus State of Assam & others, PEPSICO India Holdings Pvt. Ltd. & anr. v. Commissioner of Commercial Taxes, Chennai
• Laws Referred To: Himachal Pradesh Value Added Tax Act, 2005
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: ANKUSH SOOD
• Assessee Lawyers: C S LODHA; JANESH GUPTA
• Keywords: Tax Classification; Tax Classification; Value Added Tax; Processed vegetables; Potato chips
• Section: 6; 2(k)

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No. 1506 of 2009. Judgment Reserved on: August 20, 2010. Decided on: September 9, 2010. PEPSICO India Holdings Pvt. Ltd. ….... Petitioner. Versus The Assessing Authority-I & ors. ….Respondents. Coram The Hon’ble Mr. Justice Kurian Joseph, Chief Justice The Hon’ble Mr. Justice Rajiv Sharma, Judge. Whether approved for reporting? Yes. For the petitioner: Mr. C.S.Lodha, Sr. Advocate, with Mr. Janesh Gupta, Advocate. For the Respondents Mr. Ankush Dass Sood, Addl. Advocate General. ---------------------------------------------------------------------------------------------- Justice Kurian Joseph, C.J. Whether potato chips would fall within the classification of processed vegetables in the Schedule under the Himachal Pradesh Value Added Tax Act, 2005, is the question essentially to be tackled in this case, though several other legal and factual issues are also raised ancillary thereto. 2. The petitioner-Company is …… “ engaged in the sale of processed potato i.e. potato chips under the brand name ‘Lays’ and ‘Uncle Chips’. The processes involved in obtaining potato chips from potato are very simple namely slicing, frying and adding salt-spices or flavouring 2 agents” (extracted from the Writ Petition). The Himachal Pradesh Value Added Tax, 2005 came into effect from 1st April, 2005. The charging provision under Section 6, to the extent relevant, reads as follows: “6. Levy of tax.- (1) Subject to the provisions of this Act, there shall be levied a tax,- (a) at every point of sale in respect of the goods specified in the second column of Schedule ‘A’, (b) at the prescribed points of purchase in respect of goods specified in the second column of Schedule ‘C’, and (c) at the first point of sale in respect of the goods specified in the second column of Schedule ‘D’, 3. The Act contains 4 Schedules. Schedule ‘A’ containing 3 parts: Part I enumerates goods taxable @ 1%, Part II @ 4% and Part III covers goods other than those specified in Part I and Part II of Schedule ‘A’ and Schedules ‘B’, ‘C’ & ‘D’. Schedule ‘B’ enumerates goods which are exempted from tax. Schedule ‘C’ enlists goods which are subject to purchase tax and Schedule ‘D’ deals with goods which are subject to tax at the first point of sale. Part III of Schedule ‘A’ which in taxing statutes is generally known as residuary entry, reads as follows: [SCHEDULE-A] PART -- III Goods Taxable @ 12.5 percentum “ All goods other than those specified in Part I, Part II of Schedule ‘A’, Schedule ‘B, Schedule ‘C’ and Schedule ‘D’.” 4. The question before us is whether potato chips are goods specified in Part II of Schedule ‘A’, or Part III, residuary entry. 3 5. In order to analyze the said issue as to whether potato chips falls under Part II enumerated goods with 4% tax or residuary entry with 12.5% tax, it is necessary to refer to certain other entries. Schedule ‘B’ deals with goods exempted from tax. To the extent required for discussion, we may extract certain entries: [SCHEDULE ‘B’] GOODS EXEMPTED FROM TAX. Sl. No. GOODS Conditions of exemption 2. Agriculture or horticulture produce, including herbs or saplings of trees sold by person or a member of his family, grown by himself or grown on any land in which he has an interest whether as owner or usufructuary mortgagee, tenant or otherwise. 22. Fresh fruits. ---- 23. Fresh milk and pasteurized milk. ---- 24. Fresh plants, sapling and fresh flowers. ---- 25. Fresh vegetables. ---- 26. Garlic, ginger, green chillies, onions, potatoes, sweet potatoes, tapioca and their seeds. ---- 39. Meat, fish prawn and other aquatic products when not cured or frozen; eggs and live stock and animal hair. (Except when sold in sealed container). Except when sold in sealed containers. Part II of Schedule ‘A’ deals with goods taxable @ 4%. To the extent relevant, the Schedule reads as follows: [SCHEDULE ‘A’] [ PART – II] GOODS TAXABLE @ 4 Percentum. Sl. No. GOODS 21. Coffee beans and seeds, cocoa pod, tea of all kind (whether leaves or in processed form) and chicory. 30. Dry fruits, Wet dates & porridge. 39. Flour (atta), maida, suji, besan etc. 41. Fried and roasted grams. 44. Herbs, bark, dry plants or dry roots, commonly known as jari booti and dry flowers. 78. Processed fruits, vegetables etc. including fruit jams, jelly, pickles, fruit squash, paste, fruit drink & fruit juice (whether in sealed containers or otherwise). 4 79. Processed meat, poultry & Fish. 95. Spices of all varities and forms including cumin seed, aniseed, turmeric and dry chillies. 98. Starch. 109. Vegetable oil including gingili oil and bran oil. 6. A bare comparison of the two Schedules would give a clear indication that though the legislature exempted certain goods wholly from tax, if the very same exempted goods are processed in the manner indicated in Schedule ‘A’ Part II, such goods are liable to tax @ 4% and in respect of other processes not indicated in Schedule ‘A’ Part II, such goods are to be covered by the Part III, residuary entry. In this context, it is also required to refer to the definition of the term goods as appearing under Section 2(k) of the Act, which reads as under: (k) “goods” means every kind of movable property (other than news-papers, actionable claims, stocks and shares and securities) and includes live stock, all materials, commodities and articles and every kind of property (whether as goods or in some other form) involved in the execution of a works contract, and all growing crops, grass, trees or things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale;” It needs no elaborate discussion to hold that potato chips is also covered by the definition of “goods”. Then the simple question is whether potato chips is goods covered under Schedule ‘B’ exempted, Schedule ‘A’ Part II, goods taxable @ 4% or Schedule ‘A’ Part III, goods taxable @ 12.5%. 7. At the outset, we have to state that the petitioner-Company has no case that potato chips being basically potato itself, is goods wholly exempted from tax. It is also to be noted that the residuary entry also deals with goods assessable to tax @ 12.5 %. The only difference is that 5 under the residuary entry, the goods are not specifically enumerated as under other Schedules. The State has specified under Schedule ‘B’, goods which are exempted from tax and under Schedule ‘A’ Part I, goods which are liable to tax @ 1% and in Part II goods @ 4%. Schedule ‘C’ goods @ 12.5%, Schedule ‘D’ 25%, 14%, 12.5% etc. The purpose of the taxing statute is to provide for the levy of Value Added Tax on the sales or purchases of goods in the State of Himachal Pradesh. Therefore, the State Legislature has specified the goods which are exempted from tax and the goods which are assessable to tax at varying percentage and goods which are not specified in any other Schedules are also assessable to tax and those un-specified goods are covered by Part III of Schedule ‘A’ and they are taxable @ 12.5%. Thus, the residuary entry is intended for covering goods assessable to tax, which are not otherwise specified in any of the other Schedules. Hence the moot question is whether potato chips as manufactured and sold by the petitioner-Company under the brand name of “Lays and Uncle Chips” is covered by any of the Schedules. 8. As already stated above, the legislature intended a few goods to be wholly exempted from tax and those goods are enumerated under Schedule ‘B’. But, if those goods undergo the enumerated treatment—process like drying, powdering, juicing etc. as referred in Part II of Schedule ‘A’, those goods are liable to tax under 4% and if those processes—treatment is not covered by Part II Schedule ‘A’, such processed goods would be covered only by Part III, the residuary entry. 9. Under the exempted goods covered by Schedule ‘B’, potato is at entry No. 26. Other items in entry No. 26 are garlic, ginger, green chillies, onions, sweet potatoes, tapioca and their seeds. Entry 22 is fresh fruits, No. 25 is fresh vegetables, 39 is meat, fish, prawn and other aquatic products when not cured or frozen; eggs and live stock and animal hair 6 (except when sold in sealed container). The legislature in Schedule ‘B’ having specifically exempted all agriculture and horticulture produce under entry No. 2, fresh fruits under entry No. 22, fresh vegetables under entry No. 25, potato under entry No. 26, meat, fish, prawn etc. under entry No. 39, deemed it fit to impose tax @ 4%, on coffee, beans and seeds, cocoa pod, tea of all kind (whether leaves or in processed form) and chicory under entry No. 21, on dry fruits under Sl. No. 30, flour (atta), maida, suji, besan etc. under Sl. No. 39, fried and roasted grams under Sl. No. 41, herbs, bark, dry plants or dry roots (jari booti) and dry flowers under processed fruits under entry No. 78, processed vegetables under entry No. 78, fruit jams, jelly, pickles, fruit squash, paste, fruit drink & fruit juice under entry No. 78, processed meat, processed poultry and processed fish under entry No. 79. Spices under entry No. 95, starch under entry No. 98 and Vegetable oil under entry No. 109, all at in Part II of Schedule ‘A’ @ 4%. It is significant to note that the legislature has conspicuously left out any form of potato processing or processed potato, under Part II Schedule ‘A’ to be taxed @ 4%, though potato is exempted from tax under Schedule ‘B’. The vehement contention of the assessee is that potato is a processed vegetable. Technically or say scientifically, it cannot be disputed that potato chips is also a processed form of potato and potato is a vegetable and by the processing of slicing, frying and spicing, the potato chips do not cease to be vegetable. However, we may make a passing observation that in common man’s dictionary of vegetables, we may not find a place for potato chips. We may also record the submission of Sh. Ankush Dass Sood, learned Addl. Advocate General that the branded goods, ‘lays and Uncle Chips’ do not claim to have starch after the processing of potato to make it the branded item. But the question is whether the legislature 7 intended potato chips to be covered by the omnibus expression ‘processed vegetable’? The answer in the context of the specified items exempted and taxed @ 4% when processed in the prescribed manner, is only in the negative in view of the conspicuous omission of processed potato under entry 78 of Part II of Schedule ‘A’, or any other specific entry despite ‘potato’ being exempted goods under Schedule ‘B’. The answer in the negative is also fortified for the reason that the goods which are exempted under Schedule ‘B’, if specified in any other form under Part II of Schedule ‘A’, are put to tax @ 4% like meat and processed meat, fish and processed fish, fruits and processed fruits, vegetables and processed vegetables, fruits and dry fruits etc., but processed potato is left out. 10. By another angle of analysis also, our view is fortified. Under the 4%- Part II of Schedule ‘A’ entry 78 deals with processed fruits, vegetables etc. including fruit jams, jelly, pickles, fruit squash, paste, fruit drinks and fruit juices. It has to be specifically noted that all items specified under the entry mainly relate to fruits except pickles. Though fruits are also sometimes used to make pickles- achars (and sometimes meat, fish including prawns are also used to make pickles), in common parlance, nobody would dare to give the colour and company to the group of pickles or paste or jam or jelly or fruit squash with potato chips. Potato chips in common parlance are known as snacks. No doubt, they are vegetable in content; but in form, it is not specified as an item either under entry 78 or any other entry under 4% group of Part II of Schedule ‘A’ despite indicating several all such processed goods, the basic form of which are exempted under Schedule ‘B’. 11. The petitioner assessee itself understood potato chips as an item covered by the residuary entry as is born out from the fact that from 2005 to 2008, the petitioner had paid tax @ 12.5%, only treating it as 8 covered under the residuary entry. Only in the year 2008, the objection is raised by the petitioner who made a self-classification on re-thinking after three years of payment of tax, to be covered by the 4% group under entry No. 78 in Part II of Schedule ‘A’, as a processed vegetable. It has also to be specifically noted that there is no contention that potato chips are exempted from tax in view of the exemption of potatoes under entry No. 26 of Schedule ‘B’. In the context of the entries as analyzed above, under the provisions of the H.P. VAT Act, 2005, since processed potato is not a specified item under Part II of Schedule ‘A’ in the 4% group, it has to be covered by the residuary entry for the un-specified items in the other Schedules. 12. It is one of the cardinal principles of construction of an entry in a fiscal statute that the articles in the Schedules should be construed in its normal, popular and commercial parlance. In the words of Lord Wright in Attorney General for the Isle of Man v. Emily Moore, reported in AIR 1938 Privy Council 238, where the question considered was a particular material is ‘mineral’ or not. “Whether particular material is mineral and comes within the reservation made by the Crown is an issue of fact to be decided according to the particular circumstances of the case, the duty of the Court being to determine what the words meant in the vernacular of the mining world, the commercial world and landowners at the relevant time.” 13. In M/S Ganesh Trading Co. Karnal etc. etc., v. State of Haryana and another etc. reported in AIR (61) 1974 Supreme Court 1362, the question considered was whether paddy and rice are identical goods. It was held that where paddy is de-husked and rice is produced, there is a change in the identity of the goods. In the said decision in the matter of interpretation of a taxing statute, it has been held as follows: 9 “In finding out the true meaning of entries mentioned in a Sales Tax Act, what is relevant is not the dictionary meaning but how those entries are understood in common parlance, specially in commercial circles.” 14. In Mukesh Kumar Aggarwal & Co., v. State of Madhya Pradesh and others, reported in AIR 1988 Supreme Court 563, the principle has been succinctly dealt with at paragraph 4. To the extent relevant, the judgment reads as follows: “In a taxing statute words which are not technical expressions or words of art, but are words of everyday use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance i.e. “that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it.” Such words must be understood in their ‘popular sense’. The particular terms used by the legislature in the denomination of articles are to be understood according to the common, commercial understanding of those terms used and not in their scientific and technical sense “for the legislature does not suppose our merchants to be naturalists or geologists or botanists”. The expression ‘Timber’ has an accepted and well recognized legal connotation and is nomen juris. It has also a popular meaning as a word of everyday use. In this case, the two meanings of ‘Timber’ the legal and the popular, coalesce and are broadly subsumed in each other.” It may be noted that the Apex Court in the said decision held that stacks of ‘eucalyptus-wood’ sold by the forest department after separating the ‘Ballies’ and ‘Poles’ do not constitute and answer the description of ‘Timber’ under Madhya Pradesh General Sales Tax Act, 1958. 10 15. In Collector of Central Excise, Bombay-I and another v. M/s. Parle Exports (P) Ltd., reported in AIR 1989 Supreme Court 644, the Apex Court held as follows: “The expressions in the Schedule to the fiscal statute and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which they are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them.” 16. In Indian Cable Company Ltd., Calcutta v. Collector of Central Excise, Calcutta and others, reported in (1994)6 SCC 610, at paragraph 5, it has been held as follows: “……..in construing the relevant item or entry, in fiscal statutes, if it is one of every day use, the authority concerned must normally, construe it, as to how it is understood in common parlance or in the commercial world or trade circles. It must be given its popular meaning. The meaning given in the dictionary must not prevail. Nor should the entry be understood in any technical or botanical or scientific sense. In the case of technical words, it may call for a different approach. ……” 17. In Mauri Yeast India Pvt. Ltd. v. State of Uttar Pradesh and another, reported in (2008) 5 SCC 680, it has been reiterated that the trade or commercial meaning or the end-user context would, thus, be a relevant factor in construing the fiscal statute. We may also refer to a celebrated decision of the Supreme Court of United States in Wilma E. Addison v.Holy Hill Fruit Products, reported in 322 US 607, wherein it has been held as follows: 11 If legislative policy is couched in vague language, easily susceptible of one meaning as well as another in the common speech of men, the courts should not stifle the policy by a pedantic or grudging process of construction; but in construing a statute the courts may not draw on some unexpressed spirit outside the bounds of the normal meaning of its words. ……… Legislation when not expressed in technical terms is addressed to the common run of men and is therefore to be understood according to the sense of the thing, as the ordinary man has a right to rely on ordinary words addressed to him.” 18. In view of the age old principles thus well settled in construing the fiscal statutes, it is difficult for us to accept the contention of Sh. C.S.Lodha, learned Senior Counsel for the petitioner-Company that potato chips should be taken to be included in the general expression ‘processed vegetables’. The reliance placed on the decision of the Apex Court in Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co., reported in (1989) 1 SCC 150, wherein it has been held as follows: “But there is a word of caution that has to be borne in mind in this connection, the words must be understood in popular sense, that is to say, these must be confined to the words used in a particular statute and then if in respect of that particular items, as artificial definition is given in the sense that a special meaning is attached to particular words in the statute then the ordinary sense or dictionary meaning would not be applicable but the meaning of that type of goods dealt with by that type of goods in that type of market, should be searched.” has no relevance or application in the instant case. The legislature has not given any artificial definition or attributed a special meaning to processed vegetables. Infact, the intention of the legislature is to the contrary by 12 attributing a special meaning to potato chips as snacks and excluding the said item from the illustrated group of processed vegetables. The contention, based on Deepak Agro Solution Ltd. vs. Commissioner of Customs Maharastra, reported in (2008) 8 SCC 358, that “what is not excluded would be held to be included” is also un-acceptable since the legislature, as we have discussed above, has specifically excluded potato chips or for that matter any form of processed potato in the entries for concessional tariff @ 4% in Part II of Schedule’A’ though several other such exempted goods, when processed have been granted the concessional rate of 4% tax. The reason is simple. Potato chips in common and commercial parlance has distinct identity and the State does not want to put such a commercially different product in the basket of processed vegetables. The legislature only included potato for exemption and excluded a commercially different product namely potato chips for reduced tax- concessional tax. Thus, it is a case of exclusion by express omission in the entry for concessional tariff. Such goods, being taxable have to find a place in the fiscal statute and thus, the relevance for residuary entry, which is also an entry for taxable goods not specified elsewhere. 19. Having analyzed the factual position on the basis of pristine first principle of taxation, we shall also deal with various other contentions raised by the learned Senior Counsel, Sh. C.S. Lodha, appearing for the assessee. One of the main contentions is on the persuasive value of the decisions rendered by the High Courts of Guahatti, Punjab and Haryana, Madras and Uttrakhand. At the outset, we may specifically note that the factual position regarding entry as analyzed in the first decision in the series, by the High Court of Assam is entirely different from that of the Himachal Pradesh. All other High Courts have 13 only followed the High Court of Guahatti. Therefore, we shall first analyze the factual position in the Assam VAT Act. 20. The decision of the Guahatti High Court is in PEPSICO India Holding Pvt. Ltd. Versus State of Assam & others, decided on 28th April, 2009. In the Assam VAT Act, 2003, First Schedule deals with list of exempted goods. To the extent relevant, we may extract the Schedule. FIRST SCHEDULE List of exempted goods Sl. No. Description of goods Conditions and exception 17. Fresh plants, saplings and fresh flowers 18. Fresh vegetables and fruits 19. Garlic and ginger 24. Meat, fish, prawn and other aquatic products when not cured or frozen; eggs and livestock and animal hair The Second Schedule deals with goods taxable @ 4%. To the extent relevant, we may extract the Schedule as under:- SECOND SCHEDULE (at the relevant time) Sl. No. Description Rate of tax (paise in the rupee 31. Flour, atta, maida, suji and besan 4 32. Fried grams 4 35. Herb, bark, dry plant, dry root, commonly known as jari booti and dry flower 4 80. Processed or preserved vegetables and fruits including fruit jam, jelly, pickle, fruit squash, paste, fruit drink and fruit juice. 4 21. Entry No. 80, as originally stood covered only following items “ processed or preserved vegetables and fruits”. The inclusive 14 illustration was added only thereafter, w.e.f. 5.12.2005. The entry was once again amended w.e.f. 16.10.2008 and as amended, the entry reads as follows: “Processed or preserved vegetables and fruits including jams, jelly, pickles, fruit squash, paste, fruit drinks and fruit juice but excluding ‘potato chips’, banana chips and cooked preparation of the vegetables and fruits.” 22. The High Court in the case at hand examined the situation prior to 2008 as to whether potato chips would be covered by the expression ‘processed vegetables’. It has to be specifically noted that potato is not goods exempted under the first Schedule in the Assam Act. The exempted goods are only fresh vegetables and fruits, garlic and ginger. Still further, it has also to be very significantly noted that the residuary entry namely the 5th Schedule uses the expression “all other goods not covered by first, second, third and fourth Schedules,” whereas under the H.P. VAT Act, 2005, Part III residuary entry uses the expression “ all goods other than those specified in Part I, Part II of Schedule ‘A’, Schedule ‘B’, Schedule ‘C” and Schedule ‘D’. It makes a lot of difference between the two expressions, ‘covered’ as used in the Assam VAT Act and ‘specified’ under the H.P. VAT Act. This aspect of the matter is not discussed or dealt with in the judgment of the Guahatti High Court and probably could not be discussed also since the same was not required or relevant for the decision. 23. That apart, we may also deal with the other aspects as well. One of the views taken in the judgment is that by the inclusive definition of various vegetable items, potato chips are also covered. We find it difficult to be persuaded on that aspect since in entry No. 80, at the relevant time, the illustrated items included only jams, jelly, pickles, fruit 15 squash, paste and fruit drink and fruit juice. An item in a particular tax entry should take its shade and colour from the group to which it is included. That is a well settled position in tax jurisprudence and this aspect has been discussed in detail, referring also several English, Canadian and American decisions in Royal Hatcheries Pvt. Ltd. and others Versus State of Andhra Pradesh and others, reported in 1994 Supp. (1) Supreme Court Cases 429. The question considered in the said decision was where the entry “Livestock, that is to say, all domestic animals such as Oxen, bulls, cows, buffaloes, goats, sheep, horses etc.” would take in ‘chicks’ though in the scientific and technical sense and meaning of the words ‘livestock’ and ‘animals’, chicks are also included. The Supreme Court reiterating also the settled proposition that expressions occurring in sales tax statutes must be understood in their popular sense, in the sense in which people conversant with the subject matter with which the statute deals with would attribute to it, held that chicks will not be covered by the expression domestic animals. It was held that the animals mentioned in the class are illustrative of the class or nature of group of animals and that chicks cannot take the shade or colour from the group of domestic animals indicated in the entry, being generally included in the group of birds. It will be profitable to refer to the paragraph 6 of the judgment wherein various celebrated decisions have been discussed. ( para 6) “6. It is a well-settled proposition that such expressions occurring in the sales tax enactments must be understood in their popular sense, that is in the sense in which “people conversant with the subject-matter with which the statute is dealing would attribute to it”. In State of W.B. v. Washi Ahmed this Court observed: (SCC pp. 248-49, paras 2 & 3) ( 1977-2 SCC 246). 16 “ … Now, the word ‘vegetable’ is not definded in the Act but it is well settled as a result of several decisions of this court of which we may mention only two, namely, Ramavatar Budhaiprasad v. Assistant STO ( AIR 1961 SC 1325) and Motipur Zamindary Co. Ltd. Vs. State of Bihar (AIR 1962 SC 660), that this word, being a word of every day use, must be construed not in any technical sense, not from any botanical point of view, but as understood in common parlance. The question which arose in Ramavatar case (AIR 1961 SC 1325), was whether betal leaves are ‘vegetables’ and this Court held that they are not included within that term. This Court quoted with approval the following passage from the judgment of the High Court of Madhya Pradesh in M.P. Pan Merchants’ Assn., v. State of M.P [(1956) 7 STC 99]. ‘ In our opinion, the word “vegetables” cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before. The term “vegetables” is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table.’ and observed that ‘the word “vegetable” in taxing statutes is to be understood as in common parlance i.e. denoting class of vegetables which are grown in a kitchen garden or in a form and are used for the table’. This meaning of the word ‘vegetable’ was reiterated by this Court in Motipur Zamindary case (Motipur Zamindari Co. v. State of Bihar, AIR 1962 SC 660), where this Court was called upon to consider whether sugar-cane can be regarded as vegetable and it was held by this Court that sugar-cane cannot be said to fall within the definition of the word ‘vegetable’. It is interesting to note that the same principle of construction in relation to words used in a taxing statute has also been adopted in English, Canadian and American courts. Pollock, B., pointed out in Grenfell v. IRC [(1876) 1 Ex. C. 242, 248], that 17 ‘if a statute contains language which is capable of being construed in a popular sense such a statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning of course, by the words “popular sense”, that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it.’ So also the Supreme Court of Canada said in Planters Nut and Chocolate Co. Ltd. V. The King [ (1591) 1 DLR 385] while interpreting the words ‘fruit’ and ‘vegetable’ in the Excise Act: ‘They are ordinary words in every day use and are, therefore, to be construed according to their popular sense’. The same rule was expressed in slightly different language by Story, J., in 200 Chests of Tea [ 22 US (9 Wheaton) 430, 438 ], where the learned Judge said that ‘ the particular words used by the legislature in the denomination of articles are to be understood according to the common commercial understanding of the terms used, and not in their scientific or technical sense, for the legislature does “not suppose our merchants to be naturalists, or geologists, or botanists”.’” 24. Yet another contention, reiterated by learned Senior Counsel Sh. Lodha is that the Ministry of Finance, Government of India, dealing with Department of Revenue in the Circular No. 6/88, has clarified that potato wafers are included in the group of vegetables as classifiable under Chapter 20 of the Central Excise Tariff Act. Reference is also made to the literature published by the Ministry of Food Processing, wherein potato chips is included as a vegetable product and, therefore, it is contended that contemporaneous expressions should govern the interpretation of the entry in other statutes as well. We are afraid that the contention cannot be appreciated, though the said contention was found favour with by the Guahatti High Court. The expressions take their 18 meaning in the particular context where they are used. As we have discussed above, there is no dispute with regard to botanical content of potato chips, as a processed vegetable. It has also to be specifically noted that Union Ministry while dealing with the food processing policy only, stated that potato wafers and chips would be major vegetable food products. Purpose was only to show that there is no non-vegetarian content and that it is a food product of vegetables only. The purpose is clear from the following expression in the policy itself; “fiscal initiatives, interventions like rationalization of tax structure on fresh foods as well as processed foods and masonry used for the production of processed foods”. Therefore, it is fairly clear that the Ministry was dealing with the food processing sector, while issuing the policy. In the National Industrial Classification Policy, 2008, published by the Central Statistical Organization, manufacture of potato snacks is treated as processing of vegetables. At the risk of redundancy, we may state that there is no quarrel with the proposition that potato snacks or chips is potato processed and still remaining vegetable. The crucially relevant question is whether processed vegetable is specified as an item for reduced rate of 4% tax in Part II of Schedule ‘A’ when other items like fruit jam, jelly, paste, fruit squash, fruit drink, fruit juice and pickles have been specified. Potato chips, as discussed above, in common parlance cannot be included in that group; it is a processed food, snacks. It is significant in this context to note that the Guahatti High Court has analyzed and understood the above aspect of the matter in that manner only, as can be seen at paragraph 15, wherein it is stated: “ ‘Potato chips’ processed or manufactured from potato, though it may be sold or purchased as a snack item, discloses certain common characteristics or features that 19 are to be found in fruit or vegetable items specifically included under entry 80. In such a situation, we are of the view that it would be correct to hold that ‘potato chips’, though not specifically included, yet, as the same has not been excluded either, would come within the inclusive definition of processed vegetable or fruit so as to fall under entry 80 of Part A of the Second Schedule to the Act.” 25. Under the H.P. VAT Act, as discussed above, there is no exclusion by omission, there is only inclusion by express specification. It has also to be noted that inclusive definition approach can be taken in a taxing statute only if the items to be included can be specifically included in the category of articles enumerated by way of illustration in the entry. ‘Potato chips’ by no stretch of imagination, can be included in the category of fruit jam, jelly, fruit juice, squash or pickles. As correctly analyzed by the Guahatti High Court, it is a snack item and unless it is specified in the respective entry, it cannot be given the strained meaning as a processed vegetable. That would do violence to the fiscal statute. The approach as taken in paragraph 19 of the judgment, reads as follows: “19. In the present case, the specific inclusion of items like jam, jelly, pickles etc., which in common parlance are not understood to be items of processed vegetable or fruit, gives sufficient indication that processed vegetable or fruit appearing in Entry 80 has been given a special or technical meaning as distinguished from the ordinary meaning. If a processed vegetable or fruit is to be understood in the ordinary way, none of the items specifically included in Entry 80 could have been so included. That apart, the Government of India has understood ‘potato chips’ to be a vegetable product for the purpose of classification under the Central Excise Tariff Act. Such understanding has also been reiterated by the Ministry of Food Processing. As held by the Apex Court in State of Tamil Nadu & Ors. –vs- 20 Mahi Traders (73-STC-228-SC) (supra), “Contemporaneous exposition by the administrative authorities is very useful and relevant guide to the Interpretation of the expressions used in a statute”. Considering the above, we are of the view that the words “processed vegetables or fruits” appearing in Entry-80 must be ascribed a fictional meaning to include items which in everyday use may not be vegetable or fruit items.” We regret, we are unable to be persuaded and in our humble view, it does not reflect the correct position under law, particularly in the background of the H.P. VAT Act. If that be so, it was not necessary for the legislature to provide for other entries on processed fruits like dried fruits, wet dates, fried and roasted grams, spices, starch etc. Contemporaneous expressions are to be understood in the context and purpose of the statute concerned. It will be profitable to refer to the guidance at paragraphs 12, 13 and 14 of Royal Hatcheries Pvt. Ltd., (supra): “12. Certain notifications and clarifications issued by the Central Board of Direct Taxes under the Wealth Tax Act and the Income Tax act and by the Central Board of Excise and Customs under the Central Excise Act are brought to our notice which say that hens on a poultry farm are animals, that poultry farming falls within the meaning of animal husbandry and that poultry feed is treated as animal feed respectively. It is also pointed out that the Indian Customs Tariff Act, 1986-87 has classified “Poultry” as a species of “live animals”. Reliance is also placed upon a textbook Genetics and Animal Breeding by Maciejowski wherein domestic animals have been divided into five broad categories, namely, cattle, oxen, swine, sheep and poultry. Domestic animals are also classified into farm animals and those which ar merely associated with farms. 21 13. On the other hand, Mr. C. Sitaramiah, the learned counsel for the State of Andhra Pradesh relied upon the following decisions in support of his contention that in popular sense and in common/commercial parlance, day- old chicks are never understood as domestic animals and, therefore, do not fall within the said clause (xxvi). In Casher v. Holmes ( 109 ER 1263) question arose, whether gold and silver are included within the expression “all other metals” occurring in the relevant enactment providing duty on several goods. Lord Tenterden, C.J. held that “the words ‘all other metals’ in this Act of Parliament must be understood in their ordinary and popular sense; and in that sense they certainly do not include gold and silver. They are never spoken of in popular language as metals, but as ‘precious metals’.” To the same effect are the observations of Littledale, J. While undoubtedly, gold and silver are, strictly speaking, metals, the learned Judge held, they cannot be treated as such for the purpose of the Act in question which provided for levy of duties on several metals. Two other learned Judges, Parke, J. and Taunton, J. too agreed with this view. The next decision cited is in Earl of Normanton v. Giles [ (1980) 1 All ER 106]. There the question was whether rearing pheasants for sport can be characterized as livestock-keeping within the definition of the expression ‘agriculture’. The Rent Agriculture Act, 1976 defined ‘agriculture’ in the following words- “(a) agriculture includes- (i) diary-farming and livestock keeping and breeding (whether those activities involve the use of land or not)…..” 14. It was held by the House of Lords that rearing pheasants for sport cannot be characterized as livestock- keeping or breeding for the purposes of the Act. However, if the pheasants are reared and bred for food, the situation would be different. Similarly in Hemens (Valuation Officer) v. Whitsbury Farm and Stud Ltd. [(1988) 1 All ER. 72], the House of Lords held that keeping and breeding of thoroughbred racehorses does not amount to agricultural 22 operation within the meaning of General Rate Act, 1967. Learned counsel also relied upon the decision in Alexander v. Immigration Appeal Tribunal [(1982) 2 All ER 766], to support his contention that the delegated legislation must be construed sensibly according to the natural meaning of the language which was employed and not with the strictness applicable to a statute or statutory instrument. The rules considered in the said decision are the Immigration Rules.” 26. It may not be altogether out of context to also make an observation that in all other contemporaneous expressions regarding the classification of potato chips as processed vegetable, the context related to food processing and the promotion and encouragement, the Ministry concerned intended to give to such sectors. It is a well settled position that there is no equity in tax as held in Cape Brandy Syndicate v. Commissioners of Inland Revenue (1921) 1 KB 64,: “In a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” 27. In PEPSICO India Holdings Pvt. Ltd.,& anr. v. Commissioner of Commercial Taxes, Chennai, reported in 2010 ( 29) VST 214 (Madras), the Madras High Court has followed the Guahatti decision and yet we may deal with the factual position and dispute involved in that case. Entry 51 of Part ‘B’ of the first Schedule to the Tamil Nadu VAT Act, specifically dealt with chips, for tax @ 4%. The only condition is that they should be sold without a brand name. Therefore, the question before the Court was whether potato chips if sold under a brand name, would attract tax @ 4% or at 12.5% in the residuary entry. 23 “Entry 51 of Part B of the First Schedule to the TN VAT Act reads as follows: “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.” Entry 52 of Part B of the First Schedule to the TN VAT Act is as follows: “Fried and roasted grams, peas and peas dhall, chillies, coriander, turmeric shikakai, shikakai powder, jaggery gur, including jaggery powder and Nattu chakkarai other than those specified in the Fourth Schedule.” Entry 107 of Part B of the First Schedule to the TN VAT Act is as follows: “Processed fruit and vegetables including fruit jam, jelly, pickle, fruit squash, paste fruit drink and fruit juice (whether in sealed containers or otherwise) other than specified in the Fourth Schedule.” It has to be specifically noted that the Fourth Schedule enumerated goods exempted from tax. Item No. 33 following items: “ Fresh vegetables including potatoes, tapioca and fresh fruits.” Despite ‘potato’ being exempted goods as in the H.P. VAT Act, the Tamil Nadu State legislature prescribed 4% tax in the First Schedule only for non-branded potato chips under entry 51. It has also to be specifically noted that under entry 52, several fried vegetables and fruits have been included in ‘B’ Schedule for 4% tax but, fried potatoes or fried vegetables have not been specified in that Schedule. Under the Tamil Nadu VAT Act, also under entry No. 107 for 4% tax, the categories enumerated among the processed vegetables are fruit jams, jelly, pickles, fruit squash based on fruit juice. Processed potato in brand name is not 24 included. On the contrary, only non-branded potato chips are included for 4% tax and the branded potato chips have been specifically excluded meaning thereby it can come only under the residuary category of goods not specified elsewhere. These aspects of the matter, unfortunately have not been brought to the notice of the Madras High Court and hence not considered and on that angle also, the decision is to be distinguished on facts and hence, we regret, we are unable to be persuaded by the decision of the Madras High Court as well. 28. The situation with the Punjab and Haryana High Court is also not different. Under the Punjab Value Added Tax Act, 2005, the exempted goods under item 18 of Schedule ‘A’ entry reads as follows: [ SCHEDULE-A] “Fresh fruits and vegetables.” Potato is not an item included to the exempted category. In Schedule ‘B’, for 4% tax, entries 75 and 88 read as follows: “75. seeds other than seeds of grass vegetables and flowers”. “88. Processed fruits and vegetables i.e. Fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice (whether in sealed container or otherwise).” The Punjab and Haryana High Court has followed the decision of the Guahatti High Court and that of the Madras High Court. However, it is interesting also to note that under the Punjab VAT Act, entry No. 88 prior to the amendment specifically included potato chips as an item taxable @ 4% and the same was taken away, it appears in the amendment introduced in October, 2007, as is seen from the judgment itself. “ Prior to its amendment, Entry 88 covered not only the items listed therein but also all other processed foods and 25 vegetables such as potato chips, frozen peas, frozen mushrooms, dehydrated onions, dehydrated garlic in addition to the other items mentioned therein. However, after the amendment the Government chose to specify a few specified items which it thought should be covered as processed foods and vegetables which are “fruit jams, jelly, pickle, fruit squash, paste, fruit drink and fruit juice”. Thus, the Government decided to treat only these goods as “processed foods and vegetables” and excluded the rest. However, prior to the amendment, potato chips were also covered by Entry 88 of the Schedule.” However and yet, apparently in view of the decision of Guahatti and Madras High Courts, it has been held that potato chips being a processed vegetable should be included as an item under entry 88. To quote: “ In the instant case, it is the admitted position that Potato which is a vegetable is processed in order to manufacture potato chips. It is also the admitted position that there is a specific entry for ‘processed vegetables’. In order to manufacture Potato chips, the potato is sliced, fried, sprinkled with spicy and flavouring substances and the resultant product includes all the essential characteristics of potato and, thus, chips are potatoes in a processed form i.e. a processed vegetable. Therefore, the Potato chips has to be classified under entry 88 of Schedule ‘B’ of the Punjab VAT Act, 2005 and would not fall under the residuary entry. The judgment of the Guwahati High Court in Pepsico India Holding Pvt. Ltd. (supra) and the judgment of the Madras High Court referred to above squarely cover the case of the appellant, as similar questions were involved in those cases also.” 29. As already pointed out, potato is not an item of goods exempted under the Punjab VAT Act. However, potato chips originally 26 was an item included in the 4% tax of Schedule ‘B’ and it was taken away by a subsequent amendment and yet the contention was that the same would be covered by the entry of processed vegetables. In this context, the legislative prescription under Schedule ‘F’, in our view under the Punjab Act, assumes significance, which is the residuary entry. [SCHEDULE- F] List of goods taxable @ 12.5% Goods not mentioned in any other Schedule. Therefore, also all taxable goods not mentioned elsewhere are to be governed by the residuary entry. Unfortunately, these aspects of the matter have not been brought to the notice of the Punjab and Haryana High Court and thus not considered and hence, we are unable to be persuaded by the judgment of the Punjab and Haryana High Court, as well. 30. In Nestle India Limited v. State of Uttarakhand and others, (2010) 31 VST 404 (Uttara), learned Single Judge of the High Court of Uttarakhand considered the question as to whether tomato sauce would come under the category of fruit jams, jelly, fruit squash, paste, fruit drink, fruit juices and aachar. It has been held in the affirmative. We have no quarrel with the said decision since tomato sauce should take the shade and colour from the enumerated items of processed or preserved vegetables, illustrated as jelly, jam, paste squash etc. But, by no stretch of imagination, potato chips can be included in that category. 31. We may also refer to yet another contention advanced by the learned Senior Counsel Sh. Lodha, appearing for the assessee. It is contended, placing reliance on the decision of the Supreme Court in Dunlop India & Madras Rubber Factory v. Union of India, 1976 (2), SCC 240, wherein it has been held that: 27 “ When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause.” Hon’ble Supreme Court reiterated this view in Bharat Forge & Press Industries v. Collector [ 1990 (1) SCC 532] and held: “ The question before us is whether the Department is right in claiming that the items in question are dutiable under tariff entry No. 68. This, as mentioned already, is the residuary entry and only such goods as cannot be brought under the various specific entries in the tariff should be attempted to be brought under the residuary entry. 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.” It is contended that potato chips cannot be included in the orphaned residuary clause since the same can find a place in the Part II of ‘A’ Schedule under entry No. 78 of ‘processed vegetables’. As we have already discussed above, residuary entry under Part III in H.P. VAT Act, 2005, is not an entry of orphaned goods. Unlike, the Assam VAT Act, where the expression of residuary entry is ‘goods not covered’ and unlike the expression under the Punjab VAT Act “goods not mentioned elsewhere”, the expression under the H.P. VAT Act is “ goods not specified in other Schedules”. Potato chips is goods taxable and that item is not goods specified in any other entry. The three guiding principles against orphaning an article are i) by all standards and ii) by no conceivable process of reasoning and iii) reasonable claim. In fact the 28 third – reasonable claim- has relevance, only if the other two are satisfied, namely, by all standards the article should find a place in the specified entry and by no conceivable process of reasoning the article should find a place in the entry. In the taxing statute, the application of both the principles, one positive and the other negative would depend on the language used for the Schedule and the specific expression of entry in the Schedule. Viewed as above, potato chips being not specified elsewhere would come only under the residuary entry. In other words, an unspecified article in the background of the legislative intent which we have already discussed above has a definite parentage under the residuary entry as an item not specified elsewhere. 32. We may also deal with the last contention that in the event of any doubt the benefit should go to the assessee. No doubt, it is a well settled position that in the event of any doubt, the benefit should go to the assessee. See the decision in Mauri Yeast India (P) Ltd. Vs. State of U.P., 2008 (5) SCC 680. In the instant case, there is no doubt or ambiguity regarding the entry. Potato chips is to be covered by the residuary entry only since the legislative intent is very clear from the statute. In Mauri Yeast (supra), it has been held that only if there is a conflict between two entries, between a specified tariff entry and residuary entry, the specified entry should be preferred. In the instant case, there is no conflict or confusion. Unfortunately, neither the Assessing Authority nor the Commissioner of Tax has approached these aspects in the proper manner. For the Taxation Officers, the main analysis appears to have been on the expression of manufacture. That is an irrelevant factor. Whether there is manufacturing in the process of potato getting transformed into potato chips and whether that is branded or not in sale, in the context of the H.P. VAT Act, 2005, is not a conclusively or a wholly 29 relevant and material factor for finding a place under the residuary entry since the legislative intent in not specifying potato chips, despite specifying other items and despite granting exemption to potato and in not providing concessional rate of tax @ 4% is otherwise very clear. Therefore, we do not find any merit in the contentions advanced by the petitioner. Though altogether for different reasons, we confirm the view taken by the Assessing Authority as well as the Commissioner of Tax that potato chips under the H.P. VAT Act, is liable to be taxed @ 12.5% under Part III, Schedule ‘A’- residuary entry and not under Schedule ‘B’ @ 4%. 33. The Writ Petition is hence dismissed, so also the pending application(s), if any. Copy Dasti. (Justice Kurian Joseph), Chief Justice. September 9, 2010. ( Justice Rajiv Sharma ), (karan) Judge. "