Kerala High Court · 2007

H.L.DATTU, C.J. & K.T.SANKARAN,J. ---------------------------------------------------- O.T.A. NO. 8 OF 2007 ---------------------------------------------------- Dated this the 31st October, 2007 JUDGMENTH.L.DATTU, C.J.Appellant before us is a registered dealer under the provisions of theKerala Value Added Tax Act, 2003 ('KVAT Act' for short). It is the manufacturer ofa commodity known as “Ragitone”. In order to get an appropriate clarification fromthe Commissioner of Commercial Taxes, Kerala, the appellant had filed anapplication for clarification as envisaged under Section 94 of the Act.2. The Commissioner of Commercial Taxes, after hearing the appellant'slearned counsel and after going through the literature which would explain thecommodity “Ragitone”, has come to the conclusion that the rate of tax applicableto the sale of “Ragitone” is under entry 103 of SRO 82/06 and not as contendedby the appellant that it would fall under entry 86 of the 3rd schedule to the KVATAct, 2003. Aggrieved by the reasoning and the conclusion reached by theCommissioner of Commercial Taxes, the dealer is before us in this appeal.3. The appellant has raised the following questions of law for ourconsideration and decision. They are as under:“(A)Is the finding of the Commissioner of Commercial Taxesthat the product 'Ragivitta' manufactured by the appellant bymixing the powders of ragi, cardamom and muthanga istaxable @ 12.5% under entry 103 of SRO.92/06 justified inlaw?(B)Is the Commissioner of Commercial Taxes justified in law inhis finding that the content, structure and use, of “Ragivitta”which was considered by this Hon'ble Court in O.T.AppealNo.10 of 2006 and “Ragitone” manufactured by theappellant are almost in the same line and so the taxformulation entered into by High Court in the case of“Ragivitta” is squarely applicable in the case of “Ragitone”also?” O.T.A. NO.8 OF 2007 :: 2 ::4. Learned counsel appearing for the appellant would submit that the itemmanufactured by the appellant is nothing but a mixture of cereals, pulses andspices and, therefore, necessarily it would fall under entry 86 of the third scheduleto the KVAT Act and the rate of tax is at 4%. 5. To substantiate the contention so canvassed, the learned counselappearing for the appellant takes us through the process of manufacture said tohave been employed by the appellant for manufacturing the commodity known as“Ragitone”. According to the appellant, the “Ragitone” is manufactured as under:“(i)Ragi is pre-cleaned, washed thoroughly with water andsteeped in excess water for 2 to 4 hours, replacing thewater 2 to 3 times. The steeped water is drained off. Ragiis then dried and roasted at 700. It is then cooled,powdered and sieved to get the flour.(ii)Cardamom is pre-cleaned and dried and then powderedand sieved to get the flour.(iii)Muthanga is also pre-cleaned, washed thoroughly andsteeped for one to two hours. Steeped water is thendrained off; muthanga is then dried, roasted, powdered andsieved to get the flour.All the above three ingredients are then mixed together.The product is sold under the brand name “Ragitone” whichis not registered under the Trade Marks Act, 1999. “ 6. Keeping in view the process of manufacture employed by the appellantto manufacture “Ragitone”, the learned counsel for the appellant would submit thatthe “Ragitone” requires to be taxed only under entry 86 of the third schedule to the O.T.A. NO.8 OF 2007 :: 3 ::KVAT Act and not under entry 103 of SRO.82/06.7. Sri.Muhammed Rafiq, learned Senior Government Pleader appearingfor the respondent, would produce the literature of “Ragitone” before us and thenwould submit that “Ragitone” is not just a mixture of cereals, pulses and spicesand, therefore, the Commissioner of Commercial Taxes is justified in coming tothe conclusion that the said product would fall under entry 103 of SRO 82/06.8. Section 94 of the KVAT Act, 2003 authorises/grants power to theCommissioner to issue clarification. Apart from others, the Commissioner isempowered to give clarification, whether any tax is payable in respect of any saleor purchase, or if tax is payable, the point and the rate thereof etc.9. Under sub-section (3) of Section 94 of the KVAT Act, the applicationrequires to be filed by the dealer in the form prescribed under the Act. Under sub-section (5) of Section 94 of the Act, the order passed by the Commissioner ofCommercial Taxes would be binding not only on the dealer but also on theauthorities subordinate to the Commissioner including Deputy Commissioner(Appeals).10. Appellant, in order to have an appropriate clarification from theCommissioner of Commercial Taxes with regard to the tax payable on itsmanufactured product, namely, “Ragitone”, had filed an application as envisagedunder sub-section (3) of Section 94 of the Act. The clarification that was soughtis, whether “Ragitone” is exigible to tax under entry 86 of the third schedule to theKVAT Act.11. The Commissioner of Commercial Taxes, after going through theliterature on the product “Ragitone”, has come to the conclusion that “Ragitone” O.T.A. NO.8 OF 2007 :: 4 ::is not a mere mixture of cereals, pulses and spices and, therefore, it cannot bebrought to tax under entry 86 of the third schedule to the Act, but it requires to betaxed under entry 103 of SRO.82/06. While arriving at the aforesaid conclusionthe Commissioner of Commercial Taxes in its order, dated 25.5.2006, has statedas under:“The applicant contended that “Ragitone” is only a mixture ofthree ingredients, viz. Ragi, cardamom and Muthanga and soclassifiable under entry 86 of third schedule to KVAT Act, whichreads as “mixture of cereals, pulses, spices in raw form roasted orpowdered sold under brand name other than those registeredunder the Trade Marks Act, 1999”.In the case of a similar product, “Ragivitta”, which is acombination of Ragi, Red raw rice flour, cocoa and cardamom, theHon'ble High Court in OT Appeal No.10 of 2006 dated 16.1.2007had upheld the findings of Commissioner of Commercial Taxeswith regard to rate of tax, and entered into a conclusive finding thatit would fall under the entry 103 of SRO 82/06 and would fetch12.5% tax rate.Both the products mentioned above are manufactured by“Jeevans”. Going by the product profile “Ragivitta” is mentioned as“an ideal natural medicated solid food for Bonnie Babies”.Manufactured from the milk extracted from germinated Ragi mixedwith liquid extracts of cardamom and muthanga of Ayurvedic herbsand is profiled as a highly vitaminised child food.By virtue of item 23 of clause (VI) of Rules of InterpretationRegitone cannot be classifiable under entry 36 of 3rd schedule.This cannot either be classifiable under entry 86 of schedule III toKVAT Act which deals with mixture of cereals, pulses etc..In the case of “Ragivitta” referred ibid, the Hon'ble HighCourt held that being not flour only, but a preparation of Ragi, redraw rice flour, cocoa and cardamom the commodity cannot fallunder entry 86 of 3rd schedule, but is exigible to tax U/s.6(1)(d) readwith the residual entry 103 of SRO 82/06.Going by the product profile it is seen that in content,structure and use, both the commodities are almost in the sameline and so the tax formulation entered into by High Court in thecase of “Ragivitta”, is squarely applicable in the case of “Ragitone”also. O.T.A. NO.8 OF 2007 :: 5 ::So the product “Ragitone” is classifiable under entry 103 ofSRO 82/06 taxable @ 12.5%.”12. The question that requires to be considered and decided by this Courtis whether “Ragitone” that is manufactured by the assessee is a mere mixture ofcereals, pulses and spices or a commodity which is manufactured from the milkextracted from germinated Ragi seeds and mixed with liquid extracts ofCardamom and Muthanga and sold under the brand name other than thoseregistered under the provisions of the Trade Marks Act, 1999.13. The assessee's stand before the Commissioner of Commercial Taxesand also before this Court is that Ragi, Cardamom and Muthanga are cleaned,washed and dried and thereafter, they are powdered and all the three ingredientsare mixed and packed and sold and, therefore, it is the mixture of cereals, pulsesand spices.14. Learned counsel appearing for the Revenue has brought to our noticewhat has been put in the web-site by the very assessee.15. The materials so produced by the learned counsel Sri.MuhammedRafiq would indicate the process of manufacture of “Ragitone”. The same is asunder:“Ragi (Eleusine Coracana Gaertn) recommended by theWorld Health Organisation as the ideal solid food for bonniebabies. Jeevans Ragitone is manufactured from the milk extractedfrom germinated Ragi seeds and mixed with liquid extracts ofCardamom and Muthanga.Ragitone is not mixed with any artificial Vitamins orChemicals. Ragi is the richest natural source of Energy, Iron,Calcium and Carbohydrate. Ragi also has the highest digestibilityamongst all natural foods. Ragi provides energy, helps bone andteeth formation in babies, enriches blood and accelerates growth.Ragitone contains extracts of Ragi, Cardamom andMuthanga. Muthanga is a gentle natural dewormer (destroys O.T.A. NO.8 OF 2007 :: 6 ::worms) and Cardamom is a flavouring agent and carminative(removes gas from baby's stomach).Usage:Two table spoon full Ragitone in 250 ml. water or milk isstirred well and boiled to paste form. Sweeten with sugar ifnecessary. Indication:Jeevans Ragitone is manufactured from the milk extractedfrom germinated Ragi and mixed with liquid extracts of Cardamomand Muthanga of Ayurvedic herbs. Ragitone is not mixed with anyartificial vitamines. This is a unique and highly vitaminised childfood.Ragitone is the first choice for new-born babies. It isadministered in liquid paste form. Ragitone contains Proteins,Carbohydrates, needy fats for digestion and gives resistance powerfrom the attack of child diseases and also provides rich physicaland mental growth to the child. Ragitone is a natural source ofcalcium in good proportion for the growth of the teeth as well as thebone of the child.”16. In order to fall under entry 86 of the third schedule to the Act, it mustbe a mixture of cereals, pulses and spices in dried form, roasted and powderedand sold under the brand name other than those registered under the provisionsof the Trade Marks Act, 1999. Entry 103 of SRO 82/06 speaks of goods whichare not covered by any other entry of this list or by any entry of any of theSchedules to the Kerala Value Added Tax Act, 2003. Rate of Tax is 12.5%.17. In the instant case, as we have already noticed, “Ragitone” is not amere mixture of cereals, pulses and spices in powdered form. It is, but,manufactured from the milk extracted from the germinated Ragi seeds and mixedwith liquid extracts of Cardamom and Muthanga. Therefore, in our opinion, theCommissioner of Commercial Taxes was justified in informing the appellant by itsorder, dated 25.5.2007, that the rate of tax payable on the sale of “Ragitone”would fall under entry 103 of the third schedule to SRO.82/06 and not ascontended by the assessee. O.T.A. NO.8 OF 2007 :: 7 ::18. In our opinion, in view of the aforesaid discussion, the Commissionerof Commercial Taxes was fully justified in coming to the conclusion that“Ragitone” is classifiable only under entry 103 of SRO 82/06 and taxable at12.5%.19. In view of the above, the questions of law framed by the assesseerequire to be answered against the assessee and in favour of the Revenue.Accordingly, the appeal required to be rejected and it is rejected.20. In view of the order passed in the appeal, the relief sought for inI.A.No.2666 of 2007 need not be considered by this court. Accordingly, the saidapplication is also rejected.Ordered accordingly.(H.L.DATTU)Chief Justice(K.T.SANKARAN)Judgeahz/DK.