Friday, January 3, 2014

Mango pulp based slice is merely a drink and not a 'food article'; liable to Delhi Sales Tax at 8%

Mango pulp based drink 'Slice' is merely a drink/thirst quencher and not a 'food article' as per common parlance test; hence, it is liable to Delhi sales-tax only at 8 per cent


The Assessee, a trader in fruit/mango pulp based drink, known as "Slice", paid sales-tax thereon at 8 per cent;

b)  The Department argued that said mango pulp 'Slice' was 'preserved food article' under Entry 47 of First Schedule and taxable at 12 per cent;

The Tribunal relied on definition of 'food article' under Prevention of Food Adulteration Act and held that said product was a 'food article'.

On appeal, the High court held as under:

1) There is no specific entry which deals with beverages or fruit based drinks or juices. Therefore, applicable test which had to be adopted to judge whether an entry in a taxing statute comprehends one or other article, was common parlance test;

2) Consequently, Tribunal's approach in seeking recourse to definition under Prevention of Food Adulteration Act, was misplaced as there was no reference under Delhi Sales Tax Act imposing such definition;

3) Predominant content of mango pulp drink is water (70 per cent) and mango pulp content is merely 17 per cent. Since product does not claim to be a fruit juice, revenue cannot urge that it has even a minimum modicum of nutritive properties to be considered as 'food';

4) Accordingly, mango pulp based drink is, at best, an instant energy giver and a thirst quencher and not a "food article" by an application of common parlance test. Hence, it was liable to sales-tax only at only 8 per cent. -  Varun Beverages Ltd. v. Commissioner of Value Added Tax [2013] 40 59 (Delhi)

Mere CA's certificate doesn't prove absence of unjust enrichment unless it was supported by evidence

Costs Analysis Certificate by itself would not be sufficient to claim that incidence of duty had not been passed on to its customers; said certificate must be supported by materials/evidence and, if not all, a few invoices/records.


Pending claim for grant of certificates for claiming concessional rate of duty on inputs under end-use exemptions for use in manufacture of final products, the assessee received inputs on payment of duty and
paid such duty to suppliers;

Later, on receipt of certificates it applied for refund of duty paid on inputs. Said refund claim was rejected on ground of unjust enrichment;

c) The Assessee had produced Cost Analysis certificates obtained from qualified cost accountants showing that burden of duty paid on input was not transferred.
The High court held as under:

1) Under section 12B, every person who has paid duty of excise on any goods shall, unless contrary is proved by him, be deemed to have passed full incidence of such duty to buyer of such goods;

Costs Analysis Certificate by itself would not be sufficient to claim that incidence of duty had not been passed on to its customers;

3) While the assessee had claimed that said certificates were issued on basis of verification of records, but, despite various opportunities, it did not produce any evidence in support of said certificate(s) of Cost/Chartered Accountants;

4) Though it was difficult to produce all records/invoices in respect of thousands of customers, but the assessee could have produced at least few such invoices/records to show whether incidence of excise duty was passed on to customer;

5) Merely because, assessee sold final products at loss would not mean that incidence of duty had not been passed on to customers, more particularly, when invoices were issued to customers admittedly had indicated excise duty forming part of price at which vehicles were sold - Toyota Kirloskar Motor Ltd. v. Commissioner of Central Excise [2013] 40 56 (Karnataka)